Asia-Pacific’s Budget Airline Wars Heat Up

AIN AIR TRANSPORT PERSPECTIVE » NOVEMBER 18, 2013

by  NEELAM MATHEWS

Lion Air faces increasing competition from new low-fare startups in the Asia-Pacific region. (Photo: Boeing)

November 18, 2013, 9:45 AM

Economic growth, aviation deregulation, a growing middle class and aggressive tourism marketing continue to drive business in the regional markets of Asia-Pacific, where well entrenched budget carriers such as Malaysia’s AirAsia and Indonesia’s Lion Air face increasing competition from new low-cost startups. In neighboring India, three of every four airline seats now belong to budget carriers.

According to Sydney-based consultancy Center for Asia Pacific Aviation (CAPA), Southeast Asia’s international market has seen a 20-percent capacity increase in the last 18 months, from 4.7 million weekly seats in April last year to 5.6 million weekly seats last month. The fastest growing markets, Thailand and Malaysia, added 230,000 and 200,000 weekly seats during the period.

“As GDP rises, discretionary income increases, which helps us sell airplanes,” said Dinesh Keskar, senior vice president of Asia Pacific and India Sales for Boeing Commercial Airplanes. Single-aisle aircraft account for 70 percent of the Asian market, according to Boeing.

The company’s most recent forecast for the region indicates annual economic growth of 4.7 percent among Southeast Asian economies over the next two decades while traffic rises 7.5 percent a year. IATA statistics for September this year show an 8.5-percent annual rise in traffic growth in the Asia-Pacific region; that figure ranks it first among the three biggest global markets.

Asia’s long-haul budget carriers continue to show strength as well. Singapore Airlines’ low-cost subsidiary, Scoot, has ordered twenty 787s. Australia’s Jetstar just took delivery of its first Boeing 787 and plans to take two more soon. Vietnam Airlines holds an order for nineteen 787-9s and deliveries start in 2015. Royal Brunei Airlines received the first of five 787s destined to serve a route to London via Dubai on December 1. Services to Melbourne start in the middle of next year. Keskar sees still more contributions coming from previously closed markets such as the former Burma. “There is big potential in Myanmar for used aircraft,” he said. “In five to ten years, the market could be bigger than Thailand’s.”

According to Boeing, three-fourths of Southeast Asia’s new aircraft over 20 years will meet incremental market demand, while 23 percent will replace older, less fuel-efficient aircraft.