In the context of sharply rising aviation fuel prices, Spring Airlines Co.,Ltd. (SSE: 601021) has delivered a report card showing a severe decline in performance. In the first three quarters of this year, affected by escalating costs, the company's profit fell by more than 20% year-on-year.
Post-pandemic, the domestic civil aviation industry has faced multiple pressures including intensifying competition and rising costs, significantly narrowing industry profit margins. In recent years, Spring Airlines' profit growth has continued to be sluggish. In the most recent three third-quarter reports, the company's profit has continuously declined year-on-year with the decline rate expanding each time. As of the end of the third quarter this year, the company's liquid funds could still cover short-term debt, but its debt-to-asset ratio has reached a four-year high for the same period. The company will also need substantial capital investment for aircraft procurement in the coming years. In August this year, Spring Airlines launched a bond issuance plan with a total financing amount not exceeding 10 billion yuan. If the plan is successfully implemented, it will help ease the company's medium- and long-term funding pressure, but it also means the company's future financial leverage will rise further. Against the backdrop of high oil prices and overall industry pressure, Spring Airlines' subsequent operational pressure and financial risks should not be underestimated.
Profit Declines for Three Consecutive Periods, Q3 Peak Season Profit Still Falls Over 30%
Spring Airlines listed in 2015 and is the first low-cost airline in China. The company is primarily engaged in air passenger and cargo transport services and related services. Last year, nearly 98% of the company's revenue came from air passenger transport. In the first three quarters of this year, Spring Airlines achieved revenue of 19.35 billion yuan, up 15.38% year-on-year; realized net profit attributable to shareholders of 1.843 billion yuan, down 21.08% year-on-year; and realized non-GAAP net profit of 1.817 billion yuan, down 21.46% year-on-year.
Post-pandemic, Spring Airlines has consistently achieved "dual growth in revenue and profit" in recent years. Last year, the company's revenue had grown by more than 40% compared to 2019. However, the company's profit grew by less than 30%. In the past two years, the company's year-on-year profit growth rate has been less than 2%. On the revenue side, from 2023 to 2025, the company's year-on-year revenue growth rates were 114.34%, 11.5%, and 7.3% respectively, showing a continuous decline. Behind this, although the civil aviation industry has continued to recover in recent years, it also faces multiple challenges, including weak growth in high-value business travel and diversion risks, and huge differences between peak and off-peak private travel demand. Combined with intensifying market competition and rising operating costs, industry profit margins have been significantly compressed. Although Spring Airlines' gross margin has not changed much in recent years, dragged by factors such as increased employee compensation, the company's period expenses have surged significantly, putting considerable pressure on profit margins.
In the first three quarters of this year, Spring Airlines' revenue growth rate increased notably year-on-year. However, the company's profit decline further expanded year-on-year. Regarding the year-on-year profit decline, the company stated it was mainly due to the significant rise in aviation fuel prices causing a decline in gross margin. Financial reports show that in the first three quarters of this year, Spring Airlines' operating costs increased 23.11% year-on-year, far exceeding revenue growth. The company's gross profit declined significantly year-on-year, and its gross margin decreased 5.5 percentage points year-on-year to 12.18%. Looking at a longer time span, in the most recent three third-quarter reports, Spring Airlines' profit has continuously declined year-on-year with expanding declines. This indicates that the company's profit pressure is not merely disturbed by short-term oil price factors, but is the result of multiple superimposed pressures.
From operational data, in the first three quarters of this year, Spring Airlines continued to expand capacity, but the company's overall load factor was 80.2%, down 2.8 percentage points year-on-year. The company's capacity expansion in the first three quarters was mainly concentrated on domestic routes, while its domestic route passenger load factor has reached 93.52%, with limited room for further improvement. During the reporting period, although the company's international route passenger turnover increased year-on-year, the number of passengers carried decreased 8.94% year-on-year. This indicates that the growth in international route passenger turnover was mainly driven by longer flight distances rather than passenger volume growth, which also sows hidden concerns for the company's sustained profit improvement.
It is worth noting that Q3 is the traditional peak season for the civil aviation industry, yet Spring Airlines' Q3 profit performance was not optimistic. In that quarter, the company's revenue and net profit attributable to shareholders changed by 8.47% and -31.37% year-on-year respectively. Among these, Q3 revenue growth was the lowest in the first three quarters, and although the profit decline in that quarter narrowed quarter-on-quarter, it still exceeded 30%. As Q4 is a traditional off-peak season and the impact of high oil prices persists, Spring Airlines' full-year profit pressure remains significant.
Financial Burden Intensifies in First Three Quarters, Massive Capital Expenditure Raises Debt Risk
The medium- and long-term capital expenditure and debt pressures facing Spring Airlines also cannot be ignored. In the first three quarters of this year, Spring Airlines' net operating cash flow increased 10.94% year-on-year, and the company's net cash flow from financing activities also turned positive from negative year-on-year. During the reporting period, the company's net increase in cash and cash equivalents reached 2.162 billion yuan, turning positive from negative year-on-year. As of the end of the third quarter, the company's cash and cash equivalents balance reached 8.811 billion yuan, up 32.52% from the beginning of the year.
As of the end of the third quarter, Spring Airlines' short-term borrowings and non-current liabilities due within one year totaled 8.356 billion yuan. Although the company's liquid funds can still cover short-term debt, considering that Q4 is a traditional off-peak season and high oil price pressure still exists, the company's operating cash flow may decline, and its short-term debt repayment capacity may still face a test. More critically, the company's continued capacity expansion still requires massive capital expenditure, which will continuously put pressure on the company's liquidity.
At the end of December last year, Spring Airlines disclosed an aircraft procurement plan. The company intends to purchase 30 Airbus A320neo family aircraft from Airbus. The total transaction price is expected not to exceed the list price of 4.128 billion US dollars (approximately 27.6 billion yuan). The transaction adopts an installment payment method. The company will provide funding through its own funds, commercial bank loans, or other financing methods. The above aircraft are expected to be delivered in batches from 2028 to 2032.
In recent years, Spring Airlines has continued to expand its fleet size, and the company's debt scale has risen significantly. As of the end of the third quarter this year, the company's total liabilities were 34.28 billion yuan, up 19.4% from the end of last year. The company's debt-to-asset ratio was 65.41%, up 4.16 percentage points from the end of last year, at a post-pandemic high for the same period.
In the first three quarters of this year, Spring Airlines' financial burden clearly intensified. During the reporting period, the company's financial expenses increased 25.85% year-on-year to 293 million yuan. Among these, interest expenses reached 402 million yuan, up 7.15% year-on-year. In November this year, Spring Airlines explicitly stated during an exchange with investors that as aircraft and engine projects gradually advance, the company's future capital expenditure is expected to increase compared to previous years. At the same time, the aircraft procurement plan was made based on the company's long-term development plan, and the implementation of this plan will not be delayed.
Based on considerations of optimizing debt structure and broadening financing channels, in August this year, Spring Airlines launched a bond issuance plan with a total financing amount not exceeding 10 billion yuan. According to the issuance prospectus, the bond term shall not exceed 5 years (including 5 years). The proceeds from this issuance, after deducting issuance expenses, will be used to supplement working capital, repay interest-bearing liabilities, purchase fixed assets, or other purposes in compliance with laws and regulations. The above issuance plan is still in progress.
In recent years, Spring Airlines' cash and cash equivalents balance has shown a significant downward trend. If this issuance plan is successfully implemented, it will help strengthen the company's liquidity buffer and provide funding support for subsequent capital expenditure, but it will also further push up the company's debt scale and increase its financial burden. Against the backdrop of increasingly fierce market competition, high oil prices, and overall industry pressure, the company's subsequent operational pressure and financial risks deserve continued attention.
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