7 April 2012
WHEN low-cost carriers (LCCs) burst onto Asia’s aviation landscape about a decade ago, they were initially greeted with scepticism due to restrictive bilateral air service agreements, lack of secondary airports and low Internet and credit card penetration.
However, with creative collaboration (e.g. working with convenience stores and post offices to distribute tickets), liberalised air service agreements and improved infrastructure, budget air travel swiftly took hold in the region, with South-east Asia seeing the fiercest competition.
Kuala Lumpur’s Low Cost Carrier Terminal quickly reached its designated capacity and a huge replacement in Sepang – dubbed klia2 – with a handling capacity of 45 million passengers per annum (mppa), is due for completion in April 2013.
In Singapore, budget travellers accounted for 25.8 per cent of Changi Airport’s total passenger throughput in 2011; the existing Budget Terminal will soon make way for the 16-mppa Terminal 4, which is expected to be completed in 2017.
South-east Asia may be the most fertile LCC playing field but North Asia is fast making up for the lost ground. South Korea’s handful of budget carriers has ventured beyond its shores and Japan is the next place to watch with three LCCs – Peach Aviation, Air Asia Japan and Jetstar Japan – making their debut services in 2012.
But questioning the growth potential of LCCs in high-cost Japan, Standard & Poor’s Asia-Pacific aviation editorial director, Shukor Yusof, said: “Rail travel remains a profitable and viable alternative because it’s point-to-point as compared to air travel, plus there are few secondary airports in Japan.”
The failed attempts of two longhaul LCC pioneers – Oasis Hong Kong Airlines and Viva Macau – have not dampened the enthusiasm or ambition of new players. Asia’s longhaul LCC forerunners, Jetstar Airways and AirAsia X, are now getting imminent competition from Scoot Airways, Cebu Pacific Air and Tokyo-based Skymark Airlines, which is entering the fray with its Airbus A380s and A330s.
|Flightcode||MM / APJ|
|Primary base||Osaka Kansai Airport|
|Current fleet||3 A320s (leased)|
|On order||7 A320s (leased)|
|Current destinations||Osaka, Fukuoka, Sapporo, Nagasaki and Kagoshima|
|Planned destinations||Seoul-Incheon (starting May 8), Hong Kong (starting July 1), Taipei (starting September 30), Okinawa (second half of 2012)|
A joint venture between All Nippon Airways (ANA), Japan’s Innovation Network Corp and Hong Kong’s Far Eastern Aviation, Peach Aviation is Japan’s first homegrown LCC with a capitalisation of 15 billion yen (US$179 million).
The first of three Japan-based LCCs starting operation in 2012, Peach will be competing with 10 foreign LCCs already present in the Japanese market. Its fleet of A320s will operate on an 180-seat all-economy configuration, with 18 emergency-exit seats offering bigger legroom at a premium.
Standing for “Pan-Asia, Energetic, Affordable, Cute&Cool and Happy”, Peach promises to deliver a Japanese standard of service; cabin crew sports casual uniforms and planes are outfitted in white, pink and fuchsia. Aspiring to “bridge Japan and other Asian economies”, Peach will fly to regional destinations such as Seoul, Hong Kong and Taipei.
For the Osaka-Fukuoka route, Peach’s fares in early March were priced between 3,780 yen and 11,780 yen, considerably lower than tickets offered by Japan Airlines and ANA (between 20,000 yen and 21,900 yen).
A ticket on the Shinkansen high-speed train – whose highly-convenient city-to-city connections pose the greatest competition to Peach on the domestic front – costs about 14,000 yen between both cities.
|Flightcode||Yet to be announced|
|Primary base||Singapore Changi Airport (T2)|
|Planned fleet||4 B777-200s for the initial phase but up to 14 aircraft by 2016|
|Confirmed destinations||Sydney, Gold Coast (starting mid-2012)|
|Planned destinations||China, North Asia, more Australian cities, India, the Middle East, Africa and Europe. North America is not of immediate priority but has not been discounted|
Singapore Airlines (SIA) surprised the industry when it announced the launch of a new budget arm, Scoot Airways, in May 2011.
With a startup capital of S$280 million (US$221 million), Scoot will operate services of up to 10 hours from Singapore, beginning with daily flights to Sydney and the Gold Coast in Australia in June. Destinations in China and Japan are likely to be announced soon, while India, the Middle East, Africa and Europe are also on the radar.
Using B777-200s phased out of SIA’s fleet, Scoot planes will have denser configuration, with a business-class cabin offering 38-inch pitch and 22-inch wide seats. The economy-class layout has not been revealed but each row is expected to have 10 seats, an arrangement found even on such full-service carriers as Air France, Emirates and KLM.
Describing the airline as “quirky and memorable”, Scoot’s CEO, Campbell Wilson said that the carrier would not be solely dependent on Singapore’s small market size, and its target segment was different from that of the parent company.
Services such as baggage, meals, preferred seating, extra legroom, priority boarding and carriage of sports equipment have been unbundled but some of these will be packaged with a seat booking. Bookings are expected to open by end-March.
“Scoot is SIA’s answer to declining profits and an attempt to exploit the low-cost, mid-haul markets that are currently underserved,” said Shukor Yusof, Standard & Poor’s Asia-Pacific aviation editorial director. “Scoot is also a move to steal some of the thunder from Jetstar.”
Scoot’s main rivals, Jetstar Airways and Jetstar Asia Airways, will base a combined A300-200s and B787 Dreamliners fleet in Singapore for their growing Asia-Pacific network. Ironically, Scoot’s launch of Sydney as its first destination finally prodded the Malaysian authorities to grant AirAsia X the rights to fly to Sydney – a route the Malaysia-based LCC has unsuccessfully lobbied for in the past several years.
Cebu Pacific Air
|Flightcode||5J / CEB|
|Primary bases||Manila and Cebu|
|Current fleet||20 A320s, 10 A319s, 8 ATR72s|
|On order||7 A320s, 30 A321NEOs, 8 A330-300s (to be leased)|
|Current regional destinations||19 cities including Bangkok, Singapore, Taipei, Ho Chi Minh City, Hong Kong, Macau and Shanghai|
|Planned long-haul destinations||Australia, India, Middle East, parts of Europe and the US|
To replicate its dominant domestic position in the long-haul market, Cebu Pacific Air (CEB) recently signed a lease for four Airbus A330-300s, which will be configured with more than 400 seats in a single-class layout. These planes will commence operation in the third quarter of 2013 on flights to cities with a high concentration of migrant Filipino workers, such as Hawaii, Saudi Arabia and the United Arab Emirates.
CEB’s CEO, Lance Gokongwei, said: “CEB plans to charge fares that are 35 per cent lower than our rivals, which would particularly appeal to the estimated 11 million Filipinos working abroad.”
Europe, where over one million Filipino expats reside, is not a priority on CEB’s expansion plans due to the wide geographical spread of Filipinos, high fuel costs and an EU ban on Filipino airlines. The range of the A330s also meant that any destination beyond Istanbul and Moscow needs to be served with an intermediate stop, a similar situation affecting the US west coast cities such as San Francisco and Los Angeles.
With its extensive local network, CEB is the leading budget carrier in the Philippines, where LCC penetration is one of Asia-Pacific’s highest at 80 per cent. Other local budget carriers include AirPhil Express, Zest Air, AirAsia Philippines and SEAir, most of which also compete in the regional markets.
Thai Smile Air
|Primary base||Bangkok Suvarnabhumi Airport|
|Planned fleet||11 Airbus A320s by 2015|
|Planned domestic destinations||Ubon Ratchathani, Udon Thani, Khon Kaen, Chiang Rai and Surat Thani|
|Planned international destinations||Kaohsiung, Shenzhen, Macau, Surabaya, Singapore and Kuala Lumpur|
|Planned routes||Phuket-Singapore, Phuket- Kuala Lumpur, Phuket-Chiang Mai|
For a brief period, Thai Airways International (THAI) flirted with Singapore-based Tiger Airways to establish a joint-venture LCC, tentatively named Thai Tiger Airways. (THAI also owns Nok Air, a domestic LCC.) By end-2011, all talks of Thai Tiger fell through, and in its place emerged Thai Smile – renamed from Thai Wings – the new LCC entity of THAI.
Positioned as a hybrid LCC between the no-frills Nok Air and the premium THAI, Thai Smile offers a two-class service with a cost base similar to a budget airline.
With Suvarnabhumi Airport as its base, Thai Smile will fly to popular domestic destinations such as Chiang Rai and Surat Thani, and intends to compete with Thai AirAsia to erode the latter’s stronghold on the domestic LCC market.
The new carrier will commence operation on July 1 with a fleet of new 174-seat Airbus A320s, flying to regional cities such as Kaohsiung, Shenzhen, Macau and Surabaya. Other planned routes include flying from Phuket to Singapore, Kuala Lumpur and Chiang Mai. Thai Smile expects to have a fleet of 11 A320s by 2015.
|Primary bases||Jakarta and Denpasar|
|Planned fleet||10 Airbus A320s|
|Confirmed destinations||Yet to be announced|
|Website||Yet to be announced but potentially via www.tigerairways.com|
A private LCC that suspended operations in January 2011 after falling on hard times, Mandala Airlines was revitalised when Tiger Airways paid a token one US dollar for a 33 per cent share.
With its Aircraft Operator’s Certificate now re-activated, the restructured airline will resume flights on April 4 on Airbus A320s provided by Tiger Airways, in addition to loans injected by Tiger and other Mandala stakeholders.
Mandala will compete with other Indonesian LCCs such as Lion Air, Citilink and Indonesia AirAsia in the domestic and regional markets. It also has to contend with second-tier carriers such as Sriwijaya Air and Batavia Air.
As of early-March, Mandala has not announced its destinations but they are likely to be located within a five-hour flight time from Jakarta and Denpasar.
This article was first published in TTG Asia, March 23 issue, on page 8. To read more, please view the digital edition
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