Wirraway
13th Feb 2004, 23:44
Singapore "Straits Times" 13/2/04
The big winner is... the air traveller
By Karamjit Kaur
NEWS ANALYSIS
THE sky's the limit for no-frills carriers in the Asia-Pacific, a region that is enthusiastically embracing the emergence of such airlines.
Established to provide mainly travel from just one city to another, their 'mind-blowing potential' stems from the absence of air services by international carriers to most of the 235 Asia-Pacific cities with populations exceeding 500,000, and 130 with more than one million.
Aviation expert Peter Harbison, managing director of the Sydney-based Centre for Asia Pacific Aviation, forecasts that 'dozens' of budget carriers will emerge in the region in the next 10 years.
However, the promise is peppered with perils and problems.
Topping the list is the business model to adopt that will enable these carriers to compete against the likes of Singapore Airlines (SIA) and Cathay Pacific.
For example, should the Internet be the main channel for ticket sales? Should there be free seating on board?
It is too soon to offer a final judgment on it but the industry's big boys, in Singapore for a two-day conference that began yesterday, are agreed on one thing - the big winner is the air traveller.
The offer of low, low fares will attract many travellers who will, in turn, help entrench the budget carriers - and ensure their growth.
So what are the traditional international carriers, such as SIA, to do? Sit back?
No way, says Mr Mo Garfinkle, chief executive of Washington-based aviation consultancy GCW Consulting, organisers of the meeting attended by 250 people, including airline bosses, airport officials and aviation experts.
The experience in the United States and in Europe has demonstrated the folly of complacency. There, premium carriers lost significant market share to such no-frills airlines as Ryanair and Southwest Airlines.
Says Mr Garfinkle: 'This is the best of times for the low-cost carriers and the worst of times for the traditional carriers.'
Speaking in his personal capacity as a consultant to several international carriers including SIA, he notes: 'They will grow at a faster rate than traditional airlines... I would suggest that we all get used to the fact that low-cost airlines are here to stay and they will be a major force and a major benefit to the industry.'
He observes that some traditional airlines are 'panicking', some are in 'self-denial' while others have decided to jump into the fray.
However, AirAsia's boss Tony Fernandes, a guest speaker at the symposium, wants the big boys to stay away.
Full-service carriers such as SIA should stick to what they know best, said Mr Fernandes, during a panel discussion moderated by former SIA deputy chairman and chief executive officer Cheong Choong Kong.
But SIA, seeing the nasty consequences of scoffing at the threat in the US and Europe, is setting up its own no-frills airline, Tiger Airways, with local and foreign partners. It owns 49 per cent but is staying away from running it or any decision-making, leaving them to the other partners, including Ryanair founder Tony Ryan's Irelandia Investments.
Qantas has started Jetstar and Thai Airways International, Nok Air, with a 39 per cent stake.
All three low-fare airlines will take off later this year.
Mr Fernandes is convinced the parents will regret their birth. He says: 'Qantas and SIA will discover that it isn't as easy as it looks. It's a tough business... and airlines that have stayed focused on what they are good at will succeed.'
Others disagree, saying traditional airlines have two choices: play the game and risk some cannibalisation, or lose market share.
If they choose to play, they should emulate SIA by taking a stake but not getting involved in its operations, say both Mr Garfinkle and Mr Harbison.
Otherwise, their low-fare airline faces a high probability of going bust because they may not be as focused on costs and their operations may be influenced by their parents, says Mr Garfinkle.
'I don't think, for example, that Nok Air is doing the right thing because I do not believe Thai Air can keep its hands off the structure,' he adds.
But Nok Air chief executive Patee Sarasin insists that it will rely on its parent's expertise only in ground handling and aircraft maintenance. When deciding on, among other things, branding and fares, it will be independent.
Given that the big boys with deep pockets are jumping into the low-cost business, Dr Cheong thinks traditional carriers in Asia, especially the larger ones such as SIA and Cathay Pacific, will survive the challenge by out-competing the low-cost carriers.
'They will still be around in 15-20 years' time. In a bruising free-for-all, who do you think will be the first to be depleted of cash?' he asks.
To which Mr David Huttner retorts: 'Although these carriers have the resources, I do not know if they have the know-how to get it right.'
Mr Hutter is head of strategy and communications at Virgin Blue, a low-cost carrier with more than 30 per cent of the Australian domestic air travel market.
For the traveller, it matters little who wins the battle and which is the winning business model. Competition is good, and when it brings lower fares, all the better. One can't have enough of a good thing.
==========================================
The big winner is... the air traveller
By Karamjit Kaur
NEWS ANALYSIS
THE sky's the limit for no-frills carriers in the Asia-Pacific, a region that is enthusiastically embracing the emergence of such airlines.
Established to provide mainly travel from just one city to another, their 'mind-blowing potential' stems from the absence of air services by international carriers to most of the 235 Asia-Pacific cities with populations exceeding 500,000, and 130 with more than one million.
Aviation expert Peter Harbison, managing director of the Sydney-based Centre for Asia Pacific Aviation, forecasts that 'dozens' of budget carriers will emerge in the region in the next 10 years.
However, the promise is peppered with perils and problems.
Topping the list is the business model to adopt that will enable these carriers to compete against the likes of Singapore Airlines (SIA) and Cathay Pacific.
For example, should the Internet be the main channel for ticket sales? Should there be free seating on board?
It is too soon to offer a final judgment on it but the industry's big boys, in Singapore for a two-day conference that began yesterday, are agreed on one thing - the big winner is the air traveller.
The offer of low, low fares will attract many travellers who will, in turn, help entrench the budget carriers - and ensure their growth.
So what are the traditional international carriers, such as SIA, to do? Sit back?
No way, says Mr Mo Garfinkle, chief executive of Washington-based aviation consultancy GCW Consulting, organisers of the meeting attended by 250 people, including airline bosses, airport officials and aviation experts.
The experience in the United States and in Europe has demonstrated the folly of complacency. There, premium carriers lost significant market share to such no-frills airlines as Ryanair and Southwest Airlines.
Says Mr Garfinkle: 'This is the best of times for the low-cost carriers and the worst of times for the traditional carriers.'
Speaking in his personal capacity as a consultant to several international carriers including SIA, he notes: 'They will grow at a faster rate than traditional airlines... I would suggest that we all get used to the fact that low-cost airlines are here to stay and they will be a major force and a major benefit to the industry.'
He observes that some traditional airlines are 'panicking', some are in 'self-denial' while others have decided to jump into the fray.
However, AirAsia's boss Tony Fernandes, a guest speaker at the symposium, wants the big boys to stay away.
Full-service carriers such as SIA should stick to what they know best, said Mr Fernandes, during a panel discussion moderated by former SIA deputy chairman and chief executive officer Cheong Choong Kong.
But SIA, seeing the nasty consequences of scoffing at the threat in the US and Europe, is setting up its own no-frills airline, Tiger Airways, with local and foreign partners. It owns 49 per cent but is staying away from running it or any decision-making, leaving them to the other partners, including Ryanair founder Tony Ryan's Irelandia Investments.
Qantas has started Jetstar and Thai Airways International, Nok Air, with a 39 per cent stake.
All three low-fare airlines will take off later this year.
Mr Fernandes is convinced the parents will regret their birth. He says: 'Qantas and SIA will discover that it isn't as easy as it looks. It's a tough business... and airlines that have stayed focused on what they are good at will succeed.'
Others disagree, saying traditional airlines have two choices: play the game and risk some cannibalisation, or lose market share.
If they choose to play, they should emulate SIA by taking a stake but not getting involved in its operations, say both Mr Garfinkle and Mr Harbison.
Otherwise, their low-fare airline faces a high probability of going bust because they may not be as focused on costs and their operations may be influenced by their parents, says Mr Garfinkle.
'I don't think, for example, that Nok Air is doing the right thing because I do not believe Thai Air can keep its hands off the structure,' he adds.
But Nok Air chief executive Patee Sarasin insists that it will rely on its parent's expertise only in ground handling and aircraft maintenance. When deciding on, among other things, branding and fares, it will be independent.
Given that the big boys with deep pockets are jumping into the low-cost business, Dr Cheong thinks traditional carriers in Asia, especially the larger ones such as SIA and Cathay Pacific, will survive the challenge by out-competing the low-cost carriers.
'They will still be around in 15-20 years' time. In a bruising free-for-all, who do you think will be the first to be depleted of cash?' he asks.
To which Mr David Huttner retorts: 'Although these carriers have the resources, I do not know if they have the know-how to get it right.'
Mr Hutter is head of strategy and communications at Virgin Blue, a low-cost carrier with more than 30 per cent of the Australian domestic air travel market.
For the traveller, it matters little who wins the battle and which is the winning business model. Competition is good, and when it brings lower fares, all the better. One can't have enough of a good thing.
==========================================