Spring says time is right for leasing

Spring Airlines Co, China's first low-cost carrier, plans to start an aircraft-leasing business to reduce costs and increase usage of its fleet as travel demand rises.

The carrier is registering the business in China (Shanghai) Pilot Free Trade Zone to take advantage of lower tax rates, and regulatory approval may come as soon as year-end, said Tian Chao, Spring's finance manager, in Hong Kong on Tuesday.

The leasing company will be a separate entity managing Spring's fleet, and will later also lease aircraft to other carriers, he said.

"We have been in talks with other possible clients in the mainland and overseas, but that's not an immediate priority," Tian said at the Growth Frontiers Asia Pacific conference. "The main purpose is to help our company reduce costs."

Spring joins companies including AirAsia Bhd in entering the leasing market as demand for planes rises, with economic growth in the region making air travel affordable to more people. Routes within or connected to China will be the largest driver of a projected 5.7 percent increase in air travel demand in Asia in the four years through 2017, according to an International Air Transport Association study last year.

Spring, which intends to hold an initial share sale this year, doesn't plan to buy more aircraft for the leasing operation and will rely on the airline's order book for now, Tian said.

AirAsia, the continent's biggest budget airline, set up a jet-leasing company this year.

China's government in July encouraged aircraft-leasing businesses to look overseas for expansion and fundraising and cut their reliance on the local market.

Spring, started by Chairman Wang Zhenghua in 2005, plans to spend as much as 2.5 billion yuan ($409 million) to expand its fleet and network amid an increase in travel in the country, the Shanghai-based carrier said in May.

The China Securities Regulatory Commission on Oct 15 approved Spring's application for an IPO. The carrier expects to sell shares as early as this year, Wang said on Sept 26 in Shanghai. Funds raised from the sale will be used for new aircraft and expansion of its international network.

Spring has 46 aircraft in its fleet and two A320 simulators, Wang said.

The carrier plans to buy a maximum of nine Airbus Group NV A320 aircraft and three A320 simulators, according to its preliminary IPO prospectus.

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