Meet the leader of China's low-cost carriers

Why Spring Airlines is far ahead of its rivals
Why Spring Airlines is far ahead of its rivals

Spring Airlines is the undisputed leader in China's low-cost carrier (LCC) market, experts say, as the government focuses on boosting the sector's untapped potential to meet booming travel demand.

"Spring was really the only low-cost carrier in China until this year when the government began using it as the popular model for other airlines to base themselves on," Peter Harbison, executive chairman at CAPA (Centre for Aviation) told CNBC on Wednesday.

The 10-year-old company enjoyed an impressive debut on the Shanghai Composite on Wednesday, with shares surging 44 percent in an initial public offering (IPO) that was more than 163 times oversubscribed.

The airline reported a 95 percent average load factor last year, the highest among all Chinese carriers, Reuters reported. According to Maybank, the carrier's success partly derives from its dedication to the China market.

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With routes primarily focused on greater China, Japan and Korea, the company is focusing on where Chinese customers want to go, which is North Asia, says Mohshin Aziz, aviation analyst at Maybank Investment Bank.

"CEO Xiuzhi Zhang is carrying a China-centric LCC strategy. There is absolutely no emphasis on Southeast Asia, unlike other Asian budget carriers. His priorities remain right on China," Aziz added.

Tomohiro Ohsumi | Bloomberg | Getty Images

Spring's dedication to low prices also makes it a hit among price sensitive passengers.

"Even when compared to AirAsia, the region's most successful LCC, Spring has such a good culture of cost, it's really aggressively low cost in every respect all through to the management ranks," Harbison said, referring to Spring's rule of executives travelling only on the cheapest routes.

Domestic competition is intensifying in Chinese airspace after regulators ended a six-year ban on the formation of new airlines in 2013. Incentives like reduced airport charges and simplified approval processes saw more entrants join the market, including the likes of Guangzhou-based Jiuyuan Airlines and Hainan Airlines subsidiary West Air.

However, CAPA's Harbison doesn't anticipate competition to be a problem for Spring: "Spring is so far ahead of the crowd and has such a good brand that for the next year or two, it's got pretty much a free road."

Safety concerns

Budget carriers in Asia have come under renewed pressure over safety following the crash of an AirAsia plane in December, but Maybank's Aziz explains that safety isn't as urgent a concern in China compared to other high-growth markets like Indonesia.

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"In the past, China hasn't had the best safety track record but from the early 2000s onwards, all state carriers have been buying brand new planes, up to 100 orders a year, so it's hard to find old planes in China now."

Moreover, the opening of an Airbus manufacturing factory in Tianjin in 2009, the company's first outside of Europe, is aimed at producing narrow-bodied crafts for the Asian market, and underscores Beijing's drive to ensure its planes will always be new, Aziz added.