Japan Airlines to make local unit of China’s Spring Airlines a subsidiary, eyeing post-coronavirus travel recovery
- JAL will raise its stake in the low-cost carrier to 51 per cent to give it greater access to the Chinese market, anticipating travel returning to 2019 levels by 2025
- Analysts say while tensions between Tokyo and Beijing over issues like the Diaoyu/Senkaku islands could affect tourism, they still have strong economic ties
Anticipating a solid recovery in demand for foreign travel as soon as the coronavirus pandemic has been brought under control, Japan Airlines is to make the local unit of Chinese low-cost carrier Spring Airlines into a subsidiary.
JAL is to increase its stake in Spring Airlines Japan from its current 5 per cent to 51 per cent and will release the full details of the investment on May 7, when it unveils its midterm business plan, a spokesman for the Japanese company told This Week in Asia.
JAL raised about 180 billion yen (US$1.7 billion) through a public stock offering in November, with the cash injection being invested in replacing older aircraft and measures to survive the economic downturn brought on by the pandemic. Around 10 billion yen (US$92.8 million) will be allocated to the Spring Airlines deal.
Spring Airlines Japan was founded in 2012 and is based out of Narita International Airport. It flies to three domestic airports and to Chinese cities including Tianjin and Harbin.
“We are very much looking to the future and beyond the coronavirus pandemic and we believe this partnership with Spring Airlines will work well,” the JAL official said. “This will give us greater access to parts of the Chinese market that previously we have not been able to reach.
“We are looking three or four years into the future and we are anticipating that the industry should be back to 2019 levels by 2025,” he said.
The official also played down the risks associated with greater exposure to the Chinese market at a time of deepening geopolitical tensions in the Indo-Pacific region, emphasising that the new alliance is “all about getting over coronavirus and getting the industry moving again”.