Spring Airlines’ 1H net profit down 25% on higher operating costs

Shanghai-based LCC Spring Airlines reported a net profit of CNY554 million ($81.7 million) in the 2017 first half, down 25.2% over net profit of CNY740.1 million in the year-ago half because of a sharp increase of operating costs.

Operating expenses jumped 41% to CNY5 billion while operating revenue was up 28.1% to CNY5.1 billion. Ancillary revenue grew 23.6% to CNY409 million.

Passenger boardings increased 26.8% to 8.32 million with an average load factor of 91.8%, down 1.15 points over year-ago period. Passenger capacity rose 30.7% to 16.1 billion ASKs against a 29.1% increase in passenger revenue to 14.8 billion RPKs. Cargo traffic volume was up 20.1% to 23,372 tonnes.

In the first half, Spring increased domestic capacity but cut international capacity, especially on routes to Japan, Korea and Thailand because of increasingly fierce competition. The ratio of international routes decreased to 30.7% from 34.6% in terms of ASKs while domestic routes were up 65.9% from 61.9%; the number of regional routes (Hong Kong, Macau and Thailand) decreased 3.4% from 3.5%.   

As of June 30, the carrier expanded its fleet to 73 aircraft by introducing seven Airbus A320s on 162 routes, which included 108 domestic and 54 international routes. Spring noted the company will continue to expand international operations, but plans to focus more on the more profitable domestic market.

“In 2016, domestic LCCs account for a 10% share of Chinese market, which is still comparably low. With the implementation of relevant favorable policies formulated by the Civil Aviation Administration of China [CAAC] for domestic LCCs—and continuous robust growth of domestic market demand—the Chinese market has a broad prospect and big potential,” Spring noted in a statement.

The carrier is scheduled to take delivery of four A320s in the second half of this year.