Business Model Lines Blur as Budget, Legacy Airlines Slug it out

By David Leo, TODAY

The line between legacy airlines and budget ones continues to blur as more budget carriers fly beyond the four-to-five-hour range, eyeing markets traditionally served by full-service operators. AirAsia’s addition of Honolulu as a destination is just the latest.

At the same time, legacy airlines are starting budget offshoots, such as Lufthansa’s Eurowings and Singapore Airlines’ Scoot.


Image result for eurowings
Eurowings operates non-stop from Cologne and Bonn to destinations in the US (Seattle, Orlando, Miami and Las Vegas).

Long-haul operations are usually tough on the business models of budget airlines — fuel prices are a higher percentage of a budget carrier’s operating expenses — and there is no telling how long fuel prices will stay at their current low levels.

The longer the flight, the higher the expectations of creature comforts. But new and more fuel-efficient long-range aircraft are making it possible for low-cost carriers to ply the same distant routes that have traditionally been the domain of the big guys.

Reaching further

Budget aviation history is dotted with the failure of many who tried to go farther and failed. Yet, ambitious entrepreneurs, from Sir Freddie Laker — who pioneered the trans-Atlantic no-frills model in the 1970s with his Skytrain service — to AirAsia founder Tony Fernandes, keep trying.

This is the spirit of adventure that keeps the industry learning and thriving.

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Singapore based Scoot is looking beyond India and the Mideast to destinations in EU, starting with Athens in June. 

In June, AirAsia will introduce flights from Kuala Lumpur to Honolulu under its long-haul AirAsia X banner, becoming the first budget airline approved by the US Department of Transportation for operations between the US and Asia.

The flight will clock 16 to 18 hours, including a two-hour transit stop in Osaka. There will be four weekly services.

Mr Fernandes made a similarly bold move back in 2009, launching services to London, and, in 2011, to Paris. He did it despite the collapse in 2008 of Hong Kong’s Oasis Airlines, which commenced services to London (Gatwick) in 2006 followed by services to Vancouver in 2007.

Before it folded, Oasis was voted “World’s Leading New Airline” at the 2007 Annual World Travel awards.

Ultimately, Mr Fernandes also suspended AirAsia X’s operations to London and Paris in 2012, because of high fuel prices and weak demand.

Yet that setback has not stopped him from launching new services to Honolulu.

He has also confirmed that Air-Asia X will resume operations to London when the airline receives its new, more economical long-range Airbus A330-900neo fleet in 2018. Rome and Frankfurt are also in the plans.

More than just dollars

Price is a budget airline’s main feature and attraction. AirAsia’s introductory offer of RM2,300 (S$731) for a return ticket from Kuala Lumpur to Honolulu is a steal.

There will be takers, but unless AirAsia is able to grow the traffic for the route, the limited market may not be able to sustain it in the long run.

Honolulu is very much a leisure destination.


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AirAsia depends on feeds from its regional connections in countries such as Indonesia, Thailand and India. 

But AirAsia faces competition on this route from legacy airlines such as Japan Airlines, Korean Air, Air China, China Airlines and Philippines Airlines, whether direct from their home bases or in code-share arrangements with partner airlines such as Delta Air Lines and United Airlines.

Besides, tour planners for the US West Coast that include Honolulu as part of the itinerary are inclined to favour connections from San Francisco or Los Angeles.

AirAsia therefore cannot depend solely on point-to-point traffic between Kuala Lumpur and Honolulu.

Tweaking the model

As budget and legacy airlines continue to borrow ideas from one another, that is where the line blurs.

Full-service airlines are increasingly unbundling their products and offering meals and baggage space as add-ons.

British Airways is the latest airline to stop offering free meals for the short-haul, and ironically, Delta is considering re-introducing complimentary refreshments.


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A number of legacy airlines adopted the budget model of charging for checked baggage and while the global standard is one carry-on, Ryanair surprises by allowing two pieces. 

Ryanair too has become more customer focused, expunging its erstwhile terse take-it-or-leave-it attitude.

Some budget carriers are already offering premium class products, especially for the medium to long haul, to attract business travellers and others.

A common playing field can only mean cheaper seats for all. For passengers, that, at least, is the hope.


AirAsia Bags 4 Awards at 2015 World Travel Awards

Image Source: Airbus
The AirAsia group, which recently celebrated their 14th anniversary, received four prestigious recognitions at the 2015 World Travel Awards.
AirAsia won the ‘Asia’s Leading Cabin Crew,’ ‘World’s Leading Low Cost Airline’ title for the third consecutive year, the ‘World’s Leading Low Cost Airline Website’ and ‘World’s Leading Low Cost Airline App’ titles for the first time.
AirAsia also recently created history, beating other full-service carriers and won the title of ‘Asia’s Leading Cabin Crew’ at the World Travel Awards (Asia & Australasia) Gala 2015.

Asia’s Leading Cabin Crew is…Air Asia

AirAsia has re-written history yet again by becoming the first low-cost airline to be awarded ‘Asia’s Leading Cabin Crew’ at the prestigious World Travel Awards (Asia & Australasia) Gala 2015.


Other airlines nominated in the ‘Asia’s Leading Cabin Crew’ category include Air India, Cathay Pacific Airways, China Southern Airlines, Garuda Indonesia, Hainan Airlines, Hong Kong Airlines, Korean Air, Malaysia Airlines, Singapore Airlines, SriLankan Airlines and Thai Airways.

“I am very proud of what our team of cabin crew has achieved. It is an example of what pushing the boundaries mean – we are not just a low-cost airline, but an airline that provides high value. Being awarded ‘Asia’s Leading Cabin Crew’ is testament that low-cost doesn’t mean compromise on quality,” Tony Fernandes, Group CEO of AirAsia said.

Skytrax: AirAsia is The Best Low Cost Airlines in Asia and the World for 2015

PARIS —AirAsia was named the World’s and Asia’s Best Low Cost Airline at the recently concluded Skytrax World’s Airline Awards rites held at the Paris Air Show in Le Bourget for seventh consecutive year.

With 19 million customer surveys completed worldwide by over 160 nationalities, Skytrax is the global benchmark of airline excellence. It measures 41 key performance indicators of airlines front-line products and services. Skytrax award is one of the most prestigious airline industry accolades.

Tony Fernandes, CEO of AirAsia, received the awards at the Paris Air Show.

Fernandes dedicated the award to the 17,000 AirAsia Allstars and said, “We faced many challenges this past year but I am proud to say that our staff banded together for our guests and we have emerged stronger than ever. To be named the ‘World’s Best’ for the seventh consecutive year is an incredible honor, and I dedicate it to the 17,000 AirAsia Allstars who are the force behind it all.”

“We would also like to thank our guests and stakeholders for continuing to believe in us. We are committed to continue innovating on all fronts to provide our guests with not only the best value but also a superior travel experience and convenience using technology,” Fernandes added.

Datuk Kamarudin Meranun, executive chairman of AirAsia Berhad, said Skytrax’s recognition reinforces the efforts that the Group is taking to strengthen its services and network.

“And we will take every effort to live up to this recognition,” Meranun said.

The AirAsia Group comprises short-haul low-cost airlines AirAsia Berhad (airline code AK), Indonesia AirAsia (airline code QZ), Thai AirAsia (airline code FD), Philippine AirAsia (airline codes PQ & Z2) and AirAsia India (airline code I5).

AirAsia X, the long haul affiliate of the AirAsia Group,  was also  named the World’s Best Low Cost Airline Premium Cabin and Best Low Cost Airline Premium Seat by Skytrax for the second consecutive year.

Tan Sri Rafidah, chairman of AirAsia X Berhad, and Benyamin Ismail, acting CEO of AirAsia X Berhad, were present to receive the awards .

“We are thrilled to know that our guests have been enjoying the AirAsia X Premium Flatbed seats and we will work to further enhance our guests’ comfort and maintain our position as the best premium class cabin & seats in the low-cost airline category,” Meranun said.

Both AirAsia and AirAsia X Group have carried nearly 300 million guests since their inception in 2001 and 2007, respectively.

Source: Maila Ager,

AirAsia, CAE Invest In Philippine Aviation Academy

MANILA, Philippines – An aviation training center owned by Canada’s CAE Inc. and Malaysia’s AirAsia has invested in the Philippine Academy for Aviation Training (PAAT).

PAAT said the Asian Aviation Center for Excellence (AACE) recently made an investment in the training center, located in Clark, Pampanga.

The Kuala Lumpur-based AACE provides training for pilots, cabin crew, maintenance engineers, technicians, grounds service personnel as well as leadership and management training development for airlines throughout ASEAN.

“With this new partnership in the Philippines, AACE has come closer to our vision of expanding operations in the region to make AACE a truly ASEAN training hub offering a complete training system and state of the art facilities for the aviation industry,” Dato’ Fareh Mazputra, CEO of AACE, said in a statement.

Opening in Clark in December 2012, PAAT is an Aviation Training Organization approved by the Civil Aviation Authority of the Philippines to train pilots in Airbus A319/320/321 series.

“With the new investment and by working hand in hand with AACE, we are setting the stage for the Philippines to become an important destination for pilots, cabin crew and airline workers to gain additional experience, skills and world-class training opportunities,” PAAT general manager Raoul S. Pérez said.

AirAsia Philippines and AirAsia Zest have also signed a training services agreement with PAAT and have been using its facilities for the recurrent training of its pilots since April 2015.


Air Asia: Piso Fare Promo

MANILA, Philippines – Following the travel passes launch in February, Malaysian-based budget carrier AirAsia now offers again its “Piso Fare” promo.

This round offers 3 million seats for grabs and over 20 countries across AirAsia Group’s route network.

With a base fare of P1 ($0.22) and no fuel surcharge, passengers only need to pay for airport taxes and fees when booking for this promotion, AirAsia said.

International destinations covered in this promo include: Kota Kinabalu; Kuala Lumpur; Macau; and Incheon (Seoul). Domestic spots include Cebu; Davao; Kalibo (Boracay); Manila; Puerto Princesa (Palawan); Tacloban: and Tagbilaran (Bohol).

From Cebu, promo fares are also available for flights to Incheon (Seoul); Kota Kinabalu; Davao; and Cagayan de Oro.

Flights from Kuala Lumpur to Bali; Bangkok; Kalibo (Boracay); Kota Kinabalu; Hong Kong, Langkawi; Melbourne; Penang; Sapporo (transit via Bangkok); Seoul; Taiwan and many others are also on promotional sale.

The promotional seats started Monday, March 23 and ends Sunday, March 29. Travel period is from September 1, 2015 to May 31, 2016.

Booking starts for as low as P201.12 ($4.49) – all-in or for 1-way travel.

Promo seats can be booked via AirAsia’s website; mobile app on iPhone and Android devices; or access the site via mobile.

Apart from the Piso Fare promo, AirAsiaGo, the budget carrier’s low cost airline, is also presenting savings up to 75% when promo seats are booked together with hotel accommodation. Savings up to 50% are also available for those who would book for hotel accommodation.

The same promo booking period and travel period applies.

AirAsia flies to 90 destinations. AirAsia Philippines also operates a fleet of 15 aircraft.

Malaysian mogul Tony Fernandes, who transformed a floundering carrier into Asia’s biggest budget airline, faced his first major crisis after an AirAsia plane went missing last year.

AirAsia Flight QZ8501 with 162 people onboard went down in stormy weather on December 28, 2014, in the Java sea during what was supposed to be a short trip from the Indonesian city of Surabaya to Singapore.

Rescuers called off the hunt for the remaining passengers on March 17 this year, almost 3 months after Flight QZ8501 went down in stormy weather as it flew from the Indonesian city of Surabaya to Singapore, killing all 162 people on board.


Malaysia’s AirAsia Grants Fresh Loan To Philippine Unit


MANILA – The Philippine unit of Southeast Asia’s largest budget carrier has secured a fresh loan from its parent firm in Malaysia.

In a disclosure to Bursa Malaysia, AirAsia Berhad said it has provided financial assistance to AirAsia Inc amounting to $22.34 million.

The fresh loan would be used “to facilitate the ordinary course of business of AirAsia Inc.”

“The financial assistance provided does not have a material effect on the share capital, shareholding structure or net assets of the company,” Malaysia’s AirAsia said.

Southeast Asia’s largest budget carrier in August last year provided an $18-million loan to support the operation of its Philippine unit, then followed this up with another $55 million last November.

Malaysia’s Air Asia through AA International owns 40 percent of Philippines’ AirAsia, while Filipinos Marriane Hontiveros, Michael Romero, Antonio Cojuangco and Alfredo Yao hold the remaining 60 percent.

AirAsia Philippines recorded a net loss of 19.3 million Malaysian ringgit in the fourth quarter of last year from 24.8 million in the same period the previous year.

Despite the losses, AirAsia Berhard said Air Asia Philippines “remains on track with its turnaround plan, which is currently being implemented, to improve both yields and load factors.”

To recall, AirAsia Philippines secured the Securities and Exchange Commission’s (SEC) consent to acquire 100 percent of Zest Airways Inc.

In December last year, the Senate Committee on Public Services approved the sale of Zest Airways to AirAsia Philippines. The House Committee on Franchise also gave its consent in February of last year.

Under Republic Act No. 9183, any change in a carrier’s ownership has to be approved by Congress. AirAsia Philippines is now seeking approval from the Civil Aeronautics Board and the Civil Aviation Authority of the Philippines.

AirAsia Zest and AirAsia Philippines operate a combined fleet of 15 aircraft, servicing domestic destinations such as Kalibo (Boracay), Puerto Princesa (Palawan), Tagbilaran (Bohol), Cebu and Tacloban. Its international destinations include China and Korea.


AirAsia To Offer ASEAN Pass in Philippines This Month

DAVAO CITY — The imminent integration of regional economies is beginning to make itself felt in the travel industry, with AirAsia soon to offer a ticketing scheme to flyers traveling to 137 destinations within the Association of Southeast Asian Nations (ASEAN).

 The ASEAN Pass scheme is being finalized for Philippine markets this month and will be launched with promotional schemes intended to attract price-conscious travelers, the company said in a statement.

The pass is structured as a pre-paid system from which credits will be deducted as the traveler flies. AirAsia says this will provide travelers “with great value as they are guaranteed to able to fly at very low rates within ASEAN,” it said.

“The list of routes featured in the ASEAN Pass will range from one credit up to a maximum of eight credits one way,” it said, with users also able to earn points that can be applied to future flights, it added.

AirAsia Philippines is launching on March 27 a thrice-daily Davao-Manila service and four flights a week between Cebu and Kota Kinabalu, Malaysia.

In launching the Pass in other markets late last year, Tony Fernandes, group chief executive officer of Malaysia-based AirAsia Bhd, said the airline, “being a true ASEAN airline, (is) serving all 10 ASEAN member countries.”

“With the dawning of the ASEAN economic community and progress on ASEAN open skies, we are pleased to promote ASEAN integration by helping to bridge ASEAN communities,” Mr. Fernandes added.

He said the company, which takes the ASEAN Single Aviation Market “seriously,” is confident that the “introduction of this ASEAN Pass will boost air travel… as well as attract foreign tourists to this region.”

He said since air travel is the most convenient form of transportation, he believes that the introduction of the Pass “will be the catalyst for a new chapter of air travel with AirAsia.”

Source: Carmelito Q. Francisco