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Spring Airlines plans Shanghai float next year

By Wang Ying (China Daily)
Updated: 2009-07-30 08:00

Passengers board a Spring Air plane in Heihe, Heilongjiang province. The firm plans to expand its fleet by 2015.[China Daily]

Even as its two local rivals, China Eastern Airlines and Shanghai Airlines are fine-tuning their merger, Spring Airlines is taking steps to boost its market share by expanding its fleet, launching more outbound flights and also looking at a public float next year.

Shanghai-based Spring Airlines trumped its State-owned rivals by reporting a net profit of 21 million yuan last year, while its net profit soared to 41.17 million yuan in the first half of this year. However, its chairman Wang Zhenghua said the carrier plans to strengthen its operations to face future uncertainties.

"Currently, our management team has too much power in decision making, and that's not good for the development of a corporation," said Wang during the carrier's fourth anniversary ceremony. "To solve this problem, a listing on China's bourse would be ideal," he told reporters.

Wang said by going public the carrier can become more transparent, balanced and financially resilient. The privately owned airline, however, has no plans to list its shares this year.

Related readings:  Spring Airlines expanding fleet   China Eastern to merge with Shanghai Airlines   China's East Star Airlines reveals $110m debts   China Airlines to set up branch on mainland

"We are planning to list on the Shanghai bourse in the second half of next year," Wang said.

Concerning the ongoing consolidation between China Eastern and Shanghai Airlines, Wang said the merger would pose a challenge to Spring Airlines. "The only thing you can do is to make yourself get stronger," said Wang.

In addition to the listing plan, Spring Airlines is also planning to augment its fleet size. "We plan to increase the fleet strength to 100 planes from the current 13 by 2015, and most of them will be Airbus A320s," said Wang.

In March, the low-cost carrier took delivery of the first A320, and plans to have 30 fully owned aircraft over the next six years.

However, increasing the fleet size would also involve huge spending for the carrier. Although Spring Airlines has been one of the few carriers to post a profit amid the aviation industry downturn last year, Wang said they are also short of money.

"The purchase of 15 A320 aircraft would cost us nearly 5 to 6 billion yuan, and I cannot think of any better solution to raise capital than through a public listing. I am also not comfortable in running the company with a loan," he said.

According to Wang, the budget airline has short listed three securities firms as financing consultants. In late 2006, Citigroup made a proposal for Spring Airlines' listing, with a market capitalization of 8 billion yuan.

"If everything goes smoothly, we expect to have our shares listed in late 2010," said Wang.

Wang, a former Shanghai government official, in 1981, founded Shanghai's Spring Travelling Agency. Based on the agency's outstanding performance and abundant resources, Wang later floated the low-cost carrier Spring Airlines.

"We have also received final approval from Civil Aviation Administration of China to run outbound flights," said Wang.

The green light from the regulator means Spring Airlines is qualified to fly from China's major cities to overseas cities within a five-hour voyage.