AirAsia this week launched its budget air travel operation

AirAsia this week launched its budget air travel operation
with a bang. It is offering a rock-bottom promotional fare of
Bt99 for a one-way trip to any of the major domestic
destinations, including Chiang Mai, Phuket, Hat Yai and Khon
Kaen. The promotional fare -- which actually goes up to about
Bt250 when taxes and fees are added -- is unheard of in this
country, where air travel until now has been a luxury beyond the
means of the great majority. As of yesterday, about 70 per cent
of AirAsias 20,000 promotional tickets were snapped up by
frequent air travelers, as well as curious people who have never
been in an aircraft before. Thailands first budget airline could
not have found a better way to gain such huge publicity.

Cost-conscious travelers will also be happy to know that when
AirAsia starts its regular no-frills flights, its tickets will be
20-50 per cent lower than for the other airlines. Consumers will
have more choices when they sit down to plan their trips for
business or for pleasure.

More significantly, the new budget airline will be the
catalyst for a drastic change in the way airlines operate, not
only in Thailand but throughout Southeast Asia.

Already competition is heating up as Thai Airways
International (THAI) and other domestic airline operators have
begun to offer their own promotional fares to try to keep
customers. They are also known to be looking at ways to
streamline their operations, something they might otherwise not
have done had AirAsia not burst onto the scene.

Competitive pricing and finely-tuned market segmentation is
the name of the game. Competitive pricing calls for all airline
operators to lower their operating costs without compromising
quality of the services that their respective customers demand.

On the one hand, airlines that fail to adjust to changing
market conditions, characterized in this case by cut-throat
competition, will fall by the wayside. Those which survive the
baptism of fire will be rewarded with more business as a result
of an expected rapid expansion in the customer base as more
people take to the air -- and greater profitability in the long
run. At present, only 10 percent of the Thai population travels
by air.

Indeed, the whole transport industry, including bus and train
services, which are the mainstay of domestic travelers, may well
be transformed for the better as people adjust to the convenience
and cheapness of air travel.

From the consumer's point of view, this increased competition
which will transform the airline industry should pay dividends in
terms of value for money, more choices and more satisfaction.

Behind the scenes, though, AirAsia, which is certain to
completely transform domestic air travel in this country, is the
result of an extraordinary deal made between powerful business
groups with connections in high places in both Thailand and
Malaysia.

Shin Corp, founded by Prime Minister Thaksin Shinawatra, holds
a 51 percent stake in AirAsia Aviation -- a joint venture in
partnership with Malaysias Air Asia. The deal smacks of a
conflict of interest given the fact that the Thaksin
administration controls the government agencies charged with
regulating the airline and aviation industries.

The high-profile deal, once made, cannot be undone. Although
the advent of a budget airline in this country is an exception to
the rule of fair competition and the concept of a level playing
field, the Thaksin government must now stand back and let AirAsia
compete against existing rivals and even more newcomers which
will come along to share in the swelling air travel market.

-- The Nation, Bangkok