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Spring Airlines looks to Japan for expansion

China Daily, August 30, 2011

Shanghai-based Spring Airlines plans to set up a?subsidairy in Japan. [Web photo]

Spring Airlines Co Ltd, China's only budget carrier, is set to establish a subsidiary in Japan as part of its efforts to explore international markets. Preparatory work is currently under way.

"Spring Airlines is planning to open a company in Japan," said Wang Zhenghua, Spring Airlines' chairman and founder, during a lecture at Shanghai Jiaotong University on Saturday, according to reports on the major Chinese-language website 163.com.

Zhang Wuan, a spokesman for Spring Airlines, said on Monday that the idea of opening a subsidiary in Japan was first raised at the beginning of this year. "Currently, we have embarked on the preparation work," Zhang said.

The subsidiary is likely to become the first for a Chinese carrier in Japan, according to Zhang. Even the nation's three biggest State-owned carriers - China Southern Airlines Co Ltd, China Eastern Airlines Co Ltd and Air China Ltd - only operate sales departments there.

Since starting its first international flight to Japan's Ibaraki prefecture in July 2010, Spring Airlines has been actively exploring overseas markets, and more than 20 percent of its external flights are bound for Japan.

"The Japanese aviation market is extremely important and large, especially for carriers based in the Yangtze River Delta region," said Zhang.

He added that Japan's more-than-100 airports need to begin flights to China. Spring Airlines has been approached by more than 10 Japanese prefectural governors about starting regular flights. Meanwhile, an agreement was reached a month ago for Spring Airlines to begin flights to Sagaken.

Wang said that Japan has an isolationist and protectionist market - as a case in point, he said that in order to open its subsidiary, Spring Airlines had to establish a joint venture in Japan, with a stake of no more than 33 percent.

"A stake of 33 percent stake is too low for Spring Airlines, and we are worried that this will limit our influence during decision-making," Wang said.

The carrier's flight to Ibaraki has so far maintained an average occupancy rate of 95 percent, indicating strong demand for low-cost air travel in the Japanese market.

Spring Airlines is not the only carrier looking to explore the low-cost Japanese air market. Japan Airlines Co Ltd has established a joint venture - Jetstar Japan Co Ltd - with Australia's Qantas Airways Ltd and the trading house Mitsubishi Corp to tap into the nation's budget travel market, according to the Wall Street Journal.