China budget carrier Spring eyes $3b A320 order

Chinese low-cost carrier Spring Airlines is set to make an order for up to 30 Airbus A320 aircraft worth $3 billion at list prices, the company's chairman told Reuters on Wednesday, amid an expected surge in budget flights in China.

The airline hopes to divide the order between the current model of the Airbus A320 and the re-engined A320neo, Wang Zheng-hua, said in an interview on the sidelines of a regional low-cost airlines conference in Singapore.

Shanghai-based Spring, which has a fleet of 40 A320s, is one of the largest dedicated budget carriers in China. Its success and a relaxation of airline regulations by the Civil Aviation Administration of China (CAAC) in 2013 have paved the way for competitors to enter the low-cost market in the country.

Spring wants to start taking deliveries from the new order from 2015. The new aircraft will replace existing planes and add capacity in the Chinese domestic market.

"We are looking to make a large purchase," said Wang. "Now is the time for additional growth."

China's airline market, which is dominated by State-owned carriers like Air China, China Eastern Airlines and China Southern Airlines, is seen as being on the brink of a low-cost travel boom.

This is due to the large number of airports that are being developed to connect hundreds of its cities, and the growing demand for air travel within the country for both leisure and business.

Spring had been prevented from ordering new aircraft in 2012 and 2013 by the CAAC, which was concerned about over-capacity and competition in the Chinese domestic market. Those restrictions were lifted in late 2013, according to Wang.

The CAAC has also rescinded a rule that prevented airlines from offering discounted fares, allowing the airline to offer even cheaper fares to stimulate the market, he noted.

This has resulted in several new entrants coming into the low-cost market. China Eastern is converting its Beijing-based subsidiary China United Airlines into a low-cost carrier, while the HNA Group, which owns Hainan Airlines and Hong Kong Airlines, is converting Chongqing-based subsidiary West Air into a low-cost carrier (LCC).

"We believe that by early 2015, there will be four to five LCCs in China. There will be a lot of competition and we must be prepared for that," Wang said.