Budget airlines to have staying power in Asia

Budget airlines to have staying power in Asia

Associated Press Jakarta

Budget airlines will survive in Asia as long as they have adequate capital and are treated fairly by regional governments and airports, U.S. Transportation Secretary Norman Mineta said on Thursday.

No-frills air travel - where carriers cut perks for travelers, slice costs, trim turnaround times, and sell more tickets through low-cost channels - arrived in Asia three years ago and analysts have predicted the sector is set for explosive growth.

The surge has been led by companies such as Malaysia's AirAsia, Australia's Virgin Blue, and recent Singapore entrant Valuair. Tiger Airways, backed by full-service flag-carrier Singapore Airlines, entered the market last week.

Some analysts have raised questions about the viability of the airlines, especially with at least three low-cost airlines going belly-up in Europe.

But Mineta expressed confidence in the sector.

"I would think that low-cost carriers will be able to survive," Mineta told the Associated Press in telephone interview from Bali, where he is attending a meeting of transportation ministers from the Asia-Pacific Economic Cooperation countries.

"It takes some time to get a secure footing in the marketplace," he said. "It also depends on how fairly they are treated by airports in terms of access." Many Asian airports restrict landing slots and give preferential treatment to national carriers.

Mineta said the low-cost carriers in Asia have been a boon to the traveling public and "put pressure on the other airlines to improve their service, their fares and all that accrues to the benefit of the traveling public."

Budget airlines are already having a significant impact on the industry, especially in Singapore.

Singapore Airlines announced on Wednesday that it will drastically cut costs in anticipation of intense competition from regional low-cost carriers. Officials didn't give many specifics or a timetable, but said the airline's board will consider reducing staff costs, cutting fuel consumption, and promoting cheaper Internet ticket sales.

Last week, Singapore authorities unveiled plans to build a dedicated low-cost airport terminal to try and fend off competition from regional airports hoping to attract business from fast-growing budget airlines.