Fri, Oct 14, 2016 - Page 11 News List

LCC business lucrative, despite hurdles: Boeing

Staff writer, with CNA

Low-cost carriers (LCC) still appeal to Taiwanese, despite two locally owned budget carriers struggling financially, a Boeing executive said in Taipei yesterday while discussing the market outlook in Taiwan.

Taiwan has a growing economy and market penetration for no-frills airlines is relatively low compared with other countries in Northeast Asia, which suggests there is room for growth, said Randy Tinseth, vice president of marketing for Boeing Commercial Airplanes.

Acknowledging the recent difficulties faced by V Air (威航) and Tigerair Taiwan (台灣虎航), Tinseth said he remains confident that the emergence of LCC business — both regionally and in Taiwan — is unlikely to slow.

V Air suspended operations on Oct. 1, while Tigerair Taiwan is also in bad shape.

“For every market, there will be winners and losers,” Tinseth said at a news conference, adding that with a good business plan, capital and corporate culture, the LCC model remains lucrative.

“I think the challenge here in Taiwan is there is a greater desire for people to come visit Taiwan than necessarily to leave on the low-cost model.”

It explains why the more successful LCCs operating in Taiwan are foreign-based, he said, adding that Taiwanese LCCs should improve their services for local passengers to develop a more balanced consumer base.

Boeing said that passenger air traffic in Northeast Asia will grow at an annual rate of 2.6 percent over the next 20 years, backed by LCCs.

Taiwan could see even greater growth with a stronger economy, although it might pick up rather slowly in the LCC market, Tinseth said.

“We have seen a surge in the number of flights being added within the region due to the emergence of LCCs over the past five years,” he said.

According to Boeing, the market share of Northeast Asia LCCs has grown from 31 percent in 2011 to 47 percent this year.

The trend is exciting news for the aviation industry, because budget airlines help stimulate flight demand in general, Tinseth said.

Mature fleets in Northeast Asia will drive replacement demand, contributing two-thirds of the region’s aircraft deliveries, he added.

Boeing also forecasts that airlines in Northeast Asia will require 1,440 new commercial airplanes valued at over US$320 billion between now and 2035.

More than half of these airplanes, or approximately 770 aircraft, will be for widebody airplanes such as the new 787 and 777 airplanes, while 600 units will be for narrow-body airplanes, such as the new 737 MAX, Tinseth said.

"Widebody airplanes will continue to play an important role in Taiwan's commercial air travel market and that trend will continue as EVA Air introduces new 787s in the coming years," he said

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