Low-Cost Carriers to Take 30% of Market
By Boonsong Kositchotethana, Bangkok Post, Thailand
Jul. 13–No-frills carriers in the Asia Pacific region are expected to significantly increase their market share in the region’s overall airline business to as much as 30 percent in the next five years from 9 percent now.
The European plane maker Airbus sees budget airlines in the region moving toward capturing the same size of market as in North America and Europe where low-cost carriers (LCCs) account for 29 percent and 26 percent of total airline market respectively.
“The Asia Pacific has the potential to grow to a similar level as North America and Europe,” Joost van der Heijden, senior airline marketing director at Airbus SAS, said in an interview.
Driving much of the region’s growth would be economic powerhouses China and India, where air travel demand is soaring at rates not seen in any other part of the world.
Airbus’s view of the LCC market in Asia Pacific is consistent with the most recent study by the Centre for Asia Pacific Aviation (Capa), the Sydney-based aviation research and consultancy firm.
Capa projected that LCCs in Asia Pacific are likely to increase their market share to 25 percent by 2012, from around 12 percent at present.
With a population of 3.9 billion, and, less than 20 LCCs, and accelerating air travel liberalisation, the Asia Pacific is poised to expand its LCC sector, said the Airbus executive.
By comparison, there are some 50 LCCs operating in Europe where there are 490 million people and 10 LCCs in North America with a population of 300 million.
The emergence of LCCs would help propel Asia Pacific air traffic, which Airbus projected would grow by 6 percent per year over 2006-25, exceeding the world’s average of 4.8 percent.
“A swag of new orders by Asia Pacific LCCs will propel the sector to 25 percent of total seats in the region within five years — double their current penetration,” the Capa report said.
Growth in LCC fleets in the region, based on known orders, would rise from about 300 aircraft with 45,000 seats to about 870 aircraft by 2012 with 170,000 seats — almost a four-fold increase, according to Capa.
AirAsia, Southeast Asia’s largest LCC operator with units based in Malaysia, Indonesia and Thailand, along with its recently launched long-distance operation AirAsia Long Haul, would become by far the region’s biggest LCC by 2012, following the recent confirmation of an order by AirAsia Long Haul for 10 Airbus A330-330s.
Jetstar is also poised for significant capacity growth over the next five years, while Tiger Airways would also rise up the rankings following a memorandum of understanding for 30 additional A320s, plus 20 options, giving the Singapore-based carrier the ability to expand its fleet to 70 A320s probably by the middle of the next decade, Capa said in a commentary.
Meanwhile, the Indonesian LCC Mandala Airlines has ordered 25 A320s to replace its ageing B737-200 fleet and provide capacity for growth.
The growth calculation excludes major orders by Indonesia’s Lion Air and Hong Kong Airways.
Both of the airlines exert significant competitive pressure on incumbents in their respective markets.
Capa said LCCs were set to continue to challenge full-service rivals in short-haul markets and, increasingly, long-haul segments in the region.
“The battle is set to intensify,” the Capa report concluded.
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