- The Washington Times - Thursday, December 25, 2003

HONG KONG — The theory is simple enough: Sell the tickets cheap and more people will fly, even if they are herded aboard like cattle with nothing more than peanuts and soft drinks for dinner.

Low-cost airlines have been a success in the United States and Europe, and a new batch is swooping into Asia to see whether the formula can work here. Some of the new carriers are independents, and others are owned by larger airlines.

Singapore Airlines is the latest big player planning a low-cost carrier, Tiger Airways, expected to begin flying next year. Singapore’s partner is the founder of the budget European carrier Ryanair. They have not announced Tiger’s ticket prices.

Indonesia’s Lion Air, which also plans to begin operations in 2004, said a one-way ticket from Singapore to Jakarta would cost $49, compared with $313 on a full-service carrier.

Thai Airways plans its own low-cost airline, and British tycoon Richard Branson is moving into the New Zealand market with Pacific Blue Airlines after starting up Virgin Blue in Australia. Travel agents charge about $855 for a Virgin Blue flight from Melbourne to Perth, compared with $1,340 on national flag carrier Qantas, which is planning its own cut-rate airline, Jetstar, next year.

Aviation analysts expect more startups.

“This is going to be a big, big movement,” said Peter Harbison, managing director at the Center for Asia Pacific Aviation, a consultancy in Sydney, Australia.

The low-cost concept became a moneymaker in the United States, where it was pioneered in the 1970s by Southwest Airlines, the model for budget carriers elsewhere such as Ryanair and EasyJet in Europe.

“Asia is playing catch-up,” said Joyce Lai, a spokeswoman for the low-cost Malaysian carrier AirAsia, which has been successful on domestic routes and moved international this month with flights to the Thai resort island of Phuket.

AirAsia says its operating costs are less than half those of other successful Asian carriers, and it has made air travel an affordable option for more Malaysians. The concourses of Kuala Lumpur’s international airport still teem with business executives in suits and well-heeled tourists, but they are joined by many less-wealthy travelers flying back home to visit relatives in the provinces.

“Most of the time you can get really good rates — in fact, sometimes it’s cheaper than bus tickets from Penang to Kuala Lumpur,” said George Ong, who runs a travel agency on Penang island specializing in local tour packages.

But some analysts note that Asia is quite different from the United States and Europe — which have huge, open-aviation markets — and that could stop some low-cost carriers from enjoying the same success. Asian regulators typically have been reluctant to open routes to more competition, although that reluctance is easing.

Moreover, many low-cost airlines keep down expenses by flying out of secondary airports, avoiding major hubs where takeoff and landing fees are much higher, and still getting passengers close enough to their destinations. That works fine in U.S. cities such as Dallas or Chicago, or in London with its multiple airports, but there are few similar places in Asia.

“If you’re flying Singapore-Hong Kong, you don’t have an opportunity to lower your costs by going to a secondary airport,” said Philip Wickham, Asia aviation analyst at investment bank ING Barings in Hong Kong.

Although travelers might be fine with no amenities on flights that last an hour or two, many routes in this region take longer.

“Here in Asia, four-hour flights are bread-and-butter flights,” Mr. Wickham said. “You have to start giving people more than coffee and peanuts.”

With such obstacles, some analysts expect a shakeout in the low-cost business. That already has happened in Japan, where two budget airlines emerged after deregulation removed fare-price controls starting in the late 1990s. Both struggled to gain market share, as established airlines fought back with discounts.

One of them, Air Do, also known as Hokkaido International Airlines, filed for bankruptcy protection in June 2002 after several years of battling the major airlines. It is restructuring with the assistance of All Nippon Airways, Japan’s biggest domestic operator.

“You see all of the new names appearing — in three years, I don’t think they’ll all still be there,” Mr. Wickham said.


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