Here's a good move Mr Dixon from "The Bulletin" Sept 3, would
save you on middle managment costs for sure and give the
pilots the chance to show you how to really run a No-frills airline.
......Airasia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile)............
Wirraway
"The Bulletin"
September 3, 2003
NO FRILLS TAKES FLIGHT
Cheap air travel is the surefire way to put seats on seats - but who will rule in Asia, the state or the entrepreneurs? By SONIA KOLESNIKOV-JESSOP
When AirAsia started flying out of Kuala Lumpur two years ago, it quickly became the cheapest of the cheap, the lowest-cost airline in the world. AirAsia says it spends only 2.5 cents to fly one passenger one kilometer, compared to 4.5 cents for Ryanair and 7.5 cents for Southwest – the discount leaders of Europe and America.
Airasia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile). Cabin attendants do double duty, cleaning planes and selling drinks on commission. It's a "big fallacy" to think no-frills means just cutting out free drinks, says CEO Tony Fernandes, who has been known to work the check-in counter. You've got to "change the airline culture."
Even that may not be enough for no-frills entrepreneurs. The discount revolution has been slow to arrive in Asia, where governments still control most major airlines and have offered a grudging welcome to new competitors. Last year discount carriers accounted for less than 1 percent of passenger traffic in Asia (excluding Australia and Japan), compared with about 25 percent in the United States and 10 percent in Europe. While Southwest recently became the largest airline in the United States, AirAsia is a small success, with 7 planes and profits of $US5.3 million last year. Now, in a frontal assault on AirAsia and other private upstarts like Cebu Pacific in the Philippines and Bangkok Airways, state-owned carriers like Singapore Airlines, Thai Airways and Qantas are considering their own no-frills spinoffs. "Most of the airlines in Asia are big monopolies; they have always had it their way and they don't like any whiff of competition," says Fernandes. "The unknown is causing this mass hysteria."
It may seem that major airlines can't lose this war, with the state on their side. Asian governments have yet to embrace the wave of deregulation that made it possible for entrepreneurs like Tony Ryan to become major players in the West. There is no Asian equivalent of Ryanair, which flies all over Europe, because Asian states have been much slower to open their airports to all comers. Asian discounters are for the most part limited to domestic flights. Yet when Malaysia Airlines last year launched a fare war against AirAsia, the government stopped it, saying it wanted both to survive. Fernandes says for majors to fly without frills is like Ritz-Carlton competing with the YMCA. "Business sense will prevail," he says.
It will be hard to make the no-frills formula work Asia wide. In Europe and the United States, the strategy includes hiring nonunion staff, using one (often narrow-body) aircraft model to cut maintenance costs, flying short routes (less than two hours) to reduce turnaround times, landing only at secondary airports, selling tickets online to avoid middlemen and eliminating frills like hot food. In Asia, labor is already inexpensive, most regional hops are longer than two hours, secondary airports are not cheap and consumers are less likely to buy online. Asian majors already cram cheap seats into the back of wide body jets, creating a budget "plane within the plane." All this makes it near impossible for discounters to gain cost advantages on routes in Asia, says Richard Stirland, director general of the Association of Asia Pacific Airlines.
So why are the majors testing the down market? In the West, no-frills airlines are luring millions of customers who have never flown before, and Asia has an even larger untapped market – one that no airline executive dares ignore. Analyst Peter Harbison says Asian governments are opening up "possibly faster than many imagine," lowering airport charges and other barriers in response to SARS and the recent downturn in air travel. Singapore and Thailand will decide "fairly soon" on whether to launch a new budget carrier based in Chiang Mai, Thailand, says Singapore Trade Minister George Yeo. And while one former deputy chairman of Singapore Airlines recently warned that aviation history is "littered" with no-frills failures, another is leading a new start-up, ValuAir. None of this scares AirAsia, which is gearing up for regional flights, perhaps next year. Fernandes insists, "We can always beat the big guys on cost." He won't say how, but pretty soon, he'll have a chance to prove it.
With Lorien Holland in Kuala Lumpur
© 2003 Newsweek, Inc.
===========================================