Spring Airlines’ profit climbed 17.5% in the first half from a year earlier as the budget Chinese carrier cut costs, defying a spate of lower earnings across the domestic aviation sector, Yicai Global reported.
Net profit came to 854 million yuan (US$119 million) in the first six months, while operating revenue rose 13% to 7.2 billion yuan (US$1 billion), the Shanghai-based operator said in a semi-annual financial report.
Privately owned Spring Airlines has six Airbus A320neo aircraft which consume 15% less fuel than the previous generation of A320 planes. The firm is likely to reduce fuel consumption further by introducing more A320neo planes.
Excellent cost control is the main reason why the airline’s profit grew faster than revenue, PingAn Securities said in a research report.
By comparison, other domestic carriers’ profit dropped on average by a quarter in the first half compared with the same period last year, Yicai Global learned at the 2019 National Civil Aviation Mid-Year Work Conference held last month.
The whole civil aviation industry saw a 2% decline in profits in the January to June period.
The sector has struggled in the face of rising fuel prices, greater exchange rate fluctuations, a decreasing proportion of business travelers and competition from high-speed trains, Civil Aviation Administration of China Director Feng Zhenglin said at the conference.
Air China, the country’s flagship carrier, saw profit fall 9.5% to 3.1 billion yuan. Guangzhou-based China Southern Airlines slid 21% to 1.7 billion yuan, while regional carriers XiamenAir sank 72% to 116 million yuan and Shandong Airlines lost 27 million yuan compared with a 200 million yuan profit a year earlier.
Spring Airlines remained buoyant with a 13% rise in first-half passenger numbers to 10.8 million. Its planes had an average passenger load of 92%, a rise of 2.4 percentage points. The average load for international carriers was 90%, up 4.9 percentage points.
According to Flight Global, Spring currently flies to 191 destinations, most of which are to points within China. Domestically, the airline says it is working to diversify its route network. During the first half it established a base at Lanzhou in Northwest China.
On the international front, the airline notes that Thailand, Japan and South Korea still remain strong markets. However, capacity growth for Thai routes has slowed down in the first half of the year. Japan and South Korea, meanwhile, are showing strong demand, the report said.
Moving forward, the airline says that the domestic market continues to be its main revenue source, but warns that as a low-cost carrier, it is more susceptible to macroeconomic forces both within and around China. It has also flagged uncertainty over jet fuel pricing, as well as domestic competition between airlines, and with railway networks, as potential threats.