In April a Southwest Airlines flight attendant became an overnight sensation when a video of her pre-flight safety speech went viral on YouTube.
In the video, Martha Cobb was seen telling passengers that she wanted them to position their seat belts like her “grandmother wears a support bra: tight and low across her hips” before informing them that “in the unlikely event the pilot lands beside a hot tub” each traveller would get their own “teeny-weeny yellow Southwest bikini”. On cue, her colleagues hold up yellow life jackets.
China’s largest budget airline Spring Airlines, has also come up with a tongue-in-cheek approach to getting passenger attention. Last year the airline started offering themed flights. In one of the most popular, the flight attendants were dressed up as French maids and butlers. “We want to emphasise serving customers,” Zhang Wu’an, a spokesman, told the Financial Times. Launched in 2005, Spring Airlines initially sought to take on state-owned goliaths like China Southern and Air China by offering promotional tickets at much lower fares. But it pulled its best deals after regulators warned that it would face hefty fines for “disrupting market order” (a move intended to protect the state-owned airlines, say Spring’s supporters).
Spring has since raised its prices although it aims to be about 30% cheaper than its larger rivals. The company promotes fares that range from Rmb99 ($15.79) and Rmb299, while its average load factor, which measures the proportion of seats filled with paying passengers, is 94%, says the Wall Street Journal.
More impressive, the company has been profitable since 2006. Last year its net profit reached Rmb732 million, up 17% from 2012. Revenue rose 16.5% to Rmb6.56 billion from the year before. (China’s airline industry saw its total profits sink 7.7% to Rmb27.3 billion during the same period.)
Should investors feel inclined, they will soon be able to board Spring’s growth express. Last week it was given the green light to launch an IPO and is reportedly looking to raise Rmb2.5 billion in a Shanghai flotation. The proceeds will be used to purchase nine Airbus A320 jets and three Airbus flight simulators.
Unlike conventional airlines, Spring doesn’t bother with first or business class cabins (although it does offer what it calls “business economy class” seats). It doesn’t serve ‘free’ meals and drinks during the flights. The South China Morning Post reports one trip in which flight staff even charged Rmb5 for a cup of water during a one hour delay on the tarmac.
Low-cost carriers like Ryanair and Easyjet generally top up their airfare revenues by selling ancillary items, such as hotel rooms, car hire and holiday insurance. But Spring generates a massive portion of its revenue from local government subsidies. In fact, incentive payments from local governments and airports accounted for more than 79% of its total revenue last year, says Economic Information Daily.
Take its subsidy agreement with Hebei, where the local government offers payments to Spring in exchange for bringing passengers to the province’s Shijiazhuang Zhengding International Airport, which now serves as the budget airline’s hub in Northern China.
“Through the company’s low fares strategy we have attracted a large number of passengers. From 2011 to 2013, the annual passenger throughput [at Shijiazhuang Zhending International Airport] rose from 1 million to 5.1 million, which helped propel Shijiazhuang’s economic and revenue growth,” its spokesperson said. “Spring Airlines also has the biggest market share in the region.”
But industry observers say there is a danger to relying so much on government largesse. “If the proportion of subsidy accounts for so much of an airline’s profits it becomes very susceptible to changes in policy, like whether the local government decides to continue the subsidy programme,” an analyst told Economic Information Daily.
Spring is working to diversify its revenues by increasing its international routes. It now flies to 16 international destinations, after starting a daily flight from its hub in Shanghai to Singapore in April. The carrier reckons that by the end of the year international routes will reach 30% of its total business.
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