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Source: www.asiaecon.org |

ASIAN BUDGET AIRLINES LAUNCH PRICE WAR


Asian budget airlines are set to offer dirt-cheap tickets during the summer holidays to help boost demand for travel amid the global economic downturn.


Asian budget airlines are set to offer dirt-cheap tickets during the summer holidays to help boost demand for travel amid the global economic downturn.

Singapore-based Tiger Airways said that it would launch summer fares starting at about $16, including taxes. Another Singapore-based budget airline, Jetstar Asia, said it extended a promotion to beat the cheapest price offered by rivals by 10 percent until August 16. Malaysia-based Air Asia is offering tickets starting from 26 cents for travel within Malaysia. Indonesia’s Lion Air is selling one-way trips from Singapore to Bali for $5.80 from June 1 to September 30. Thailand’s Nok Air is offering one-way fares for as low as 25 cents, excluding taxes and fees, for domestic flights between May 15 and September 30. 

Moreover, Air Asia will be starting services between Kuala Lumpur and London, making it only the second budget airline to offer long-haul, low-cost travel. While the last airline to try it, Oasis Hong Kong, failed to maintain their services after it collapsed from high fuel costs and intense competition, Air Asia is confident that it will succeed this time around.

“There’s a lot of latent demand and we think we’ve got the right elements to make the economics work,” Azran Osman-Rani, chief executive of Air Asia X, said.

Asian budget airlines have only recently seen explosive growth as protectionist pressures eased and countries in the region opened up more routes to competition. These airlines manage to offer cheap fares by keeping their costs down in all areas. In the area of ticket sales, selling tickets electronically online or through the telephone remove costs from paying travel agent commissions and printing paper tickets. Inside the cabin, they keep costs down by ditching the usual luxuries offered by traditional airlines, such as free food and drink. In terms of the physical equipment and infrastructure used, costs are kept at a minimum by using the same type of airplanes to minimize maintenance, training and repair costs and by flying only to airports with cheaper landing fees.

Budget airlines in the region are expected to flourish this year amid the global economic downturn. A recent report by the Centre for Asia Pacific Aviation (CAPA) predicts that budget airlines will experience increases in both passenger traffic and earnings this year compared to traditional airlines.

“Stormy conditions in 2008 have already helped the low-cost segment gain a larger share of global aviation,” the CAPA report stated. “Now predicted tougher economic conditions and lower fuel prices will give the sector a major advantage in 2009.”

The launching of a price war between these airlines reflect their optimism in their performance this year and their confidence that the current economic climate will drive travelers towards their business.

“The current economy makes it a tough operating environment where competition will be intense and fares will be under pressure,” Jetstar Asia’s commercial head Leslie Ng said in a statement. “People are going for cheaper fares as they become more cost conscious and want to get value for money deals.”

Analysts say that the only thing that may setback growth in this low-cost sector is if governments return to protectionist policies to save their flagship carriers. However, protectionism in the sector is not expected to be reestablished as Asian governments are trying to boost their tourism industries and are committed to establishing a common economic community.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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