LCC sector in Asia witnessing strong growth

Written by FE Online | Mumbai | Updated: Aug 4 2014, 23:36pm hrs
Asia is setting a new trends in long-haul, low-cost air travel, and China is poised to become a key regional player in the coming years, according to 'Generation X Long Haul Low Cost Comes Of Age' a new Asia Pacific air travel report by OAG Aviation Worldwide.

In the last decade, South East Asian low-cost carriers (LCCs) led by Malaysia-based AirAsia have remodelled the air travel map in the Asia Pacific region. Now, LCCs are seeking to expand their route networks to better connect the rapidly growing travel markets of South East Asia and North East Asia, plus South Asia, Australia and New Zealand.

The LCC sector in Asia is experiencing strong growth with massive potential demand supported by fast-growing economies and rising demand for intra-regional travel. Although low-cost air travel originated in Europe and North America to connect destinations typically within four hours flying time, Asian LCCs are adapting the model for locations up to eight hours apart. This enables cost-conscious Asian travellers to fly to new destinations for which flights were either previously unavailable or were priced too high.

The Asia Pacific air market continued to evolve, and although LCC growth has been slow in China it will be pivotal to the future development of the sector. OAG analysed the regions top 20 country pair markets for total seat capacity between June 2010 and June 2014 and China features in eight of the fastest growing routes. The average annual growth in seat capacity between Australia and China was 11.4 per cent, while 20 per cent capacity growth was recorded between China and Thailand.

Further room for expansion is evident, with only three routes from China Shanghai-Singapore (ranked fifth), Bangkok-Shanghai (ranked 19th), and Beijing-Singapore (ranked 23rd) listed in OAGs Top 25 low-cost, long-haul routes in Asia Pacific. The other top routes are: Bangkok-Seoul, Perth-Sydney, Singapore-Sydney, Singapore-Taipei, Hong Kong-Tokyo, Seoul-Singapore, Melbourne-Singapore, Bangkok-Tokyo (Narita), Kuala Lumpur-Melbourne, MNL-Tokyo, Perth-Singapore, Brisbane-Perth, Tokyo (Haneda)-Singapore, Jakarta-Hong Kong, Brisbane-Singapore, Tokyo (Narita)-Singapore, Denpasar-Hong Kong, Bangkok-Tokyo (Haneda), Kuala Lumpur-Sydney, Kuala Lumpur-Taipei, Hong Kong-Sydney and Chennai-Singapore.

Supporting the Low-Cost, Long-Haul Air Market Asias pioneering low-cost, long-haul carriers include AirAsia X, Thai AirAsia, XJetstar Airways, Jetstar Asia and Scoot. Soon to join them will be Indonesia AirAsia and NokScoot, while Chinas Spring Airlines and Cebu Pacific from the Philippines are beginning to expand their low-cost, long-haul flight networks. More airlines seem likely to follow in the coming years as Asias air market expands further.

To support the expansion of the pan-regional LCC sector, new airport infrastructure is being developed. Kuala Lumpur recently opened the worlds largest dedicated LCC airport terminal, opening up flight access to a total population of 3.4 billion people living within eight hours of the Malaysian capital. The opportunities in China, plus India and Indonesia, are similarly alluring. Large populations, multiple airports and ongoing air transport liberalisation mean these three countries are poised to drive growth in Asias long-haul LCC market.

In China, the Civil Aviation Administration of China (CAAC) recently abolished the minimum pricing requirement for airlines, and introduced new measures and incentives designed to encourage the development of China-based LCCs.

Mark Clarkson, business development director, ASPAC, OAG, said, Given the potential impact of the recent changes made by the CAAC to the rules governing the establishment and operation of LCCs, the opportunities are now available for major Chinese low cost carriers to emerge or for a major Chinese carrier to make a play for regional markets.