Air Transport World

Asia's absent revolution: no-frills airlines are flourishing across North America and Europe but not in Asia; however, that may be changing. (Competition).

Around the world, low cost airlines are booming. Everywhere, that is, but in Asia, where a host of restrictions, political agendas and the lean cost structures of existing flag carriers are barriers to success.

Thus far, introduction of low-cost airlines has been confined to the liberalized domestic markers in Malaysia, the Philippines and Japan. While there has been a proliferation of new airlines, particularly in Indonesia and Thailand, few come dose to the Southwest Airlines model. However, that may be changing, fueled by tourism demands and airport privatization, according to a comprehensive report by the Sydney-based Centre for Asia Pacific Aviation.

The study does not suggest that LCAs will have an easy time of it. While US and European LCAs maintain significant cost advantages over their full-service counterparts, that task is significantly more difficult in Asia owing to efficiencies imposed by the impact of the region's financial crises in 1997 and 1998. According to CAPA founder Peter Harbison, the process of adapting to the market shock associated with the crises saw most Asian airlines accelerate their cost-reduction programs and initiate productivity improvements, resulting in a 20.9% drop in unit costs between 1997 and 1999 and a 22.9% lift in staff productivity.

"The major European airlines' high-cost environment provides fertile ground for the low-cost operators in Europe and is reflected in an average 38.6% gap between the leading low-cost airlines and the established airlines such as Lufthansa and Air France," Harbison notes. In the US, the costs of the full- and low-cost carriers are considerably closer, with an average differential of 23.5%, and he claims that Asian carriers, like those in the US, have become accustomed to operating in highly price-competitive low-yield markets. …

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