Tue, Mar 15, 2005 page10

• Asia's budget airlines boost travel, tourism

  • DPA
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  A plethora of new no-frills airlines have taken to the skies in Asia, spurring both domestic and regional travel last year and are boding well for Asian tourism.

  The regional impact is most visible in Singapore.

  Low-fare carriers accounted for 7 percent of the 3,700 weekly flights at Changri Airport last year, helping the Singapore Tourism Board (STB) in its drive to reinforce the city-state's position as a gateway for intra-regional travel.

  At least three no-frill airlines base their flights out of Singapore, including ValuAir owned by former Singapore Airlines executive Lim Chin Beng, SIA's Tiger Airways and Qantas Airway's JetStar Asia.

  Others, such as Malaysian budget-airlines pioneer AirAsia, are using Singapore as a major destination and hub.

  "With more affordable air fares and ease of travel, business and leisure travellers in the region and beyond Asia can now visit Singapore more often," said Lim Neo Chian, deputy chairman and chief executive of STB.

  Although no-frills statistics are still hard to come by in Bangkok, partly because of the flexible booking methods practiced by the budget airlines, a glance at air traffic between Singapore and Bangkok last year is revealing.

  According to the Tourism Authority of Thailand (TAT), arrivals from Singapore at Bangkok International Airport last year reached 413,931, a 28 percent jump, compared with 2003 figures. Overall arrivals were up 19 percent.

  "You have to say this could be due to low-cost carriers, given that they are competing like crazy on that route," said John Koldowski, managing director for the strategic intelligence unit of the Pacific Asia Travel Association (PATA), headquartered in Bangkok.

  Currently there are at least three budget airlines plying the Bangkok-Singapore route, including Thai AirAsia -- the Thai affiliate of Malaysia's AirAsia, ValuAir and Tiger.

  Meanwhile, ValuAir's efforts to penetrate the Singapore-Hong Kong route last year has led to the a price war creating the cheapest routes in the world with flights available for the equivalent of US$0.04 per kilometer.

  Hong Kong-based Cathay Pacific has this month slashed the price for a four-hour return flight to Singapore to just HK$114,while Singapore Airlines is offering a fare of S$116, both cheaper than ValuAir's S$160 fare.

  One reason for the cut-throat competition on the Bangkok-Singapore and Hong Kong-Singapore routes is the need for name recognition by these low-budget contenders.

  "One of the key points for these carriers is to get positioned in the minds of the consumers, and that's a numbers game," Koldowski said. Another reason is finance.

  "Once you've got the brand name recognition then you are primed for an IPO, and that helps your cash flow so you can buy new aircraft and put on new routes," Koldowski said.

  That's the game plan followed by AirAsia, Southeast Asia's first genuine budget airline, and arguably the one best positioned to expand and survive.

  AirAsia, founded by Tony Fernandes, started in December, 2001, with just two aircraft serving Malaysia's limited domestic routes.

  It now has a fleet of 80 aircraft and, after successfully listing on the Malaysian stock exchange last November, it announced plans to buy another 40 A320 jets at US$2.5 billion by January next year.

  To date, AirAsia and its affiliates Thai AirAsia and AWAIR (in Indonesia) have carried over 9 million passengers across the region, according to AirAsia CEO Fernandes.

  AirAsia expects to start flights to China by next month, perhaps through it's Thai affiliate Thai Air Asia, which is 49 percent owned by Shin Corp.

  Thai AirAsia, which started up in February last year, already operates flights between Bangkok and Macau, Penang and Singapore plus serving a host of domestic destinations in Thailand.

  Although there has not been a corresponding surge, yet, in air catastrophes, questions about safety are likely to impede the popularity of low-budget travel among international tourists in many markets.

  "It's still mostly domestic passengers who are using these," said Dudi Sudibyo, a local aviation industry expert in Indonesia. "A lot of foreigners are suspicious of safety records. Where do they cut costs? Maintenance? Training of pilots?"

  That may be true for tourists coming from Europe or the Americas, but expats living in the region have already cottoned on to the low-cost bargains, industry sources say.
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