Spring Adds 30 Airbus A320 Jets as China Backs Discount Carriers

Spring Airlines Co., China’s biggest non state-controlled carrier, has signed an accord with Airbus SAS for 30 additional A320 jets and may buy more as government policy shifts to favor discount airlines.

The Shanghai-based airline signed an agreement on Nov. 22 for the A320 single-aisle jets due from 2015, pending government approvals, said Jonathan Hutt, deputy general manager for strategy. The purchase has a list price of about $2.75 billion, though customers typically get discounts.

“We hope this is a sign Spring will be able make far larger orders,” Hutt said in an interview at the Capa World Aviation Summit in Amsterdam yesterday.

The carrier has a goal of building a fleet of 100 planes by 2020 after revising the target from 2015 because of delays in approval for more jets, Hutt said. Management intends to meet next month to discuss further expansion plans, he said. Airbus, based in Toulouse, France, declined to comment.

China’s Civil Aviation Administration announced this month that it had scrapped a floor on air-fare prices in support of low-cost carrier development and liberalization of other measures that could spur the segment. The nation is easing aviation regulations and boosting infrastructure spending as Chinese carriers are forecast to require more than 5,580 planes in the next two decades.

“Within the last 12 months we have seen many signs that obstacles we currently face will disappear,” Hutt said. Spring’s goal is to become “the first low-cost mega-carrier in the north Asia region,” he said.
Policy Shift

The policy liberalization will probably spur new entrants, Hutt said, with potential for five to eight new discount airlines being set up in the next two years. Some will be new entities and others affiliated with Chinese network carriers.

“We are very fortunate to have the first-mover advantage,” Hutt said. The airline wants to add scale to help fend off competition from foreign airlines, including AirAsia BHD (AIRA), the region’s largest discount carrier, that are expanding their China networks, he said.

The airline, in business for eight years, fills more than 95 percent of its seats on its 39 jets, while serving 63 domestic and 18 international route, Hutt said.

Spring plans to begin service between Shanghai and Osaka, Japan, from mid-January. The airline will also use A320s equipped with winglets — devices on the wing that can improve range — to fly to markets such as Singapore and Kuala Lumpur from across its China network, he said.