Budget airlines may soar in Asian skies: experts

Budget airlines may soar in Asian skies: experts

M. Jegathesan
Agence France-Presse
Kuala Lumpur

More no-frills airlines may take off in Asia to meet
increasing consumer demand following the success story of
Malaysia's budget carrier AirAsia, industry experts say.

The push for countries such as China and Indonesia to set up
budget airlines such as those in the United States and Europe was
fueled by market demand and profitability, analysts told AFP.

Peter Foggin, London-based senior vice-president of DVB Bank
AG said Asia could be next in line for the budget boom.

"That would not surprise me at all because of the success of
USA's Southwest Airlines, UK's EasyJet and Ireland's RyanAir. And
now you see the success of AirAsia in the last 18 months. People
will say if they (AirAsia) can do it, I can do it also," he said.

Commenting on plans by Singapore Airlines to possibly launch a
budget carrier, Foggin said: "They see the success of AirAsia.
They know how big the market is and how good the opportunity is
in Asia."

Singapore Airlines (SIA) has this year floated plans to enter
the budget carrier market, mulling the idea of converting its
regional wing, SilkAir, or establishing a separate airline.

SIA said on June 12 it would make a decision by the end of the
year after a task force set up to look into the feasibility of a
low-cost outfit completed its study.

Former Singapore Airlines (SIA) managing director Lim Chin
Beng has also begun moves to set up a regional budget airline in
potential competition with his former employer.

AirAsia Friday named three foreign partners who will inject
US$26 million to enable the 18-month old profit-making carrier to
buy new aircraft to expand its business.

The investors are the Bahrain-based Islamic Development Bank
(IDB), Gulf-linked Crescent Venture Partners and Deucalion
Capital, a Frankfurt-based global private equity fund.

Foggin said besides Singapore, budget carriers are expected to
emerge in China and Indonesia.

"China, Indonesia, definitely, we will see low-cost carriers
taking off," he said.

Azrul Azwar, an economist with MIDF Sisma Holdings Sdn Bhd,
expressed similar sentiments saying the huge populations and
large geographical areas of the two countries were encouraging
factors for budget airlines.

"I think there seems to be a new trend in Asia to jump onto
the bandwagon. There is big potential in China and Indonesia for
this business," he told AFP.

AirAsia chief executive Tony Fernandes said the region offered
vast opportunities for budget carriers.

"I think there is a lot of potential. Sure some countries will
start low cost business carriers," he said.

But Foggin cautioned potential players, saying that AirAsia
entered the business with many advantages which new individuals
may not have.

"AirAsia has built a great platform with a low cost base which
appeals to passengers to fly. It has a large domestic market as
only six percent of the 23 million population have flown," he
said.

Azrul said AirAsia's impressive start could be challenged by
new budget carriers if it does not move faster to expand
regionally.

"It has raised new funds to acquire new aircraft, it could add
regional destinations before competition comes in," he said.

Azrul also said that AirAsia could form strategic alliances
with foreign carriers.

"AirAsia could fly the foreign tourists when they arrive in
the country directly to under-served and remote areas in Malaysia
or in the region," he said.

But Fernandes maintained that AirAsia was unfazed by the
possibility of competition from SIA or other countries, saying it
would not be rushed into going regional.

"I am very surprised SIA is going budget. I think they are
losing focus. It is like Rolls Royce saying it will launch mini
cars. I am in no rush to go regional," he said.