Spring Airlines, a low cost carrier in China, confirmed it has started the preparatory work of establishing a subsidiary in Japan, though it did not disclose specific timetable. It is believed that the new company, after being put into service, will launch air services in the Japanese domestic market, and services between Japan-China, Japan- South Korea.

Spring Airlines is the first budget airline in China which operates a fleet of 30 aircraft. The airline has opened 57 routes from its 4 domestic bases - Shanghai Hongqiao, Shanghai Pudong, Shenyang and Shijiazhuang. The carrier has launched services to Hong Kong and Macau, plus three Japanese routes.

Wang Zhenghua, chairman of Spring Airlines, said Japan is the airline's key overseas market among the areas within 5-hour flight duration time from China. Meanwhile, setting up a Japanese subsidiary is an important step forwards its overseas expansion. The budget airline also seeks to build joint ventures in Hong Kong, Macau and South Korea.

Pilots in China are in short supply, while Japan has abundant pilot resources. In particular, Japan Airlines withdrew its loss-making routes after bankruptcy, which leads to excess pilots than it currently needs. Spring Airlines can take full advantage of the pilot resources after entry into the Japanese market.

However, there is another problem. Spring Airlines operates a fleet of all- Airbus 320 aircraft, but the majority of Japanese pilots are more familiar with Boeing aircraft. Spring Airlines is more likely to make a choice between Airbus 320 and Boeing 737-800 after establishing the subsidiary.

Spring Airlines is subject to the restrictions of Japan government's policy. Since Japan has a protectionist and isolationist market, Spring Airlines should establish a joint venture with a stake of not more than 33 percent in Japan. "A stake of 33 percent is too low for Spring Airlines, and we are worried that this will limit our influence during decision-making," Wang said. Currently, the airline is in talks with its Japanese partner.

Spring Airlines is not the only carrier seeking to explore the Japan's low-cost air market. AirAsia Japan, a joint budget airline between AirAsia and All Nippon Airways, has announced to launch three Japan domestic air routes in August and two international routes in October. Another budget carrier Peach Airlines has been put into service from March. In addition, Japan Airlines has established a joint venture - Jetstar Japan, which will operate Japan's domestic services starting from July this year. Spring Airlines is inevitable to face "low cost competition" after entry into Japan.