Spring Airlines Announces First International Route

China's Spring Airlines has announced its first steps into the International market. Routes News investigates its new route to Tokyo Ibaraki and what's next for the fledgling low-cost carrier.

Spring Airlines is a low-cost carrier with bases at Shanghai's two main airports: Pudong and Hongqiao. It currently operates a wholly domestic schedule serving 24 destinations with 466 weekly non-stop flights, and is now the 11^th largest carrier in the Chinese market. It connects Shanghai with mainly regional markets. Interestingly the carrier has no non-stop service to Beijing.

Spring Airlines operates a fleet of A320 narrowbody aircraft and after five years of domestic operations will venture into the international market.

This week, Spring Airlines announced its first international service which will be operated from Shanghai Pudong to Tokyo Ibaraki. Ibaraki is Tokyo's third airport and located 80km from the city. Spring Airlines plans to operate the service on a three times weekly rotation.

The announcement from Spring Airlines is a welcome boost for the airport as it currently has just two scheduled airlines operating from the ex-military airport, Star Alliance member Asiana Airlines operating a daily service to Seoul Incheon and Skymark Airlines, also offering a daily service to Kobe, Japan.

Although there is currently no non-stop service between Shanghai and Ibaraki there are currently 118 weekly flights between the airports of Pudong (PVG) and Hongqiao (SHA) in Shanghai and Narita (NRT) and Haneda (HND) in Tokyo.

The table below illustrates the markets and which carriers serve these routes. There is bilateral symmetry on the carriers operating the route.

Source Flightbase 14-20 September 2010

According to IATA BSP data (Airport IS), the Shanghai Pudong-Tokyo Narita sector has seen over 1.3 million O&D passengers fly the route between March 2009 and 2010, with over 560,000 O&D passengers on the Hongqiao-Haneda sector. Spring Airlines will be the first low-cost entrant on the Shanghai-Tokyo market. While not possible to gain bilateral access to the major Tokyo airports, which are reserved for 'primary airlines', it will perceive the market to be strong enough to capture market share from these routes and stimulate growth where yields are high.

With only legacy carriers operating the sector, and one way fares around the $700 mark(one way) for a block time of under three hours, Spring Airlines is attempting to introduce the first low-cost product between these city pairs. With low pricing and a huge potential market, Spring Airlines will be confident that it will be able to make Ibaraki work despite it being 80km from Tokyo. Spring Airlines also has strong tour operator support from within the same group of companies and leisure tourists will not be so concerned with flying into an airport 80km from Tokyo, which is not a major issue in a metro city such as Tokyo. With no slot constraints Spring Airlines will be able to maximise schedule times into Ibaraki with its A320 aircraft and the carrier has cited that this is the first step in its plan to develop its international market.

SPRING AIRLINES GROWTH

Spring Airlines will focus its international growth on the major trunk markets out of Shanghai Pudong, with its growth likely to be dependent on bilateral agreements and slot availability at the major airports, the availability of secondary airports which provide alternative access to key markets will be very important.

The table below illustrates the largest international markets currently served from Shanghai Pudong:

Source Flightbase 14-20 September 2010

Spring Airlines could potentially consider Seoul and Osaka as its next destinations. It may well look to serve Seoul's secondary airport, Gimpo, which currently has no service from Pudong, and with over a million passengers flying into Incheon the market demand will be there. Equally, the same scenario could exist in Osaka where Itami Airport will be able to provide secondary access to a market where nearly 800,000 O&D passengers have flown the route into Kansai.

Also South East Asia is a large volume market from Shanghai with Singapore and Kuala Lumpur being big Chinese markets, however sector lengths are a longer and the yields will not be much higher than North Asia.

WILL SPRING SUCCEED?

Spring Airlines is one of only two low-cost carriers operating in the Chinese market with Lucky Air. The Chinese market is dominated by legacy carriers and while Spring Airlines has been able to establish a successful domestic network, it is still relatively small. In a country with a population of over 1.3 billion and a low propensity to fly, there is without doubt a huge potential untapped market for the low-cost model in China. Whether low-cost carriers are able to penetrate the legacy carriers' stranglehold remains to be seen though. This will be a major obstacle to long-term international growth for Spring Airlines.

Having established itself as a domestic carrier, going international seems to be a natural step and one that has not been taken lightly.