JAL targets Spring Japan takeover

JAL – Japan Airlines (JL, Tokyo Haneda) has confirmed plans to take control of Spring (IJ, Tokyo Narita) later this summer. Sources familiar with developments told the Kyodo news agency that JAL is looking to inject an additional several billion yen into the LCC, possibly by the end of June, to increase its stake to 51% or more. At present, Spring Japan is majority-owned by Chinese LCC Spring Airlines (9C, Shanghai Hongqiao) with JAL owning around 5%. The sources said JAL’s rationale is to tap into an expected surge in demand for post-pandemic travel between China and Japan. Founded in 2012 as Spring Airlines Japan (IJ, Tokyo Narita), Spring has focussed primarily on the Japan-China market offering flights from Tokyo Narita to each of Harbin, Nanjing, Sapporo Chitose, and Tianjin. It also offers domestic flights from Narita to each of Hiroshima Int’l, Sapporo Chitose, Saga. Despite being around for almost 10 years, its fleet growth has been tepid – three B737-800s between 2014 and 2016 growing to six in 2017 where it has remained ever since. According to Spring Airlines’ financials, its Japanese subsidiary has yet to post a profit and while it had made progress in reducing its losses in 2019, the COVID-19 pandemic has wiped out all and any improvements made. Spring Airlines’ CFO and Secretary of the Board, Chen Ke, said the Chinese carrier had had to inject CNY750 million yuan (USD105 million at the time) into Spring Japan in July 2020 to help shore up its capital reserves. However, while Spring Airlines controls 57% of its Japanese subsidiary, by law, its voting rights, as a foreign entity, are capped at 29% thus limiting its effective control. For its part, JAL has already signalled its intentions for Spring. In March, it said it was planning to invest a total of JPY10 billion yen (USD92 million) into Spring Japan and Jetstar Japan (GK, Tokyo Narita) (in which it owns 50%) to help solidify the two budget airlines’ finances which have taken serious hits as a result of COVID. Aside from Jetstar, JAL Group currently includes ZIPAIR Tokyo (ZG, Tokyo Narita), a low-cost carrier that plans to orient itself towards the medium- and long-haul services niche using B787-8s.