Spring Airlines: China's Low-cost Airline

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Case Details:

Case Code : OPER085
Case Length : 27 Pages
Period : 2005-2009
Organization : Spring Airlines Ltd.
Pub Date : 2009
Teaching Note :Not Available
Countries : China
Industry : Aviation

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Springing a Surprise Contd...

The innovative idea had been offered by Zhang Dejiang (Zhang), Vice Premier, China, according to Air Transport Intelligence⁷. According to Spring, if the idea was implemented, it would increase the seating capacity by 40 percent and translate into savings of 20 percent for the airline.⁸ Spring also expected to reduce airfares for passengers who opted to stand.

Spring started its operations as a low-cost, no frills private airline in China, in 2005. Until it was set up, the Chinese aviation industry was mainly dominated by the Big Three - China Southern Airlines Company Limited⁹ (China Southern), China Eastern Airlines Corporation Limited¹⁰ (China Eastern), and Air China Ltd.¹¹ (Air China).

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Earlier in the same year, Okay Airways¹² (Okay) was set up as the first private low-cost airline in China. However, the airline gave up the low-cost business model within eight months of launching operations since it found it difficult to maintain the low costs...

Excerpts >>

7] Air Transport Intelligence is the foremost intelligence service offered online to the air transport industry worldwide.
8] Peter Pae, "Chinese Airline May Offer Cheaper Fares to Passengers who Stand," www.latimes.com, July 4, 2009.
9] Founded in 1989, China Southern Airlines Company Limited is a Guangzhou-based major carrier that operates domestic, regional, and international flights. As of December 31, 2008, the airline operated with a fleet of 348 aircraft (Source: http://investing.businessweek.com).
10] Founded in 1988, China Eastern Airlines Corporation Limited is a Shanghai-based major carrier that operates domestic, regional, and international flights. As of July 30, 2009, the airline operated with a fleet of 238 aircraft (Source: www .planespotters.net).
11] Founded in 1988, Air China Ltd. is a state-owned major carrier based in Beijing. At the end of 2008, the company operated with a fleet of 243 aircraft.
12] Founded in 2004 and headquartered in Tianjin, China, Okay Airways started as China's first private airline. The company started operating as a low-cost airline, but within eight months, it gave up the business model and continued its operations with the conventional model.

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