AirAsia enters premium market

IT looks like AirAsia is taking Qantas head-on in the competition to harness the potential of Asia, which has been touted as the only region to be growing while the rest of the aviation world reels in uncertainty.

The Malaysian and Asia’s largest budget operator announced plans for an Asia-wide premium airline, following in the footstep of Qantas which indicated its regional carrier RedQ would be based in either Singapore or Kuala Lumpur. However, AirAsia’s proposed Caterham Jet plans to operate out of Subang – the predecessor of Kuala Lumpur International Airport at its new Sepang location. It has set eyes on destinations that include Singapore, Jakarta and Bangkok.

Earlier, it was Qantas that came close upon the heel of AirAsia in announcing a joint-venture budget carrier to be based in Narita, Tokyo – AirAsia in partnership with All Nippon Airways to form AirAsia Japan, and Qantas in collaboration with Japan Airlines (and Mitsubishi Corporation) to form JetStar Japan. The new budget carrier will tap into the Japanese domestic market and most likely extend its reach to nearby Korea, China and Taiwan.

Indeed, the Asian region can expect some exciting times ahead. The competition is not restricted to just that between AirAsia and Qantas, but the whole gamut of airlines that include incumbents and recent or new upstarts such as Singapore Airlines (SIA) and Scoot, Cathay Pacific Airways and Virgin Australia.

It is interesting how the action by one airline usually invites others to join the party. While Asia is the new gold mine, yet to be depleted of its potential, competition is as competition is, you will want more than an equal share of the pie. All things being equal, that usually comes with early startup advantage. But the nature of the business is such that you can only move as fast as every player, perhaps a little faster but not that much significantly more. Some analysts are of the view that SIA’s introduction of Scoot is long overdue. But that could be a case of a cautiously prolonged “wait-and-see” predicament.

It looks like the year 2012 will be the year of fireworks if, hopefully by then, the grey clouds will have dissipated although according to the forecast by the International Air Transport Association (IATA), it will be a tough environment. IATA Director General Tony Tyler said: “A long, slow struggle lies ahead.” At no time in the history of aviation is the industry more uncertain about its future than now.

There is the optimism that while in the past couple of years Asia has flourished on the back of the increased demand for budget travel, the erstwhile level of demand for premium travel will return. This, especially against a background of the region’s growing wealth and spurts in increased numbers of millionaires. Hence, Qantas’s as well as AirAsia’s plans for an Asia-wide premium airline, and in the same way, Cathay’s premium economy as a preliminary step-up. But the rules that worked in the past may not hold today. Have these airlines already got a whiff of what to expect to stand them in good stead? It’s time to re-package.


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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