Low Fares FLY HIGH in Asia Pacific

NICHOLAS IONIDES reports on the latest news from the Asia-Pacific’s airports and skies


Air Asia’s Tony FernandesLOW-COST AIRLINES WERE ALL BUT unheard of in the Asia Pacific until AirAsia introduced its low-fare, no-frills concept to South-East Asia in December 2001, and instead were mainly found in Europe and North America. But they are now going from strength to strength in many parts of the region, providing more affordable travel options to more places. For example, AirAsia now flies to more than 45 destinations around Malaysia, Thailand, Indonesia, Macau, China, Philippines, Cambodia and Vietnam.

By now well established in Australia, India, Indonesia, Malaysia, the Philippines, Singapore and Thailand, low-cost carriers (LCCs) are continuing to spread their wings into new markets such as China, Nepal, Sri Lanka, South Korea and Vietnam.

According to Carlson Wagonlit Travel data, budget carriers now represent 20% of client air transactions in the Asia Pacific and account for more than half of all new aircraft capacity being introduced.

OAG (Official Airline Guide) data shows that budget airlines accounted for 12% of available seats on intra-Asia flights in 2007, up from less than 1% in 2001. The Sydney-based Centre for Asia Pacific Aviation predicts that low-cost carriers will represent 20% of seats in the region by 2010 and 25% by 2025.

And they are having a positive effect on airfares – at least from a traveller’s point of view. On the Singapore-Kuala Lumpur route, for example, AirAsia, Jetstar Asia and Tiger Airways started competing with Malaysia Airlines and Singapore Airlines on 1 February 2008 and fares have come down sharply.

AirAsia group chief executive Tony Fernandes called the opening of the route “a historic day for Asian aviation. I believe it’s the start of mass liberalisation and the end of the journey of high fares.”


New markets in sight
for Singapore-based
Tiger Airways
PHOTO: TIGER AIRWAYSSouth-East Asia is where much of the low-cost growth has been seen. Malaysia-headquartered AirAsia has led the way by expanding in part through joint-venture associate airlines in other countries, such as Indonesia and Thailand. Singapore-based Tiger Airways has followed suit by setting up an offshoot in Australia and planning for another in South Korea, and possibly the Philippines. Another one to watch, Indonesia’s Lion Air, is planning to set up associated airlines in Australia and Thailand.

In India, meanwhile, there has been huge growth and many new players are today offering significantly lower fares. In the 12 months to 31 March 2007, the number of domestic air travellers increased 39.5%.

Elsewhere in South Asia, Bangladesh and Sri Lanka both boast new players, while Nepal got its first LCC recently when Sharjah-based Air Arabia tied up with local carrier Yeti Airlines to establish flyyeti.com.

Air Arabia chairman Sheikh Abdullah Bin Mohammad Al Thani said of the reason for choosing Nepal: “We remain focused on youthful, fast-growing markets where the opportunities for growth are greatest. Nepal, with a population of 29 million and a median age of just 20, is clearly among them.”

North Asia is another fast-growing region and South Korea is poised to take off in a big way. Korean Air (KAL) is launching a subsidiary called Air Korea; Kim Young-Ho, president of KAL’s passenger division, says it is being established to “proactively deal with changes in the airline industry.” It will be challenged by Tiger Airways, which is establishing a Seoul-based carrier in partnership with the Incheon government.

The Asia Pacific is also now home to some of the first “long-haul low-cost carriers”, namely Oasis Hong Kong Airlines, Jetstar from Australia and AirAsia X from Malaysia.

But the fastest growth is still coming from travel within the region and liberalisation has much to do with this. Members of ASEAN are seeing the economic benefits air travel growth is having and have agreed that from the end of this year they will eliminate restrictions on flights between their capital cities. This far-reaching move shows that there is clearly much more to come from the region’s aggressive new players.

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