China aviation billionaire emerges on budget airlines IPO

Wang Zhenghua, chairman of Spring Airlines Co., became a billionaire as the stock surged after staging the first initial public offering of a Chinese airline since 2002.
Shares of the low-cost carrier jumped 44 percent on its trading debut on Jan. 21, and climbed by the 10 percent limit for eight straight days, tripling in value. The 10 percent increase yesterday boosted Wang’s net worth to USD1 billion, according to the Bloomberg Billionaires Index.
“The IPO came at a very good time,” said Han Yichao, a Shanghai-based aviation analyst at Chang Jiang Securities, over the phone. “Spring Air is lucky because the whole aviation sector soared last year and shares of most companies have doubled.”
Airline stocks are riding a bull market. A global surplus has driven oil prices almost 50 percent lower last year. That in turn cut expenses for jet fuel and boosted the valuation for the aviation industry and Spring Air’s offer price for its initial share sale, Han said.
China Eastern Airlines Corp., the nation’s second-largest airline by market capitalization, said Friday it expects profit in its fiscal year to rise as much as 60 percent, citing stronger operation capacity and lower jet fuel price.
Spring Air plans to buy new aircraft as rising incomes drive up demand for air travel across Asia. In the first 11 months of 2014, mainland Chinese tourists made more than 100 million international trips, topping the travel total for the previous year, according to data from the China National Tourism Administration.
Wang, 70, started the airline in 2005, and derives the bulk of his wealth from the 26 percent stake in the company. He is optimistic about the outlook for budget airlines in China because the market is still dominated by full-service carriers.
“Low-cost airlines has less than 5 percent of the market in China,” Zhang Wu’an, a spokesman for Spring Air, said in an e-mailed statement yesterday. “It has a bright market prospect in the future.” Jill Mao, Bloomberg