 Spring Air, the nation's biggest low-cost carrier, will begin flights between Shanghai and the southern Taiwanese port city of Kaohsiung in August, with Shanghai-Taipei service starting before the end of this year, Chairman Wang Zhenghua told The Wall Street Journal on Tuesday. "Taiwan is a key tourist market for Chinese travelers these days, so I believe the new routes will be become profitable for us soon," said Mr. Wang. He said it took five years to get clearance for the flights from authorities, underscoring the difficulties competing with the nation's established state-run carriers on major, high-profile routes. China's three state-owned airlines and their affiliates dominate the nation's skies, posing huge challenges for upstart private carriers trying to break into the domestic market. But Spring Air, which was launched by 69-year old Mr. Wang in 2005, has stuck firmly with a low-cost structure that allows it to charge fares 30% below those of competitors and remain profitable. Spring Air's rapid growth was also helped by its ties with Mr. Wang's Spring Travel, one of China's biggest travel agencies. "Our advantage is that we can leverage Spring Travel's tour groups to occupy two-thirds of the available seats on our flights, with the remaining targeting individuals and business travelers," Mr. Wang said. The Shanghai-based airline was a pioneer in China for selling seats to individual customers through the Internet, bypassing third-party agents and in turn reducing costs. Spring Air, which recently gained international attention for its plans to hire older female flight attendants and calling them 'flight aunties,' flies to destinations outside mainland China, mainly to cities in Japan and Hong Kong. The lucrative China-Taiwan market, however, was out of reach, until now. Chinese visitors to Taiwan have surged as relations between the neighbors warmed, helped in large part by Taiwan President Ma Ying-jeou's policy of opening parts of the island's economy to China. Direct flights resumed in 2008, and today about 10 Chinese and three Taiwanese carriers operate some 600 weekly flights between Taiwan and China. Still, demand continues to outstrip supply, said analysts. Chinese visitors to Taiwan jumped to 2.6 million last year from 1.8 million in 2011, after Taiwan began allowing entry to individual Chinese and not just tour groups. Spring Air is seeking to aggressively expand its network and fleet to drive revenue growth, particularly as plans for an initial public offering remain on hold. Mr. Wang said Tuesday there is still a plan for a Shanghai IPO, but there is no timetable because of market conditions. He previously said the public offering would aim to raise more than one billion yuan ($160.6 million). Mr. Wang said he remains confident in China's no-frills airline segment because of the potential that Chinese people will fly much more. "Passengers in developed markets like the U.S. travel 2.5 times a year on average, while the ratio in China is just 0.3 times. The growth potential is tremendous," he said. He expects the airline to carry 11 million passengers this year, up 13% from the 9.7 million passengers in 2012. Spring Air earlier set an ambitious growth target of having 100 aircraft by 2015, but has had to lower its growth projections in light of tighter controls by regulators on airline expansion plans. The airline now flies to more than 50 cities. It has a fleet of 37 Airbus A320 jets, with four more planes on order, and Mr. Wang said he expects the airline to take delivery of around six to eight new planes annually for the next few years. Source: Wall Street Journal by Joanne Chiu from China Travel & Tourism News http://www.chinatraveltourismnews.com/ | |||
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