When the COVID-19 pandemic spread all over the world last year, the aviation industry was one of the industries that suffered the greatest impact. Spring Airlines reported a loss of more than RMB 400 million in the first half of the year. However, in the second half the company turned its losses into profits, despite it being insignificant compared to its annual profit of more than 1.8 billion in 2019. Under the circumstance of the pandemic and all major airlines suffering huge losses, which included Hainan Airlines applying for bankruptcy, the performance of Spring Airlines stood out within the aviation industry.

How did Spring Airlines earn higher profits with cheaper fares? The chairman of Spring Airlines Wang Zhenghua once said, "Everything can be on a budget, except the airline's safety, employees, and punctuality."

Spring Airlines' ground pick-up cars are made locally in China, the staff uniforms are inexpensive, and most of the airline staff are fresh graduates. In addition, Spring Airlines only has one aircraft type and they try to reduce the amount of paint used without compromising on its quality, so as to reduce the weight of the aircraft itself and increase the ability to store more checked luggage.

Spring Airlines is unique in its low-cost and profitable operations. They built their own online ticketing sales system even though they had to invest more than RMB 20 million in it. However, they saved a significant amount on ticketing agent fees and greatly reduced their marketing expenses. They were also the first airline to use automated self-service machines in the airport. They only provided a free bottle of mineral water on board, and charge for other items including food. In order to reduce the use of electricity, meals on board come with self- heating.

After the passengers disembark, flight attendants undertake the cleaning work, which saves on cleaning fees. On the surface, Spring Airlines seemed to be only saving on the cost of food and cleaning, but in fact they saved a lot of hidden costs. A budget airline's method of profiting is not by lowering the benefits of flight staff, but rather to build a budgeted operative mechanism from a comprehensive system established by the company, so as to maintain its core competitiveness.

To sum it up, being low cost is not the only competitive advantage for enterprises. It is also necessary to establish a budgeted operative system so that enterprises can continuously profit through operating this system, thus creating its competitive advantage.

About The Author

Professor Zhou Bin is the first generation of professional managers after China's reform, and a Professor at APEC Institute of Business. His main research areas are in the establishment of core competitive advantage of enterprises, unhealthy organisations etc.