Thursday, January 01, 2004
Asia welcomes low-cost flying
The New York Times has an interesting story on the profusion of low-cost carriers in south-east Asia, with a special focus on Malaysian low-cost carrier, Air Asia.
AirAsia today handles 11,000 passengers a day with a fleet of 18 planes, offering fares as low as $2.60. (Ryanair has fares between European cities for under one euro, about $1.25.) This month AirAsia started its first international flights, to neighboring Thailand. It will start flying next year to Indonesia, with its 235 million potential passengers, and possibly will begin service to India and China, with a combined market of 2.3 billion.
Lured by AirAsia's success and the rapid growth of Asia's consumer class, discount airlines are popping up all over: Indonesia has Lion Air and Air Paradise International, the Philippines has Cebu Pacific Air, Thailand has One-Two-Go and former executives from Singapore Airlines plan to set up a budget airline called ValuAir next year. The incumbents are striking back. Singapore Airlines is starting a discount carrier next year to be called Tiger Airways, and Thai Airways International is looking for partners to help it start a discount carrier of its own.
Views on whether low-cost airlines will flourish in Asia vary, however, depending on whom you ask. Those who sell airplanes, airports or advice tend to be of the opinion that low-cost carriers will redraw Asia's socioeconomic map, offering affordable international travel to millions and thereby fostering the integration of a region divided by water, politics and poor infrastructure.
But analysts who follow established carriers say it is the other way around - the success of low-cost airlines depends on that map being redrawn. There are too few bilateral agreements that allow new, low-cost carriers to fly between countries, they say, and too few of the satellite airports that the airlines need to keep costs low. Moreover, in a region where most people still earn less than $7 a day, not enough people are well enough off to support a budget airline industry, they contend.
But many analysts contend that it was lack of competition that enabled big carriers like Singapore Airlines and Cathay Pacific Airways in Hong Kong to chase higher margins by wooing first-class passengers. Low-cost carriers, they predict, will tap pent-up demand among less affluent Asians who typically travel by bus and hardly expect attentive service. AirAsia has already assumed a proletarian flavor - its slogan is "Now everyone can fly."
To keep costs down, AirAsia operates only one type of aircraft, the Boeing 737-300. It has no business class, no frequent-flier program and no in-flight meals, and it uses no air bridges into the terminals. Upon arrival, passengers descend stairs to the tarmac. It sells tickets directly over the Internet and even lets passengers book using their mobile phones. Flight attendants help clean the planes after landing, then board the next group of passengers. The result: In the year ended June 30, AirAsia earned 30 million ringgit ($7.9 million) on sales of 324 million ringgit ($85.5 million).
I will be flying India's first low-cost carrier, Air Deccan sometime next week. Though it doesnt offer fares anywhere as cheap as Ryan or Air Asia ($40-$70 is the range), it will be still be an interesting experience, methinks.
AirAsia today handles 11,000 passengers a day with a fleet of 18 planes, offering fares as low as $2.60. (Ryanair has fares between European cities for under one euro, about $1.25.) This month AirAsia started its first international flights, to neighboring Thailand. It will start flying next year to Indonesia, with its 235 million potential passengers, and possibly will begin service to India and China, with a combined market of 2.3 billion.
Lured by AirAsia's success and the rapid growth of Asia's consumer class, discount airlines are popping up all over: Indonesia has Lion Air and Air Paradise International, the Philippines has Cebu Pacific Air, Thailand has One-Two-Go and former executives from Singapore Airlines plan to set up a budget airline called ValuAir next year. The incumbents are striking back. Singapore Airlines is starting a discount carrier next year to be called Tiger Airways, and Thai Airways International is looking for partners to help it start a discount carrier of its own.
Views on whether low-cost airlines will flourish in Asia vary, however, depending on whom you ask. Those who sell airplanes, airports or advice tend to be of the opinion that low-cost carriers will redraw Asia's socioeconomic map, offering affordable international travel to millions and thereby fostering the integration of a region divided by water, politics and poor infrastructure.
But analysts who follow established carriers say it is the other way around - the success of low-cost airlines depends on that map being redrawn. There are too few bilateral agreements that allow new, low-cost carriers to fly between countries, they say, and too few of the satellite airports that the airlines need to keep costs low. Moreover, in a region where most people still earn less than $7 a day, not enough people are well enough off to support a budget airline industry, they contend.
But many analysts contend that it was lack of competition that enabled big carriers like Singapore Airlines and Cathay Pacific Airways in Hong Kong to chase higher margins by wooing first-class passengers. Low-cost carriers, they predict, will tap pent-up demand among less affluent Asians who typically travel by bus and hardly expect attentive service. AirAsia has already assumed a proletarian flavor - its slogan is "Now everyone can fly."
To keep costs down, AirAsia operates only one type of aircraft, the Boeing 737-300. It has no business class, no frequent-flier program and no in-flight meals, and it uses no air bridges into the terminals. Upon arrival, passengers descend stairs to the tarmac. It sells tickets directly over the Internet and even lets passengers book using their mobile phones. Flight attendants help clean the planes after landing, then board the next group of passengers. The result: In the year ended June 30, AirAsia earned 30 million ringgit ($7.9 million) on sales of 324 million ringgit ($85.5 million).
I will be flying India's first low-cost carrier, Air Deccan sometime next week. Though it doesnt offer fares anywhere as cheap as Ryan or Air Asia ($40-$70 is the range), it will be still be an interesting experience, methinks.
