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