Year of the Low-Cost Carriers

12 Feb 2009

While full-service airlines are hoping for 2009 and all its recessionary activities to be over in a flash, low-cost carriers (LCCs) are gearing to take advantage of the opportunities seen in the current financial crisis.

At the Low-Cost Airlines World Asia-Pacific 2009 conference in Singapore yesterday, the mood was respectful of the hardships people were going through, but at the same time, optimistic that growth could still be possible.

“2008 was dreadful for the industry, and now, more passengers are willing to try LCCs,” said Tony Davis, CEO of Tiger Airways, whose main investor is Singapore Airlines. “2009 will be the Year of the LCCs.”

Bruce Buchanan, CEO of Jetstar, a subsidiary of Qantas of Australia, claimed the company had been profitable since start up and hoped to follow the example of Southwest Airlines, a trend-setter in the budget carrier field for having lowered costs annually over the past 30 years.

Both executives agreed that the focus on costs and service was paramount to increasing their product appeal. Said Davis: “Demand is still out there – as long as your price is right.”

Buchanan added that a carrier that wished to become “a Pan-Asian brand” had to invest in continuous innovation to be relevant to the various markets served.

Liberalisation of air policies by governments around the region was encouraging, the CEOs noted. Last year, Malaysia opened up previously protected routes between Singapore and parts of the peninsula, including East Malaysia, a move that instantly registered a tremendous number of service start ups.

Yesterday, Indonesia allowed Tiger the go-ahead to fly to Jakarta, a sector currently off-limits to foreign budget airlines (to defend its own fledgling LCCs). To get around the ruling, Tiger will have to offer some perks such as free refreshments, free entertainment or assigned seats. It has chosen to categorise itself as “boutique” for this particular operation.

Tiger has also put in an application to fly to Bali.

Having started out mainly catering to the leisure market, Asian LCC carriers have been also working to cater to business travellers.

Jetstar has Business Class seats, allows last minutes changes with corresponding charges and interlining with mother company Qantas, British Airways (some flights only) and partner ValueAir.

Davis of Tiger announced they would be rolling out “a business-friendly product” soon.

But corporates should also be realistic and not expect LCCs to offer what they’ve been used to such as timetables. Said Davis: “Our schedules are designed to optimise the productivity of the aircraft and make sure we get as many flights per day out of the airplane, so we’re not going to change them just to attract business travellers. But I think they will find our schedules pretty good, and there is a choice of time and destinations.

“As one gets bigger, the choices grow.”

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Margie T Logarta

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