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Prior to founding
Spring Airlines, Wang Zhenghua, already a travel industry veteran, spent an entire decade undertaking in-depth research and making preparations for the launch of China’s first lowcost carrier. The airline’s maiden flight was a milestone for the country’s aviation industry signaling not only the end of the state monopoly in China’s skies but also a range of new and exciting possibilities.
But what makes Spring truly unique is its extraordinary success from day on. Unlike airlines both at home and abroad (particularly the United States), Spring has never been in the red. In 2006, after just one year’s operation, the company’s net revenue had already reached CNY 30 million (USD 4.7 million), doubling to CNY 60 million (USD 9.5 million) the following year. In 2008, in the midst of global financial meltdown, Spring managed to stay in the black posting modest revenues of CNY 40 million(USD 6.3 million). However, the following year this figure skyrocketed to CNY 170 million (USD 26.9 million) and by 2010 it had leapt again to CNY 470 million (USD 74.3 million). In the minds of many what Spring Airlines had achieved was nothing short of a miracle!
After many false starts, Spring Airlines’ plan to publically list on the Shanghai Stock Exchange is back on. If Spring’s listing on the CNY A-share market comes to fruition, it will become China’s fifth publically listed airline and the country’s first private carrier to achieve this landmark status.
“I made it here by my own efforts. I didn’t have government backing.”
Having founded Spring Travel back in 1981, Wang would have to wait over twenty years before he was granted ap- proval by the Civil Aviation Administration of China to set-up the country’s first lowcost airline in 2004. While this may well appear a straightforward process, it was one with its fair share of problems. For Wang and his team, it was a decade of hard work, thorough research and more than a few false starts.
Like all successful entrepreneurs, it is difficult to find a window in his schedule for this interview. It helps that Wang himself never takes a day off and that he himself is very keen to spread the word about Spring.
Spring’s headquarters is an inconspicuous building next door to Shanghai’s Hongqiao Airport. The exterior is showing signs of age while inside the décor is simple with nearly no decoration whatsoever. Our interview with Wang Zhenghua was to take place in a small south-facing meeting room. The sunshine, which hasn’t been seen for days, makes a rare appearance and floods the room. This ambiance seems in keeping with the story that Wang himself is so eager to share. Wang greets us warmly. A tall man standing 1.81m, he is dressed simply in an ordinary black jacket. Despite his stature, his manner is very measured and relaxed. It is only when he begins to speak that we realize that this is a man whose thoughts are preoccupied with business strategies and opportunities. It is this that separates him from many of his peers and makes him a pioneering figure in the aviation industry
Over the years, Wang guided Spring Travel on a path of rapid and aggressive expansion. His success is borne out by statistics from the national tourism authorities which show that at its peak Spring Travel accounted for 23% of the combined revenue of all China’s 19000 travel agencies. However, Wang has never been one to rest on his laurels and by then was already looking further afield for new inspiration. He could see that outside China there were many new and innovative business models he could draw upon, but none of this would be possible without high level government support.
“From 1994, I led a team to study the business models of the top 10 travel agencies around the world. We selected four different approaches employed by companies in the United States, Great Britain and Germany and examined their feasibility. After many years of discussion we decided that we wanted to move into aviation.”
Wang pointed to the case of the Chinese airline that was operating international flights that were virtually empty especially on inbound flights. Sensing an opportunity to move into the charter business, Wang approached the airlines directly. “I had a large number of customers. The last thing I had to worry about was a shortage of passengers. So I went to the airlines and said to I would buy the tickets at 70% discount. They were all taken aback and didn’t believe I could pull it off,” he said. Wang was soon proved right. When news spread of the cheaper tickets, sales skyrocketed and by the second month ticket sales exceeded 20000. Soon the supply of the discount tickets couldn’t keep up with the demand.
Wang also recalls when in 2004 Yang Yuan, then head of China’s Civil Aviation Administration, praised Spring’s performance to a group of British journalists during a State Council press conference, many believed that this was proof that Spring was being helped behind the scenes by govern- ment officials, especially the former Vice Premier Huang Ju, a former Shanghai government official then in charge of China’s aviation industry. “I went on the record again to state that I have never turned to the government for help,”Wang says without hesitation, “I never asked Huang Ju for support. I made it here by my own efforts.” Spring Travel’s continuing success in the charter business seems to prove this point, with the company racking up over 30000 flights in the last eight years. Paying your debts on time
When the news about Wang’s plan to enter into the airline industry became public, many people, be they his own employees or government officials, thought he had taken leave of his senses.
“I remember being called into the office of a certain Shanghai government official. He shouted at me: ‘You want to start an airline? It’s a high risk business. They aren’t many success stories but there are multiple failures.’ He then got his secretary to bring in all these reports stating how U.S. airlines had posted losses for the ten years from 1995 to 2004 and showing how Chinese airlines were also loss making enterprises.”
Despite others’ skepticism, Wang firmly believed that “aviation was driven by market forces, and that the industry would be a magnet for talent. We did a lot of specialized market research. We knew that Spring Travel had the ability to generate passengers. Even with just one plane working one route there is a market and a profit to be made.”Looking back at what turned out to be a major turning point in his career, Wang clearly feels a little unsettled even today.
“I went to the Changning District government to get approval. I ended up speaking with the director in charge of these matters for two hours, hoping that he would approve the application. Instead, he told me to speak to the District Chief, who ignored me completely. This dragged on for over a month by which stage I was so anxious that I decided to approach the government of Songjiang District. At that time, Songjiang was promoting its tourism sector and we were able to come to an agreement immediately,”
Today, the U.S carrier Southwest Airlines is recognized as the godfather of today’s low cost airlines. It has gone from being an insignificant player to a major force that has revolutionized the industry with its low fare model. Spring Airlines adopted the same approach and set out to change people attitudes here at home. As Wang points out passengers in the U.S. will choose to travel with Southwest for 2-3 hour flights. “It’s the same in China. On a short flight it is not necessary have all these wasteful extras. The whole point is making flying affordable.”
Ever increasing passenger volumes has ensured that Spring Airlines has remained highly profitable, but another of Spring Airlines’ strengths is its reputation in the market and especially with its creditors.
In the global aviation industry, payment defaults are common. “Many say it is to your benefit to default on payments. In this industry we are talking about figures in the tens, even hundreds of millions. If you can delay payment for half a year, you generate a lot in the way of interest on these amounts. But I have never done this. I have never defaulted on a single payment, even though some of my own employees called me a fool on the Internet for not having done so,” Wang says with a smile. His philosophy is simple; never create trouble for yourself and never fear it when trouble comes looking for you. “The universe knows what we are doing. We need to live our lives with honor and value.” This reputation for acting with integrity has helped Wang build up strong business networks that have helped the company ride out financial downturn and bolstered the company’s expansion plans. “The U.S. sub-prime debt crisis struck in 2008 just when our company needed to bulk purchase aircraft. A single aircraft can cost in the vicinity of CNY 300-400 million and we needed to pay for the first plane before March 2009. Now on an order of sixteen aircraft we are talking many tens of millions of U.S dollars,” Wang recounts. Many domestic banks were prepared to offer him low interest loans but Wang finally signed the deal with a German borrower. “When we signed the deal, the President of the bank’s Asia-Pacific office personally came to invite me out for dinner,” Wang recalls with a broad smile.
Wang is equally concerned about treating his employees with the same integrity. “If the contract requires the payment is to be made on the tenth day of each month, Chairman Wang will tell the financial department to complete payment by the ninth. Our partners all admire his commitment to sticking to his word,” one Spring Airlines employees tells me, “Our company has never defaulted on our salaries. He has also distributed over 70% of the company’s shares to management and employees.”
Even with assets valued in the billions, Wang Zhenghua, lives an ordinary life. He also advocates thrift among those in his immediate circle and is strongly opposed to the fixation with buying luxury goods. “Spring’s CEO once spent more than 10,000 yuan buying a Louis Vuitton bag, but I objected to her using it. I think this invasion of foreign luxury goods has had a negative impact on our culture and our patterns of consumption. You spend 20-30 thousand yuan buying a bag, but the young people working in our company hotel only earn between 2000-3000 yuan per month. What will they think? Doesn’t this breed resentment? Some might claim that these brands are stimulating domestic demand but to my mind they not only show a certain disrespect for your own country, they undermine the stability of the society we all live in.”
In life, Wang Zhenghua is famous for his “stinginess”. He attaches great importance to thrift and environmental protection. A single serviette needn’t be just used once and then simply tossed away when you can use it again. When looking for staff, he looks for people with the same approach to life; those who aren’t lazy or greedy. “I don’t want money I haven’t earned from my own sweat. I don’t speculate.” In contrast to his high-energy work style, Wang prefers a slower rhythm in his life. He is fascinated by Tai Chi and has been practicing for over 37 years. Tai Chi has also become a major part of Spring’s corporate culture, with over 600 employees now studying this ancient Chinese martial art. To his fellow practitioners, he prefers to be simply called, “Old Wang.”
SpringPlus – a new choice for China’s business travelers
Spring Airlines has already become the standard bearer for low-price airlines in China. Given the company’s success, it is not unreasonable to see others copying this model in the future, resulting in a bitter and protracted price war.
“Spring’s passengers are mostly business travelers so we need to understand fully the consumption patterns of this demographic.” Wang believes that only targeted changes should be made when circumstances dictate. It was in 2011 he determined from the feedback and complaints he was receiving through a variety of channels, including his own Weibo account that this was now the time for change.
“Some passengers complained that taking flights with Spring was inconvenient. For example, additional payment is needed for speedy boarding, for selecting your seat, for buying food and beverages. This made it difficult when they tried to be reimbursed by their company,” Wang states. Therefore he determined it was necessary to pinpoint all the existing problems and find the right solutions. It was during the course of this investigation that Wang learnt how important the business traveler was, making up to 70% of his customer base. From here it was decided to tailor these changes to the demands and expectations of this increasingly important clientele.
By June of 2011, these changes began to be rolled out. First, the onboard sale of gifts and merchandise was halted on all flights. Then, in September, the new SpringPlus fare class was unveiled. Providing a business class product for less than their competitors’full economy fare, SpringPlus is now available on more than 30 routes.
“By the beginning of next year, the first four rows of every plane will offer the SpringPlus product. The pitch between the seats will be 31 inches, greater than the industry average of 28 or 29, thereby providing the passenger with a more comfortable travel experience.” He adds, “Of the 180 passengers onboard, only 24 will have purchased the SpringPlus product. On a full service airline, cabin crew will walk up and down the cabin four times per flight to cater for each and every passenger. But what we need to consider is whether it is possible to put our focus on those twenty-four people.” Even within the company opinion was divided about the need for such change. Some felt that such a change in its sales and marketing strategy wasn’t required given Spring’s success to date. But Wang’s response to these voices was simple; the market is changing and change is the key to continuing success.
“If the government gives the go-ahead, I would sell standing room tickets”
Will standing room tickets ever be available on planes? Once again Wang Zhenghua is asked to explain his famous remark.
Wang points out that he never suggested passengers could stand around inside a flying plane. He was, in fact, referring to a new kind of seating similar to a bar stool. Passengers would be half-seated and wear a safety harness. He explains that the distance separating two rows of seats is between 28-29 inches. Given that the space needed to separate rows of this new seating would be smaller, the number of seats on the plane could be increased by a third. “Of course, any such plan would need to be thoroughly examined by the aviation authorities. But if they believed it to be feasible and approved it, I would definitely sell this type of seating.”
Thanks to the persistence of Wang Zhenghua and his team, Spring’s route network continues to expand. Presently the airline operates over 50 domestic routes, including the recently approved Shanghai-Beijing route. What is little known is that Spring Airlines had been applying for permission to operate on this route for seven years before finally being given the green light. But even then, the company was only offered a midnight departure time. Many in the company complained that this couldn’t possibly be profitable and only added to the employees already heavy work load. Wang encouraged his employees and told them how lucky the company was to have this opportunity.
On China’s most profitable route, even this “red-eye” slot is highly sought-after. Rumor has it that other airlines complained to the aviation authorities about allowing a private carrier to operate this route. The Director in charge is said to have responded“You have dozens of same flights operating this route. Spring has one midnight flight. And you complain about this? Is there any equality in the world?”
Wang himself remains pragmatic but determined, “We put our energy into what deserves our attention. Regardless of what others say, we will apply for a second and third Beijing slot and ask for good departure times. Complaining achieves nothing. What matters is finding ways to solve these problems, that’s what we’re here to do.”
Spring Airlines, Wang Zhenghua, already a travel industry veteran, spent an entire decade undertaking in-depth research and making preparations for the launch of China’s first lowcost carrier. The airline’s maiden flight was a milestone for the country’s aviation industry signaling not only the end of the state monopoly in China’s skies but also a range of new and exciting possibilities.
But what makes Spring truly unique is its extraordinary success from day on. Unlike airlines both at home and abroad (particularly the United States), Spring has never been in the red. In 2006, after just one year’s operation, the company’s net revenue had already reached CNY 30 million (USD 4.7 million), doubling to CNY 60 million (USD 9.5 million) the following year. In 2008, in the midst of global financial meltdown, Spring managed to stay in the black posting modest revenues of CNY 40 million(USD 6.3 million). However, the following year this figure skyrocketed to CNY 170 million (USD 26.9 million) and by 2010 it had leapt again to CNY 470 million (USD 74.3 million). In the minds of many what Spring Airlines had achieved was nothing short of a miracle!
After many false starts, Spring Airlines’ plan to publically list on the Shanghai Stock Exchange is back on. If Spring’s listing on the CNY A-share market comes to fruition, it will become China’s fifth publically listed airline and the country’s first private carrier to achieve this landmark status.
“I made it here by my own efforts. I didn’t have government backing.”
Having founded Spring Travel back in 1981, Wang would have to wait over twenty years before he was granted ap- proval by the Civil Aviation Administration of China to set-up the country’s first lowcost airline in 2004. While this may well appear a straightforward process, it was one with its fair share of problems. For Wang and his team, it was a decade of hard work, thorough research and more than a few false starts.
Like all successful entrepreneurs, it is difficult to find a window in his schedule for this interview. It helps that Wang himself never takes a day off and that he himself is very keen to spread the word about Spring.
Spring’s headquarters is an inconspicuous building next door to Shanghai’s Hongqiao Airport. The exterior is showing signs of age while inside the décor is simple with nearly no decoration whatsoever. Our interview with Wang Zhenghua was to take place in a small south-facing meeting room. The sunshine, which hasn’t been seen for days, makes a rare appearance and floods the room. This ambiance seems in keeping with the story that Wang himself is so eager to share. Wang greets us warmly. A tall man standing 1.81m, he is dressed simply in an ordinary black jacket. Despite his stature, his manner is very measured and relaxed. It is only when he begins to speak that we realize that this is a man whose thoughts are preoccupied with business strategies and opportunities. It is this that separates him from many of his peers and makes him a pioneering figure in the aviation industry
Over the years, Wang guided Spring Travel on a path of rapid and aggressive expansion. His success is borne out by statistics from the national tourism authorities which show that at its peak Spring Travel accounted for 23% of the combined revenue of all China’s 19000 travel agencies. However, Wang has never been one to rest on his laurels and by then was already looking further afield for new inspiration. He could see that outside China there were many new and innovative business models he could draw upon, but none of this would be possible without high level government support.
“From 1994, I led a team to study the business models of the top 10 travel agencies around the world. We selected four different approaches employed by companies in the United States, Great Britain and Germany and examined their feasibility. After many years of discussion we decided that we wanted to move into aviation.”
Wang pointed to the case of the Chinese airline that was operating international flights that were virtually empty especially on inbound flights. Sensing an opportunity to move into the charter business, Wang approached the airlines directly. “I had a large number of customers. The last thing I had to worry about was a shortage of passengers. So I went to the airlines and said to I would buy the tickets at 70% discount. They were all taken aback and didn’t believe I could pull it off,” he said. Wang was soon proved right. When news spread of the cheaper tickets, sales skyrocketed and by the second month ticket sales exceeded 20000. Soon the supply of the discount tickets couldn’t keep up with the demand.
Wang also recalls when in 2004 Yang Yuan, then head of China’s Civil Aviation Administration, praised Spring’s performance to a group of British journalists during a State Council press conference, many believed that this was proof that Spring was being helped behind the scenes by govern- ment officials, especially the former Vice Premier Huang Ju, a former Shanghai government official then in charge of China’s aviation industry. “I went on the record again to state that I have never turned to the government for help,”Wang says without hesitation, “I never asked Huang Ju for support. I made it here by my own efforts.” Spring Travel’s continuing success in the charter business seems to prove this point, with the company racking up over 30000 flights in the last eight years. Paying your debts on time
When the news about Wang’s plan to enter into the airline industry became public, many people, be they his own employees or government officials, thought he had taken leave of his senses.
“I remember being called into the office of a certain Shanghai government official. He shouted at me: ‘You want to start an airline? It’s a high risk business. They aren’t many success stories but there are multiple failures.’ He then got his secretary to bring in all these reports stating how U.S. airlines had posted losses for the ten years from 1995 to 2004 and showing how Chinese airlines were also loss making enterprises.”
Despite others’ skepticism, Wang firmly believed that “aviation was driven by market forces, and that the industry would be a magnet for talent. We did a lot of specialized market research. We knew that Spring Travel had the ability to generate passengers. Even with just one plane working one route there is a market and a profit to be made.”Looking back at what turned out to be a major turning point in his career, Wang clearly feels a little unsettled even today.
“I went to the Changning District government to get approval. I ended up speaking with the director in charge of these matters for two hours, hoping that he would approve the application. Instead, he told me to speak to the District Chief, who ignored me completely. This dragged on for over a month by which stage I was so anxious that I decided to approach the government of Songjiang District. At that time, Songjiang was promoting its tourism sector and we were able to come to an agreement immediately,”
Today, the U.S carrier Southwest Airlines is recognized as the godfather of today’s low cost airlines. It has gone from being an insignificant player to a major force that has revolutionized the industry with its low fare model. Spring Airlines adopted the same approach and set out to change people attitudes here at home. As Wang points out passengers in the U.S. will choose to travel with Southwest for 2-3 hour flights. “It’s the same in China. On a short flight it is not necessary have all these wasteful extras. The whole point is making flying affordable.”
Ever increasing passenger volumes has ensured that Spring Airlines has remained highly profitable, but another of Spring Airlines’ strengths is its reputation in the market and especially with its creditors.
In the global aviation industry, payment defaults are common. “Many say it is to your benefit to default on payments. In this industry we are talking about figures in the tens, even hundreds of millions. If you can delay payment for half a year, you generate a lot in the way of interest on these amounts. But I have never done this. I have never defaulted on a single payment, even though some of my own employees called me a fool on the Internet for not having done so,” Wang says with a smile. His philosophy is simple; never create trouble for yourself and never fear it when trouble comes looking for you. “The universe knows what we are doing. We need to live our lives with honor and value.” This reputation for acting with integrity has helped Wang build up strong business networks that have helped the company ride out financial downturn and bolstered the company’s expansion plans. “The U.S. sub-prime debt crisis struck in 2008 just when our company needed to bulk purchase aircraft. A single aircraft can cost in the vicinity of CNY 300-400 million and we needed to pay for the first plane before March 2009. Now on an order of sixteen aircraft we are talking many tens of millions of U.S dollars,” Wang recounts. Many domestic banks were prepared to offer him low interest loans but Wang finally signed the deal with a German borrower. “When we signed the deal, the President of the bank’s Asia-Pacific office personally came to invite me out for dinner,” Wang recalls with a broad smile.
Wang is equally concerned about treating his employees with the same integrity. “If the contract requires the payment is to be made on the tenth day of each month, Chairman Wang will tell the financial department to complete payment by the ninth. Our partners all admire his commitment to sticking to his word,” one Spring Airlines employees tells me, “Our company has never defaulted on our salaries. He has also distributed over 70% of the company’s shares to management and employees.”
Even with assets valued in the billions, Wang Zhenghua, lives an ordinary life. He also advocates thrift among those in his immediate circle and is strongly opposed to the fixation with buying luxury goods. “Spring’s CEO once spent more than 10,000 yuan buying a Louis Vuitton bag, but I objected to her using it. I think this invasion of foreign luxury goods has had a negative impact on our culture and our patterns of consumption. You spend 20-30 thousand yuan buying a bag, but the young people working in our company hotel only earn between 2000-3000 yuan per month. What will they think? Doesn’t this breed resentment? Some might claim that these brands are stimulating domestic demand but to my mind they not only show a certain disrespect for your own country, they undermine the stability of the society we all live in.”
In life, Wang Zhenghua is famous for his “stinginess”. He attaches great importance to thrift and environmental protection. A single serviette needn’t be just used once and then simply tossed away when you can use it again. When looking for staff, he looks for people with the same approach to life; those who aren’t lazy or greedy. “I don’t want money I haven’t earned from my own sweat. I don’t speculate.” In contrast to his high-energy work style, Wang prefers a slower rhythm in his life. He is fascinated by Tai Chi and has been practicing for over 37 years. Tai Chi has also become a major part of Spring’s corporate culture, with over 600 employees now studying this ancient Chinese martial art. To his fellow practitioners, he prefers to be simply called, “Old Wang.”
SpringPlus – a new choice for China’s business travelers
Spring Airlines has already become the standard bearer for low-price airlines in China. Given the company’s success, it is not unreasonable to see others copying this model in the future, resulting in a bitter and protracted price war.
“Spring’s passengers are mostly business travelers so we need to understand fully the consumption patterns of this demographic.” Wang believes that only targeted changes should be made when circumstances dictate. It was in 2011 he determined from the feedback and complaints he was receiving through a variety of channels, including his own Weibo account that this was now the time for change.
“Some passengers complained that taking flights with Spring was inconvenient. For example, additional payment is needed for speedy boarding, for selecting your seat, for buying food and beverages. This made it difficult when they tried to be reimbursed by their company,” Wang states. Therefore he determined it was necessary to pinpoint all the existing problems and find the right solutions. It was during the course of this investigation that Wang learnt how important the business traveler was, making up to 70% of his customer base. From here it was decided to tailor these changes to the demands and expectations of this increasingly important clientele.
By June of 2011, these changes began to be rolled out. First, the onboard sale of gifts and merchandise was halted on all flights. Then, in September, the new SpringPlus fare class was unveiled. Providing a business class product for less than their competitors’full economy fare, SpringPlus is now available on more than 30 routes.
“By the beginning of next year, the first four rows of every plane will offer the SpringPlus product. The pitch between the seats will be 31 inches, greater than the industry average of 28 or 29, thereby providing the passenger with a more comfortable travel experience.” He adds, “Of the 180 passengers onboard, only 24 will have purchased the SpringPlus product. On a full service airline, cabin crew will walk up and down the cabin four times per flight to cater for each and every passenger. But what we need to consider is whether it is possible to put our focus on those twenty-four people.” Even within the company opinion was divided about the need for such change. Some felt that such a change in its sales and marketing strategy wasn’t required given Spring’s success to date. But Wang’s response to these voices was simple; the market is changing and change is the key to continuing success.
“If the government gives the go-ahead, I would sell standing room tickets”
Will standing room tickets ever be available on planes? Once again Wang Zhenghua is asked to explain his famous remark.
Wang points out that he never suggested passengers could stand around inside a flying plane. He was, in fact, referring to a new kind of seating similar to a bar stool. Passengers would be half-seated and wear a safety harness. He explains that the distance separating two rows of seats is between 28-29 inches. Given that the space needed to separate rows of this new seating would be smaller, the number of seats on the plane could be increased by a third. “Of course, any such plan would need to be thoroughly examined by the aviation authorities. But if they believed it to be feasible and approved it, I would definitely sell this type of seating.”
Thanks to the persistence of Wang Zhenghua and his team, Spring’s route network continues to expand. Presently the airline operates over 50 domestic routes, including the recently approved Shanghai-Beijing route. What is little known is that Spring Airlines had been applying for permission to operate on this route for seven years before finally being given the green light. But even then, the company was only offered a midnight departure time. Many in the company complained that this couldn’t possibly be profitable and only added to the employees already heavy work load. Wang encouraged his employees and told them how lucky the company was to have this opportunity.
On China’s most profitable route, even this “red-eye” slot is highly sought-after. Rumor has it that other airlines complained to the aviation authorities about allowing a private carrier to operate this route. The Director in charge is said to have responded“You have dozens of same flights operating this route. Spring has one midnight flight. And you complain about this? Is there any equality in the world?”
Wang himself remains pragmatic but determined, “We put our energy into what deserves our attention. Regardless of what others say, we will apply for a second and third Beijing slot and ask for good departure times. Complaining achieves nothing. What matters is finding ways to solve these problems, that’s what we’re here to do.”