SHANGHAI - Spring Airlines Co Ltd, the nation's only budget carrier, has started preparations for going public in Shanghai, showing the capital market's recognition of the private carrier's business performance. In return, the funds raised in the A-share market will further strengthen the company's competitiveness against the three main State-owned colossuses, analysts said.

Spring Airlines said in a notice that it had registered with the Shanghai Bureau of China Securities Regulatory Commission (CSRC) to launch an initial public offering (IPO).

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Insiders with knowledge of the matter said the preparations will last from three months to a year. After that, the company will go through other procedures including waiting for CSRC's final approval, which is expected to take at least six months. "That means the Shanghai-based carrier will appear on the Shanghai Stock Exchange at the end of 2011 at the earliest," said one of the insiders.

However, Zhang Wuan, spokesman for Spring Airlines, said the timing of the listing will be decided by the regulator as well as the capital market reaction.

It has been years since the budget carrier sought an IPO in the A-share market. In late 2006, Citigroup proposed Spring Airlines' listing, estimating its market capitalization at 8 billion yuan ($1.22 billion). However, the global economic meltdown in late 2008 and ensuing capital market collapse halted the effort.

Low prices and convenient services have helped Spring Airlines beat other State-owned carriers. It registered a net profit of 470 million yuan in 2010, up 240 percent from 2009. President and founder of the carrier Wang Zhenghua, expects the company to continue this growth momentum after the World Expo 2010 Shanghai.

Sources said the listing plan has a lot to do with Spring Airlines' plan to augment its fleet size. In an earlier interview, Wang said the carrier planned to increase its fleet to 100 aircraft by 2015, and its self-owned fleet size will expand to 30. Currently, Spring Airlines owns only three of the 20 aircraft it operates.

Li Lei, an aviation analyst with CITIC China Securities, told China Daily that most of Spring Airlines' jets are Airbus A320s, each costing between 400 and 500 million yuan.

Privately-run Spring Airlines has received less government support and policy preference than State-owned carriers. "So its market strategy is more passenger-oriented and often uses the leverage of low ticket prices," Li said.

"Spring Airline's success is also attributable to its parent company being Spring Traveling Agency, which guarantees the carrier a large passenger flow," said Li. By catering to the whole industry chain, Spring Airlines' business model sets an example for private carriers' future development, he added.

Wang, who formerly worked in public service in Shanghai, began his entrepreneurial career in the 1980s with a start-up capital of 1000 yuan. In 1981, he founded Spring Traveling Agency. Encouraged by its outstanding performance and resources, Wang launched the low-cost Spring Airlines.

China Daily

(China Daily 01/25/2011 page15)