BEIJING: Chinese budget carrier Spring Airlines is leveraging its low-cost position to attract customers with cheap fares as the country’s domestic aviation market recovers, pursuing an aggressive expansion strategy that could soon turn profitable.
Domestic capacity at Shanghai-based Spring rose over 50 per cent in September compared with a year earlier, while passenger traffic was up 47pc and the airline’s load factor, or percentage of seats filled, neared 90pc as it redirected planes from closed international markets. Spring’s market share has doubled from 2pc a year ago to 4pc, according to broker Jefferies.
The private airline’s success in the Chinese market, traditionally dominated by full-service state-owned carriers, could herald a wider global trend.
Investors expect low-cost, domestic-focused carriers will be the first to recover from the pandemic as leisure travellers focus on value and corporate travel takes longer to recover.
Japan Airlines Co Ltd has said it plans to bolster its low-cost operations, including its Japanese joint venture with Spring, while sources said ANA Holdings Inc is weighing whether to use budget carrier Peach for more flights.
“We do see low-cost carriers (LCCs) rebounding the fastest out of all airlines across most regions, not just China,” BOCOM International analyst Luya You said. “The reasons are that LCCs can offer lower prices due to lower costs as well as fill their planes more efficiently than full-service carriers.”
Low-cost carriers held just a 10pc market share in the domestic Chinese market, and 17pc in Japan in 2018, compared with a majority share in South Korea, India, Malaysia and Vietnam, according to CAPA Centre for Aviation data.
During the Covid-related downturn, Chinese budget operators like Spring and Air China Ltd subsidiary Shenzhen Airlines have been expanding relative to rivals.