Spring Air to restore Korea flights as political tensions ease

[HONG KONG] Spring Airlines Co, China's biggest budget carrier, plans to resume some flights to South Korea as easing tensions between the two neighbours encourage mainland tourists to return to the peninsula's popular destinations.

Relations between China and South Korea are better than a few months ago, and that should enable the airline to boost its services, chairman Wang Yu told Bloomberg Television's Tom Mackenzie in an interview this month.

Earlier this year, a partial deployment of a US missile shield in South Korea sparked a row with China, resulting in curbs on packaged tours by Chinese citizens.

"We are optimistic about short- and mid-haul international flights and will resume and add new flights in line with market demand, capacity and slot availability," Mr Wang said in Shanghai.

"We will add more flights to Japan and South Korea."

Conciliatory gestures from China after South Korea's new President Moon Jae-In agreed to suspend the missile system mean the blocked gates for tourists are opening, said Corrine Png, chief executive officer of Crucial Perspective, a research firm focused on Asian transport equities, in Singapore.

About 8.1 million Chinese visited South Korea last year, accounting for almost 50 per cent of total tourist arrivals, according to data provided by Korea Tourism Organization. In the first five months of this year, the arrivals fell 35 per cent.

"We essentially expect the traffic to gradually come back," said Ms Png.

"It will take three to six months."

Punitive Steps

Mr Wang, 47, succeeded his father Wang Zhenghua as Spring's chairman in March, when tensions escalated between the two countries. After the previous South Korean administration decided to station the US missile system, called Thaad, China saw the move as a threat to the security balance in the region and struck back with non-tariff, punitive trade measures.

Besides the ban on packaged tours, it heightened customs scrutiny of Korean goods and excluded cars with South Korean batteries from government subsidies.

As a result of the curbs, Shanghai-based Spring scaled down the number of flights to popular tourist destinations in South Korea such as Jeju and re-assigned many of its 73 Airbus SE A320 jets on domestic routes, contributing to a 16 per cent drop in shares since end-February.

In a sign that bilateral relations may be starting to thaw, Jeju Air Co said Tuesday that it won China's approval, the first this year, to fly two chartered services to Zhangjiajie in Hunan province later this month.

Bangkok is another Asian city Wang has his sights on. Starting this month, he plans to deploy a third aircraft to fly between the Thai capital and China, he said. Spring Air also wants to add more flights to Bangkok from Nanchang, the capital of eastern Jiangxi province, Hefei and Guangzhou, cities that have seen surging outbound tourists.

As the carrier works toward expanding its domestic network, it is facing challenges in efforts to bolster the airline's presence at top-tier cities such as Beijing and Shanghai, where most slots are cornered by China's top-three state-owned carriers, Mr Wang said.

"Beijing has no slots, Shanghai's slots have been blocked for more than 12 months and other major airports don't have enough slots," Mr Wang said.

"For the airline industry, slot is like heritage. That's a big challenge for us."

BLOOMBERG