Springing high

At 64, Wang Zhenghua is perhaps old for an entrepreneur in China - most people his age would be enjoying retirement. But the man simply remains tireless in pursuit of a "mission impossible".

As founder and chairman of Spring Airlines, China's only private budget airline, Wang has learned the hard way about the difficulties of promoting low-cost air travel in China, where State-owned carriers dominate more than 90 percent of the market.

To survive and succeed, Spring still has a long way to go.

But Wang is in no hurry. A Tai Chi practitioner for well over 30 years, the hale-and-hearty man uses the patience and persistence of the traditional Chinese martial art as the basis of his success.

Like Herb Kelleher, cofounder of the 38-year-old Dallas-based low-cost Southwest Airlines, Wang is striving to realize his version of a budget airline success story.

Travelers flocking to Spring Airlines have proved him right. At a time when the three national aviation giants are suffering from falling passenger demand and losing money amid the worldwide economic meltdown, Spring still maintains its 90-strong load factor. Although net profits have slumped by 70 percent since this year as the industry softens, Wang says Spring would still be able to keep a small profit margin.

That would mean since its maiden flight in July, 2005, Spring has been able to stay profitable for three consecutive years, challenging the generally agreed norm in the aviation industry that new airline companies would not be able to make money until three or five years after start-up.

What Spring has achieved is indicative of the strong market demand for low-cost air travel in the world's most populous nation.

"Each year in China only one in ten has the opportunity to travel by air, while in the US almost everyone does that more than once a year. It is only because air travel is too expensive for most Chinese." Wang notes. "Spring Airlines wants to change that by making it accessible to all."

Over the past three years, the carrier has been rolling out fares 36 percent lower than the industry's average level, sometimes as low as 99 yuan for a single trip between two Chinese cities. That is much less than a hard sleeper cabin train ticket for the same distance.

It even tried to sell one-yuan tickets to fill up empty seats on the aircraft, though authorities quashed the attempt as a violation of rules.

"But if there are empty seats left, why not let more people go on the plane by selling them cheaper?" Wang remains steadfast in his theory of maximizing interests, and claims he would still do it if allowed.

Cutting costs

Wang is often described as a man who is walking through a minefield, or a rule breaker. What he has brought to China are eye-opening ideas that challenge established norms and rules.

China's aviation industry is no hotbed of private airlines, let alone budget airlines. There are no preferential tax policies or budget terminals at major airports, to name just a few things that are usually vital to the success of budget carriers. To sell fares at 36 percent lower, Wang has to think of many different ways to cut costs.

Measures include cutting meals - passengers can only expect to get a bottle of water, and they are urged not to bring food onboard to make it lighter to travel. And don't plan on packing something heavy. A maximum of 15 kg is allowed for check-in bags, 25 percent lower than what is regulated by the Civil Aviation Administration of China. Turnaround times for the planes between flights are kept tight to make maximum use of aircraft, and to save on maintenance costs, the carrier's only planes are Airbus 320s.

But that is far from enough. More than 60 percent of an airline's operating costs are beyond direct control, including jet fuel and raw material costs as well as landing and taking-off fees paid to the airports. Moreover, Spring has to attract experienced pilots with higher salaries or incentives. All these facts have made the carrier's profit-making a mystery even to industry insiders.

But the secret, according to Wang, is no more than the big return from high load factor that is made possible through offering lower fares. With an average 95 percent occupancy rate, well above the industry average of 70 percent, Spring may stay profitable even with lower ticket prices.

Wang's Shanghai Spring International Travel Service Ltd also gives his fledgling airline a big advantage. As chairman of the travel agency that he founded in the early 1980s, Wang has a lock on a near endless supply of travelers for his airline. Currently about 30 to 40 percent of Spring's passengers book through the agency.

The company is also working on a series of cost cutting measures. They include encouraging customers to order discount tickets online and introducing automated check-in.

According to Zhang Lei, Spring's spokesman, the airline is also planning to charge passengers for all check-in baggage or overweight carry-on bags, in a bid to encourage passengers to travel light and help the airline to save fuel.

In March this year, Spring announced it had launched China's first budget terminal in Zhengzhou, Henan province, which can help cut costs by 6 to 7 percent.

All these innovations could not be possible without a frugal mentality that Wang has successfully instilled into the corporate culture.

He is the best exemplifier of the business strategy. In some cases, Wang is much more frugal than his price-sensitive customers. His office in the Shanghai Hongqiao Airport complex is a simple and small room with barely anything modern within. The Tai Chi outfit he wears everyday during morning exercises is also decorated with patches. For him, conservation is a highly valued ethic that won't necessarily reduce his enjoyment of life.

During trips abroad, the delegation he leads eats self-prepared meals and lives together in a crammed basement room to save on costs.

In Wang's words, "difficulties are not intimidating at all". As he says in his slow but firm, deliberate voice. "I think the biggest enemy is always ourselves."

Legendary career

Sitting in his office against the whitewashed walls, Wang has a scholarly and amiable look that does not instantly lend itself to his legendary experiences in the past 20 years, during which he twice ventured into new and highly risky businesses.

Some people say he is adventurous, but the modest man says he is always well prepared for the next step and does not make rash decisions.

In 1984, Wang gave up his government job in Shanghai's Changning district to work full time for a travel agency he founded three years before, a seemingly crazy decision at a time when government posts were regarded as the "golden career". That year, he was already 40-years-old.

He was betting on a new tourist boom in China, when individual travelers were quickly emerging as a new force of spending power. By catching that wave, Wang's travel agency soon became the country's biggest in 1994 and remained so for the next 13 years.

But he was not content with that, and had started to look for the next growth point even at the height of his business.

Budget airlines turned out to be his next direction, since he was inspired by the success of Southwest Airlines in the US. At that time, China's aviation industry was also allowing room for the development of private airlines.

Despite doubts and mocks, Wang pressed ahead with his decision. He had spent 10 years learning about budget airlines in the west and started charter flights in China in 1997 before finally launching Spring Airlines in 2005. He even developed his own online sales system, the first of its kind as all the other Chinese airlines relied on TravelSky, the only electronic air travel distribution system provider in China.

Only one year after Spring launched its maiden flight Wang, then 62, surprised all by announcing 30 million yuan in profits with only three leased aircraft. Next year's profit soon surged to 70 million yuan.

This year, Wang still expects the carrier to maintain a small profit margin with its stronger-than-ever efforts to slash fares.

"Budget airlines have achieved over a 20 percent market share in both Europe and the US," says Wang. "Though it's only starting in China, definitely it has a bright future."

Industry watchers say the current economic crisis could bring new business for Spring from people looking to spend less.

(China Daily 12/15/2008 page12)