Budget airlines have revolutionized the global air travel, bringing an end to the days of exorbitant prices and limited travel options. As the slogan of the world’s best low cost airline says, AirAsia, “Now everyone can fly”. It seems like that’s the case as affordable air travel has been brought to the masses.
Before exploring how low-cost airlines will dominate the market, a short explanation of what low cost airlines are – and what made them popular – is essential.
How are Budget Airlines Different?
The concept which differentiates low-cost airlines from others is a reduction of services, and therefore prices. Realizing that most passengers are just looking to get from one place to another with no special amenities, low-cost airlines give just that.
This doesn’t mean that low-cost airlines don’t offer the services which others do. They just don’t include most offerings in the default price. For example, if the passenger wants a meal they can order it at a surcharge to the airfare. Some airlines such as AirAsia have gone as far as making the luggage fee optional. Its default fare provides only 7kg of carry-on.
The concept itself has been proven to be sound as evidenced by the popularity and dominance of low-cost carriers all across the world, especially in Southeast Asia. Over half of all airline seats sold in ASEAN are on a low-cost carrier. Below are a few of the region’s success stories:
The largest low-cost carrier in the region, Malaysia’s AirAsia saw its quarterly profit rise almost 600% as its sales jumped nearly a third. It is looking to leverage high growth in China to empower itself even further.
Owning a 40% share of the Vietnamese domestic market after just 9 years of operation, VietJet is one of the fastest growing low-cost carriers in Asia. It seeks to become a top low-cost airline by adding more than 100 planes to its fleet by 2019.
Diverging from the traditional low-cost carrier’s strategy of operating small planes for short distances, Singapore’s Scoot has made itself known as one of few that operates medium to long haul flights with a widebody fleet.
Dominating the market even under normal circumstances, low-cost carriers look to advance their lead even more with the ASEAN Open Skies Agreement.
Just coming into effect last year, the ASEAN Open Skies Agreement provides better integration of air travel in Southeast Asia. It removes all restrictions which limit the number and routes of flights in the region, giving airlines the ability to launch international flights with the only constraint being the capacity of each individual airport.
With that said, it’s important to note that many of the biggest Southeast Asian airports are already at their full capacity. The maxed out list includes three airports that serve ASEAN’S largest domestic markets: Thailand’s Suvarnabhumi Airport in Bangkok, Philippines’ Ninoy Aquino International Airport in Manila, and Indonesia’s Soekarno-Hatta International Airport in Jakarta.
The unlimited flight capacity from the new agreement will revolutionize air travel in Asia. But it might be limited to routes that include non-maxed out airports until the busiest airports expand their capacity.
Moving from a strictly regulated market to a greatly liberalized one, Southeast Asia’s airline industry has opened its doors for airlines to expand even more aggressively.
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