Low-Cost Carriers' Battle Heats Up Before Launch Of The A E C

[webfact]

AVIATION
Low-cost carriers' battle heats up before launch of the AEC
BAMRUNG AMNATCHAROENRIT
THE NATION

BANGKOK: -- The approach of the Asean Economic Community (AEC) in a couple of years is meaningful for the aviation industry in Thailand, especially low-cost carriers, which are flocking here to cash in on the business opportunities from the anticipated tourism boom, resulting in greater competition.

Given the country's strategic location as a connectivity base, Thailand is becoming a battleground for aviation players. At present, there are about 24 low-cost carriers flying regionally, including four based in Thailand - Thai AirAsia, Nok Air, Orient Thai, and Solar Air. Some others operate a few flights to Bangkok, such as Tiger Airways and Jetstar Asia Airways from Singapore, Mandala Airlines and Lion Air from Indonesia, and South East Asia Airlines (SEAir) and Cebu Pacific Air from the Philippines. In the early stages, they launched service in their homelands, but lately have started spreading their wings regionally.

"Not only low-cost but more full-serviced carriers will be flying in here when the AEC opens," Udom Tantiprasongchai, chairman of the advisory board of Orient Thai, told The Nation. "Thailand is very lucky to have a good geographical position as a regional centre for the aviation industry. Unfortunately, Thai operators will be forced to face stiffer competition and will find it even harder to stay [in business]."

From now on, Udom said, the market would be more dynamic. Operators will find it more and more difficult to stay on, especially those that lack funding and strategic thinking to cope with the fast-changing business environment.

AirAsia will play a leading role in the Thai market. The recent visit to Bangkok by Tony Fernandes, the airline's founder and chief executive, to meet with Prime Minister Yingluck Shinawatra underscored this. He sought her support for the airline's rising role in the Thai market by using the country as a hub. An analyst who declined to be named said political connections were one of the keys to doing business regionally if companies wanted to secure a foothold in each country.

AirAsia, founded in 2001, has become Asia's biggest low-cost carrier. It has established a business foundation throughout the region, with 118 aircraft in its fleet at present and a further 357 on order. The analyst said it was apparent that the carrier would have a big influence on the regional skies, including Thailand. It could outperform Thai Airways International, the national carrier, within five years. Udom said: "The success of AirAsia today is [based on the fact] that it has deep pockets and [is led by] the visionary Fernandes. He is smart at doing business."

Executives in the industry say AirAsia also prospers because of its business flexibility. It makes decisions quickly, especially when it recognises that part of its business is failing. It keeps its overall operation strong by cutting off poorly performing services.

In contrast, THAI as a state enterprise is bureaucratic, takes a long time to find solutions to problems or launch new routes. Sometimes, by the time it acts, it is too late. There is no doubt THAI has gradually seen its market share snatched away by low-cost carriers, especially in the regional market.

The trend is clear that passengers are looking for affordable flights. They do not mind flying two or three hours with a low-cost carrier even if no food or drinks are served on board.

Fernandes told the media last year in Jakarta that he intended the AirAsia brand to be as well known as Coca-Cola. Its rapid expansion may help fulfil his ambition, and THAI may feel the pinch. Although THAI has a 49-per-cent stake in low-cost carrier Nok Air, that may not be enough to protect its market share from AirAsia's expansion.

This reality is underscored by the size of AirAsia's fleet. Nok Air has 16 aircraft, while Thai AirAsia will have 34 by the end of this year. Yet both were formed around the same time, nine years ago. Also, Thai AirAsia operates 174 daily flights from Don Mueang International Airport, against just 84 by Nok Air. By 2015, Thai AirAsia plans to have 46 aircraft. Although Nok Air also plans to acquire new planes, they are to replace old ones, leaving the total number unchanged. Beyond AirAsia, analysts argue that Tiger Airways, partly owned by Singapore Airlines, is in a strong position. Currently, it holds stakes in Mandala Airlines and SEAir, which will strengthen its route coverage in the region. Previously, Tiger planned to set up a low-cost carrier in cooperation with THAI, but the idea fell through when it failed to win approval from the Thai government.

Meanwhile, Thai AirAsia has adopted more aggressive marketing from season to season, especially low-priced strategy. It has lured a growing number of people to use the service.

Pinyot Pibulsonggram, Nok Air's vice president for sales and marketing, acknowledged that AirAsia was playing a bigger role here, but believed its pricing strategy had not forced Nok Air into a corner. The airline has room for growth by positioning itself as a ''premium low cost" carrier, offering some drinks and snacks for passengers. "Price is the first thing that passengers take a look at, but it is not the final reason they make a decision to buy," he said.

People have welcomed the arrival of more low-cost carriers, although they are foreign. They enjoy the broader travel options. The more low-cost carriers there are, the cheaper the tickets will be. Service charges such as for baggage will also be eased, forced by competition.

So the battle for the skies is getting fiercer. Weak operators will be forced out of business.


-- The Nation 2013-03-04

[reiltin]

The AEC will not only open up the aviation industry but all manner of consumer services and products to all.For too long monopolies here have feasted well at the table at the expense of Thai based consumers.Bring on 2015!

[Locationthailand]

The majority of this article reads like a 'plug' for Air Asia. Unbiased reporting?

[OzMick]

Here's another. Just booked AA KL - Surat for AU$17, about B500, all up. Yes it was a special deal but DILLIGAF.

[zakk9]

The majority of this article reads like a 'plug' for Air Asia. Unbiased reporting?

AA Thai is twice as large as Nok already and aims to become three times as large by 2015. They are dominating their regional market. No wonder the article is centered around them. Those who should really worry are Thai and Bangkok Air. Both already struggle with their profitability. If they continue bleeding market shares to AA, that may spell trouble long term, particularly for Bangkok Air who doesn't have government funding.

[blazes]

This article is just lazy journalism...a news release that is not even re-written.

If Tony Fernandez is such a great businessman, why has he showered millions of pounds on a shagged-out football club like Queen's Park Rangers?

And why would anyone want to fly with an airline (Air Asia) that treats its passengers like cattle? Even if you save a few baht (which most of the time is not true, when you add in all the 'incidentals' of booking on line with outfits like Air Asia.

Bah, humbug.

[ginjag]

This article is just lazy journalism...a news release that is not even re-written.

If Tony Fernandez is such a great businessman, why has he showered millions of pounds on a shagged-out football club like Queen's Park Rangers?

And why would anyone want to fly with an airline (Air Asia) that treats its passengers like cattle? Even if you save a few baht (which most of the time is not true, when you add in all the 'incidentals' of booking on line with outfits like Air Asia.

Bah, humbug.

Cattle------bullsh#t, add ons if you want to take the kitchen sink and the mother in law, YES they are so bad thats why they are doing so well, Tony Fernandez is better with QPR than Boston united.

[tig28]

And why would anyone want to fly with an airline (Air Asia) that treats its passengers like cattle? Even if you save a few baht (which most of the time is not true, when you add in all the 'incidentals' of booking on line with outfits like Air Asia.

Bah, humbug.

Hi blazes

In a couple of weeks the family (4 of) are flying AirAsia to Bali. At less than 7,000 Bt return per person we are saving quite a lot more than "a few Baht"!

This includes some of the 'incidentals' you mention --- like Baggage and preferred seating. (I find both necessary and good value)

AirAsia insurance -- I declined. (It amazes me that some travelers find this hard)

The credit card fee of 160 Bt per person made me remember Qantas' last similar charge -- it was 2000 Bt per person.

Anyway .. lets have some idea of just how (in your opinion) "Air Asia that treats its passengers like cattle"?

Bah, humbug.

[ginjag]

And why would anyone want to fly with an airline (Air Asia) that treats its passengers like cattle? Even if you save a few baht (which most of the time is not true, when you add in all the 'incidentals' of booking on line with outfits like Air Asia.

Bah, humbug.

Hi blazes

In a couple of weeks the family (4 of) are flying AirAsia to Bali. At less than 7,000 Bt return per person we are saving quite a lot more than "a few Baht"!

This includes some of the 'incidentals' you mention --- like Baggage and preferred seating. (I find both necessary and good value)

AirAsia insurance -- I declined. (It amazes me that some travelers find this hard)

The credit card fee of 160 Bt per person made me remember Qantas' last similar charge -- it was 2000 Bt per person.

Anyway .. lets have some idea of just how (in your opinion) "Air Asia that treats its passengers like cattle"?

Bah, humbug.

Blazes has just a chip on his shoulder about AAsia, We all have had a few not so nice experiences with ailines, and some posters pick on AAsia because to bring the price down to half of Thai Airways (at times) the cut some little nice bits out, BUT for an average trip-domestic of 1 and half hour, who needs all inclusive, it gives you choices thats all,

If you fly Thai for example you have to pay for baggage (indirectly) even if you only have hand luggage. It's choices again anyway.

[IsaanUSA]

I read the whole thing twice. It doesn't mention anywhere if the AEC specifically affects airlines. To me the whole article sounds like, "AEC opens new opportunities, so more people will be flying"

Am I missing something???

[OzMick]

The majority of this article reads like a 'plug' for Air Asia. Unbiased reporting?

AA Thai is twice as large as Nok already and aims to become three times as large by 2015. They are dominating their regional market. No wonder the article is centered around them. Those who should really worry are Thai and Bangkok Air. Both already struggle with their profitability. If they continue bleeding market shares to AA, that may spell trouble long term, particularly for Bangkok Air who doesn't have government funding.

How Bangkok Air can be having profitability problems when they have the Samui gold mine (worked overtime) is hard to understand. Looking more than 2 months ahead, the cheapest fare for a 1 hour BKK flight is B3200, and available on only 2 flights each day - all the others are "sold out". The normal fare is B4700, coincidentally the same as I paid for AA KL - Gold Coast (promo fare), a flight 9 times as long. Boutique airline my hairy butt!

Edited March 4, 2013 by OzMick

[ignis]

In a couple of weeks the family (4 of) are flying AirAsia to Bali. At less than 7,000 Bt return per person we are saving quite a lot more than "a few Baht"!

Looking last week Bali all in price with AirAsia was 5,990 baht for May........... Thai Air was 16,305 baht for same dates..

Think people booking AirAsia, mostly book long in advance as a week or 2 before make little sense as works out near the same...

My plan was to fly to Colombo,in May, last time I looked was 4,600 baht, appear that route has been dropped, now cheapest is more like 10,000 baht.

Couple of years ago looked last moment [next day] for flight to KL, Airasia was far more expensive than many others, book a couple of months is advance = a big saving......... Never been and not sure I would want to do long haul

As for treats its passengers like cattle, that is OK for a short trip at a fraction of the cost of other.

[ginjag]

In a couple of weeks the family (4 of) are flying AirAsia to Bali. At less than 7,000 Bt return per person we are saving quite a lot more than "a few Baht"!

Looking last week Bali all in price with AirAsia was 5,990 baht for May........... Thai Air was 16,305 baht for same dates..

Think people booking AirAsia, mostly book long in advance as a week or 2 before make little sense as works out near the same...

My plan was to fly to Colombo,in May, last time I looked was 4,600 baht, appear that route has been dropped, now cheapest is more like 10,000 baht.

Couple of years ago looked last moment [next day] for flight to KL, Airasia was far more expensive than many others, book a couple of months is advance = a big saving......... Never been and not sure I would want to do long haul

As for treats its passengers like cattle, that is OK for a short trip at a fraction of the cost of other.

Agree and as I stated earlier, it;s choices, I have been with all the Dom flights, and I go now A Asia when I can, International for transfers I HAVE REALLY TO GO THAI, but get your prices more competetive ,