Spring Airlines Japan Bets On Post-Pandemic China Tourism Boom

(Bloomberg) -- Spring Airlines Co. and Japan Airlines Co. are anticipating a post-pandemic tourism boom between China and Japan for their joint-owned budget carrier, even though Japan still lags behind major economies in reopening its borders.

Spring Airlines Japan Co. had operated seven routes from Narita to Shanghai, Tianjin, Nanjing, Wuhan and other cities, but five of them were suspended due to the virus. Even so, the carrier is eyeing new routes to Chinese coastal cities with populations of more than 10 million people, potentially by March 2024, Akira Yonezawa, Spring Japan’s new chief executive officer and former JAL executive, said in an interview.

Even amid tight restrictions, Japan is becoming the top destination among Chinese for post-virus travels, with 18% saying they want to visit, according to the Pacific Asia Travel Association. Some 90% of Spring Airlines Japan’s international passengers are nationals from China.

“Japan is close to China so it’s easy to travel and there’s a lot of expectation” for traffic between the countries, Yonezawa said. On top of that Spring Airlines offers “a deep relationship” and a platform to sell tickets in China, the CEO added.

Japan was betting on a tourism boom from the Olympics, with Chinese visitors pouring money into restaurants and souvenir shops, although that dissipated with the decision to hold a spectator-less games the closing of the borders in 2020 because of the pandemic. Even so, Japan is sticking to its target of attracting 60 million annual tourists by 2030.

To achieve Prime Minister Yoshihide Suga’s target, more than a third of the total would have to, in theory, be visitors from China, according to Yonezawa. As long as China’s economy keep growing at an annual pace of 5% to 6%, that will translate into flight demand, given the strong correlation between growth of the air-travel market and gross domestic product, he said.

Spring Airlines Japan is aiming to return to profit by 2023, but it also has ballooning debts. For the fiscal year that ended in March, debt amounted to 10.7 billion yen ($97 million), almost double of assets of 5.7 billion yen. In June, JAL bought a controlling stake in the loss-making carrier. With six aircraft, it was hard to lower fixed costs, although the carrier plans to add a few more planes in coming years, according to Yonezawa.

“Chinese travel to Japan is likely to resume its strong growth post-pandemic,” said James Teo, a Bloomberg Intelligence analyst. “Spring Airlines has a strong brand in China and that affiliation can help Spring Japan to tap China-sourced customers.”

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