Budget carriers go long haul

The latest budget carrier to announce its intention to join the long haul race is new upstart AirAsia Japan – a joint venture between Malaysia’s Air Asia and Japan’s All Nippon Airways (ANA). The carrier, based in Tokyo’s Narita, expects to commence domestic operations and flights to destinations in nearby Korea, China and Taiwan in 2012. But by 2013, it has set its eyes further afield, to Singapore and destinations in Thailand, Indonesia and Australia.

Earlier, Singapore Airlines (SIA) in introducing its new budget subsidiary Scoot has said the carrier will operate beyond the 4-to-5-hour limit of the traditional budget model, to destinations in China and Australia – though not quite as far as AirAsia’s AirAsia X which operates scheduled services from Kuala Lumpur to destinations that include Paris, London and Christchurch.

This is yet another sign of how the budget business is changing its form to take on the inter-airline competition in an arena that has hitherto been considered the domain of full-service airlines. Thus the competition is increasingly becoming a free-for-all anybody’s game.

Especially in Asia, considering the geography of the region with the exception of China and Indian with its vast expanse, it is not surprising that budget carriers will push further than originally planned as they grow. If there is any concern, it is whether the budget model will be able to support or sustain their operations, hence somewhere down the line it is likely that hybrids or compromised versions will evolve. But AirAsia X’s success has lifted the dark clouds that once enveloped the fate of the now defunct forerunner Oasis Airlines which used to fly from home base Hong Kong to Vancouver and London. In July, AirAsia X reported a healthy passenger growth of 56 per cent for the first half of the year.

While in the past full-service airlines would dismiss any competition posed by budget carriers because they served different markets, this is no longer true as the lines of segmentation continue to blur. If budget carriers want to go where the full-service airlines tread, it is only to be expected that the latter too will react to rewrite the rules of the game, as exemplified by SIA’s Scoot strategy (as with other main rivals) to secure its interest in the shifting market.

A spokesman for ANA said: “Scoot might be a competitor but the target of AirAsia Japan is to create new demand for air transport. In Japan now, there is no low-cost carrier and we are sure we can do this.”

It is true that budget carriers have largely stepped into a vacuum to provide air services where there were none or to reach places that were under-served by air and as a consequence were able to generate new demand. That does not seem to be quite where the competition is heading today, considering how many of them too want to operate to the more lucrative business or tourist destinations.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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