Regional Round-Up
Spring Airlines forced to delay China IPO
June 1st 2014
China’s most successful budget carrier, Spring Airlines, has delayed its US$405 million Initial Public Offering (IPO) on the Shanghai Stock Exchange after the China Securities Regulatory Commission (CSRC) said the airline had to satisfy additional issues relating to the company’s finances. Read More » The airline planned to offer 100 million shares, or 25% of its total capital in the IPO.
The regulatory body, calling the decision a “sudden suspension”, said an internal report had identified that the company’s profits were too high when government subsidies were taken into account. The CSRC will require additional audits at the airline. Spring Airlines said: “We have made a full disclosure of the situation. We are well prepared to deal with the various regulatory bodies audits.” The Shanghai carrier, founded by former travel agent, Wang Zhenghua, does benefit from government support and also has higher than industry average returns. Analysts calculate that Spring had received up 90% of its operating income from airports and local governments and agencies in the last three years.
In its IPO document, it stated that it received total subsidies last year that accounted for 52.9% of overall profits last year. In late April, the airline said it was continuing talks with the Hebei provincial government and the airport about a new subsidy agreement following expiry of its last contract in March. Ten-year-old Spring Airlines has become a master of ancillary revenue management, charging for everything except the seat. It’s extremely low fares have cut into the market of more established Mainland airlines.
