Budget airlines open up Asia’s skies to the masses

March 15, 2011

By Adrian Addison (AFP)

HONG KONG — A decade ago, even some of Asia’s wealthier people could face a long bumpy ride on a bus to visit family or take a break on the beach — flying was simply too expensive.

Not any more. The proliferation of low cost airlines across the region, particularly in Southeast Asia, has opened up air travel to the masses.

Malaysia-based AirAsia, which launched in 2001, was one of the first airlines to rip open Asia’s skies to the general public.

“Suddenly, people who had never been on planes — people who lived in villages and used to go on a 12-hour bus ride to see relatives — suddenly they were flying,” says planemaker Airbus’s Asia communications director Sean Lee.

“If the same thing happens in China, India and Indonesia, with their massive populations, imagine — the potential is huge.”

So huge, in fact, that Airbus predicts that a third of all new planes will be sold into the region over the next 20 years — 8,560 aircraft worth a cool $1.2 trillion.

The company has a backlog of over a thousand aircraft waiting to be delivered to the region. And of those, AirAsia has 175 firm orders for A320s, with a further 50 on option.

The airline continues to expand with the opening of three hubs in Kuching in the east Malaysian state of Sarawak, Chiang Mai in northern Thailand and Medan in Indonesia.

It is also launching operations in the Philippines later this year.

“For 2011, our plan is to further expand our route network and key routes,” AirAsia’s chief executive Tony Fernandes told AFP.

“We also plan to be more aggressive in penetrating the Indian market and further expansion in China.”

Cebu Pacific, the Philippines’ already long-established low cost carrier, plans to invest a billion dollars in 21 new Airbus aircraft and hire 2,000 more staff over the next four years to boost its international operations.

Singapore’s low cost carrier Tiger Airways, meanwhile, will take delivery of 26 aircraft by the end of March 2011, the company said.

India has eight budget airlines, which have gained nearly half of the market share in the country’s rapidly growing aviation sector.

IndiGo, launched in 2006, is the country’s youngest airline but has already become the third largest, flying 8.4 million passengers in 2010, a 16.5 percent share in domestic air traffic.

The airline announced a deal for 180 A320s, the largest number of Airbus planes ever bought in a single order, at the Paris air show this year.

IndiGo currently operates only domestic flights but has ambitious targets for 2011, planning to start flying internationally in August after recently getting government clearance.

Large scale models of the Airbus suite of aircraft were on display at the Asian Aerospace Expo in Hong Kong, alongside rival Boeing and the Chinese upstart COMAC, which has its own aircraft on the drawing board if not yet in the sky.

All will be competing for a slice of this massive market which will soon overtake both Europe and North America.

Airbus predicts a need for 5,200 new airliners in the single-aisle 100 to 210 seat category, such as the A320 family. Of these, around a third will go to low cost airlines.

The increase will be driven primarily by the growth of low cost carriers, as well as the opening of new secondary short haul routes, especially in China, India and Southeast Asia.

Airbus expects the number of passengers carried by Asia-Pacific airlines to rise by 5.8 percent per year, compared to global average increases of 4.8 per cent.

“Asia has traditionally been a wide bodied aircraft market,” Airbus spokesman Sean Lee told AFP. “But the single aisle market is growing substantially, largely thanks to the low cost carrier sector.

“If you look back to 2001 there were basically no (Airbus) aircraft flying with low cost airlines in this region. It’s expected to be 20 percent by the end of this decade — the growth has been really fast.”

There are currently just over 300 Airbus aircraft in service with Asia-Pacific budget airlines, most of which are A320s — 18 percent of the current in-service Airbus fleet in the region.

There is also a backlog of around 370 aircraft on order for future delivery to budget carriers in the region.

Greater liberalisation “open skies” policies, especially amongst the ASEAN block countries, is also expected to boost air travel in the region, Airbus say.

But it might not all be bright skies and sunshine.

Standard and Poor’s Equity Research aviation analyst Shukor Yusof says low cost carriers are likely to gain a bigger market share in the near to mid-term, as much as 20 per cent, as demand for leisure and discretionary travel grows and per capita income improves.

“That said, we anticipate turbulence in the energy markets to impact low cost carriers the most, given their business model and limited ability to offset the higher fuel costs,” he told AFP

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