World Airline Awards 2015: 10 Best LCCs In Asia


1. Air Asia (Malaysia)

2. Air Asia X (Malaysia)

3. IndiGo (India)

4. Jetstar Asia (Singapore)

5. Scoot (Singapore)

6. Peach (Japan)

7. SpiceJet (India)

8. Tiger Airways (Singapore)

9. Nok Air (Thailand)

10. Spring Airlines (China)

Budget Airlines Crowd Asia


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Asia’s skies are about to become more crowded. At least 10 new budget carriers are expected in the region by the end of next year, expanding fare choices for consumers but squeezing airline profit margins even more.

The growth in new routes is shifting east to highly congested and expensive centers such as Taiwan and Hong Kong, though Southeast Asia remains a lucrative market as more people turn to budget travel.

On Monday, Taiwan’s China Airlines Ltd. said it would team up with Singapore’s Tiger Airways Holdings Ltd. to launch Taiwan’s first budget carrier, hoping to link neighboring tourist and business hot spots when it starts service in the fourth quarter of 2014.

TransAsia Airways Corp. in Taiwan is also planning its own low-cost airline, while two other budget operations are being launched in neighboring Hong Kong, a first for the Chinese city.

“Taiwan is in an ideal location for low-cost carriers because the flight time to most destinations in Southeast and Northeast Asia is within four hours,” said Huang-Hsiang Sun, chairman at China Airlines. The carrier will own 90% of Tigerair Taiwan, with the rest to be held by Tiger.

Taiwan has been slow to embrace budget-airline travel because of a small domestic market, while earlier restrictions on air rights made it difficult for airlines to develop regional and international services.

The popularity of budget flights has forced many national carriers to slash fares to better compete against low-cost carriers.

By contrast, many Southeast Asian airports have the capacity to handle much more budget-related traffic. At Kuala Lumpur’s airport – home to AirAsia Bhd. – budget-airline flights often exceed those of full-service airlines.

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In Thailand, four new low-cost airlines are being launched, fueling more rivalry between the region’s two biggest no-frills operators, Lion Air and AirAsia.

The Thai unit of Indonesian discount carrier Lion Air started operations last week, taking on the local operations of AirAsia. Scoot, the low-cost long-haul unit of Singapore Airlines Ltd., said Monday it will start a Bangkok-based carrier with local budget airline Nok Air, to be called NokScoot.

In the Philippines, operating regional budget carriers include Cebu Pacific Air, PAL Express, AirAsia Zest, and Tigerair Philippines.

In Southeast Asia, where bustling economies and thrifty passengers have kept budget airlines profitable, low-cost carriers account for more than 52% of air capacity, according to consultancy CAPA-Center for Aviation.

That is more than double their share for all of the Asian-Pacific region. Fares between routes such as Singapore to Kuala Lumpur in Malaysia go for as low as US$20 on budget airlines, making the rates comparable with those of road-based transportation.

Faced with increased competition at home, established budget-airline brands in Southeast Asia have expanded into more costly locations in East Asia such as Japan, while South Korean airlines have started their own budget ventures.

But analysts and industry executives say that market still remains largely unproven, given the challenges of achieving scale alongside high airport fees and traffic bottlenecks. An executive at low-cost carrier Jetstar Japan Co. said earlier that ground-handling fees at the nation’s airports are “several times higher” than those in Singapore, adding to the airline’s cost burdens.

“Profit margins are very thin in East Asia because of high operating costs. Unless there’s strong government support, it will be very difficult for budget airlines here to achieve high utilization rates and turnaround times for their planes in order to turn profitable,” said Kelvin Lau, an airline analyst at Daiwa Securities. Adding to the constraints are the limited takeoff and landing slots at airports such as Hong Kong during daytime and evening peak hours.

But there is significant room for growth. In Hong Kong and Taiwan, budget airlines account for only 5% of available seat capacity, according to some market estimates, compared with about 30% to 35% in Singapore.

Budget carrier Hong Kong Express Airways Ltd. sold more than 200,000 seats in just two-and-a-half months since its launch, after the former full-service airline converted into the city’s first short-haul budget airline.

 

Source: The Wall Street Journal