Spring Airlines, a Shanghai-based budget operator, is considering a listing on the mainland next year to partially fund a US$1.2 billion bill for the acquisition of 30 aircraft. Spring Air was formed by Wang Zhenghua and started operations in 2005. It posted a more than 30 million yuan (HK$32.89 million) profit the following year with three Airbus 320s and saw earnings increase further to more than 70 million yuan with eight A320s in operation last year. Following the airline's strong earnings performance, institutional investors such as Citigroup and Goldman Sachs tried to tie up with the budget carrier through minority stakes and by offering to sponsor an offshore listing. However, Spring Air dropped those plans after fierce debates among its directors. 'Finally, we decided to list on the domestic market,' Mr Wang, Spring Air's chairman, said in Shanghai. '[China] is where we have influence and a reputation.' Mr Wang formed Spring International, a nationwide travel agency, in 1981. Spring International was ranked No1 in terms of domestic travel by the China National Tourism Administration. One major disagreement between Spring Air and investment bankers is the carrier's valuation. Investment bankers suggested the capitalisation of Spring Air could reach at least eight billion yuan, given its net assets amounted to about one billion yuan, by next year. 'The valuation is too bold,' said Mr Wang. 'I think a reasonable valuation should lie between three billion yuan and four billion yuan by that time.' Some 8,200 commuters flew Spring Air everyday with air tickets priced at a 68 per cent discount to the average guidance prices, Mr Wang said. Spring Air sells 70 per cent of its tickets on the internet and offers return tickets at prices as low as 99 yuan. The company said these and other discounted tickets accounted for 50 per cent of sales in the low season. Spring Air is playing in a grey area in terms of regulations by offering air tickets lower than the regulators allowed. On the mainland, air ticket prices are still subject to restrictions on limited variations from government's guidance prices - not higher than 25 per cent and not lower than 45 per cent. Spring Air says it filed its special offers with the CAAC but the regulator neither approved nor disapproved it. In December 2006, the airliner offered a one-yuan ticket from Shanghai to Jinan, Shandong, and the local government fined Spring Air 150,000 yuan for disregarding regulations, accusing it of violating the antitrust law. But under the weight of media support and lobbying, the company did not have to pay the fine. Without loans from banks, Spring Air operates on more than 20 domestic routes by leasing eight A320s. By year-end, it will expand its fleet to 11 and add new services to 30 cities.
