Budget Airlines Face Passenger Plane Shortage
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Budget Airlines Face Passenger Plane Shortage
Dow Jones
Tuesday October 19, 5:55 PM AEST
Regional Budget Airlines Face Passenger Plane Shortage
By Abdul Hadhi
SINGAPORE (Dow Jones)--Southeast Asia's mushrooming budget airlines are facing a shortage of passenger aircraft which means higher leasing costs on top of rising oil prices.
Many of these airlines prefer the A320 from Airbus due to its low operating cost and fuel consumption. A second choice is the B737 NGH from Boeing.
Budget airlines that are going to be launched or seek to add more aircraft next year will have to grapple with the higher costs while trying to offer the lowest fares amid a price war to capture a bigger slice of the economy air travel pie.
Over the last six months, the situation has gone from one of oversupply for these 100 to 150 seat aircraft to one where there are very few available for lease.
"This year, there are no new A320s or B737 NGs available (for lease). Next year, it's less than 20," said Sean Lee, spokesman for Singapore Aircraft Leasing Enterprise, or SALE.
"Lease rates for new single aisle aircraft have gone up 10%-15% since the start of the year," he added.
SALE, an associate of Singapore Airlines Ltd. is Asia's leading aircraft leasing company, with about 62 leased aircraft to 30 airlines worldwide.
Current rentals for new A320 aircraft range between US$250,000 to US$350,000 a month depending on the length of the lease.
Singapore-based Tiger Airways chief executive Patrick Gan shares the concern over the shortage.
"This rapid increase in demand for these two plane types is certainly an area of concern for the industry as a whole, restricting the available number of new planes and driving up plane leasing costs, which may eventually force market players to raise airfares," Gan said.
Janet Tan, chief executive of Singapore-based A-Sonic Aerospace Ltd also referred to the shortage of A320s in a recent briefing to announce her company's plans to set up a budget airline in China.
A-Sonic's China venture aims to start commercial flights by the third quarter of 2005 by which time the shortage of planes may have eased, she said.
In Singapore, Tiger - 49% owned by Singapore Airlines Ltd. - and Valuair Ltd. another budget carrier have opted exclusively for the A320.
Valuair hopes to add two aircraft every year to its fleet, in addition to the two it already has and two more it will take delivery of in December, while Tiger's plan is to have up to 12 planes by 2006 . SIA's regional arm, SilkAir - also uses the A320 as does Jetstar Asia - 49%-owned by Qantas Airways Ltd.
Within Asia, Thailand's Bangkok Airways and India's Kingfisher Airlines and Air Deccan use the A320 while Malaysia's AirAsia is considering using the aircraft.
The tight supply may ease as some U.S. airlines filing for Chapter 11 bankruptcy protection may be forced to sell aircraft as part of restructuring plans, Valuair chief executive Sim Kay Wee said.
UAL Corp.'s United Airlines, the second-largest U.S. airline, is wrestling with a plan to emerge from bankruptcy-court protection. US Airways, which has filed for Chapter 11 bankruptcy protection twice in two years, is trying to impose concessions on its workers after failing to negotiate cuts with unions.
SALE's Lee, however, doesn't expect the A320 shortage to ease by any significant way in this part of the world.
"There's strong demand for these planes in the U.S. too and many of those coming into the market because of the Chapter 11 are likely to be snapped in the U.S.," he explained.
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Tuesday October 19, 5:55 PM AEST
Regional Budget Airlines Face Passenger Plane Shortage
By Abdul Hadhi
SINGAPORE (Dow Jones)--Southeast Asia's mushrooming budget airlines are facing a shortage of passenger aircraft which means higher leasing costs on top of rising oil prices.
Many of these airlines prefer the A320 from Airbus due to its low operating cost and fuel consumption. A second choice is the B737 NGH from Boeing.
Budget airlines that are going to be launched or seek to add more aircraft next year will have to grapple with the higher costs while trying to offer the lowest fares amid a price war to capture a bigger slice of the economy air travel pie.
Over the last six months, the situation has gone from one of oversupply for these 100 to 150 seat aircraft to one where there are very few available for lease.
"This year, there are no new A320s or B737 NGs available (for lease). Next year, it's less than 20," said Sean Lee, spokesman for Singapore Aircraft Leasing Enterprise, or SALE.
"Lease rates for new single aisle aircraft have gone up 10%-15% since the start of the year," he added.
SALE, an associate of Singapore Airlines Ltd. is Asia's leading aircraft leasing company, with about 62 leased aircraft to 30 airlines worldwide.
Current rentals for new A320 aircraft range between US$250,000 to US$350,000 a month depending on the length of the lease.
Singapore-based Tiger Airways chief executive Patrick Gan shares the concern over the shortage.
"This rapid increase in demand for these two plane types is certainly an area of concern for the industry as a whole, restricting the available number of new planes and driving up plane leasing costs, which may eventually force market players to raise airfares," Gan said.
Janet Tan, chief executive of Singapore-based A-Sonic Aerospace Ltd also referred to the shortage of A320s in a recent briefing to announce her company's plans to set up a budget airline in China.
A-Sonic's China venture aims to start commercial flights by the third quarter of 2005 by which time the shortage of planes may have eased, she said.
In Singapore, Tiger - 49% owned by Singapore Airlines Ltd. - and Valuair Ltd. another budget carrier have opted exclusively for the A320.
Valuair hopes to add two aircraft every year to its fleet, in addition to the two it already has and two more it will take delivery of in December, while Tiger's plan is to have up to 12 planes by 2006 . SIA's regional arm, SilkAir - also uses the A320 as does Jetstar Asia - 49%-owned by Qantas Airways Ltd.
Within Asia, Thailand's Bangkok Airways and India's Kingfisher Airlines and Air Deccan use the A320 while Malaysia's AirAsia is considering using the aircraft.
The tight supply may ease as some U.S. airlines filing for Chapter 11 bankruptcy protection may be forced to sell aircraft as part of restructuring plans, Valuair chief executive Sim Kay Wee said.
UAL Corp.'s United Airlines, the second-largest U.S. airline, is wrestling with a plan to emerge from bankruptcy-court protection. US Airways, which has filed for Chapter 11 bankruptcy protection twice in two years, is trying to impose concessions on its workers after failing to negotiate cuts with unions.
SALE's Lee, however, doesn't expect the A320 shortage to ease by any significant way in this part of the world.
"There's strong demand for these planes in the U.S. too and many of those coming into the market because of the Chapter 11 are likely to be snapped in the U.S.," he explained.
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