Rise of Budget Carriers
1. Introduction
1. Concept & Background
For many years the Airline industry in the Asia Pacific region has been tightly regulated and consequently stable as national governments had control over operations of their national carriers and bilateral agreements between states meant that full-fledged airlines could operate without facing any competition at all. With the reform in airline licensing and access to air routes highlighted in the report[1] of the Pacific Economic Cooperation Council (PECC) conference, new rules meant intra-Asian open skies and relaxation of ownership rules. This in turn led to the boom of low-cost carriers in the region. With the skies now clear of restrictions, low-cost or ‘budget’ carriers could now prey on air routes once dominated by full-fledged carriers. With business models based on low fares and no frills, meaning the absence of meals and the comfort of using aero-bridges at airports among others, low-cost carriers took the region by storm with Virgin Blue and Air Asia leading the pack.
1.2 Advantages & Disadvantages
The rapid ascent of destinations offered by low-cost carriers meant that budget conscious travellers could now travel to more places inexpensively. With increased visitor arrivals in the region, governments spruced up their cities and aggressively expanded to attract the crowds. Singapore and Hong Kong improved airport facilities while Indonesia released hectares of space along the beach for resort development. This helped close the gap among Countries but the preference of tourists for low-cost carriers compared to flag carriers on short-haul flights proved to be a bane for full-fledged airlines. Unlike low-cost carriers, the cost of labour among others meant that full-fledged airlines could not offer competitive prices like their counterparts. Japan Airlines and Malaysia Airlines took the hardest hit with the latter almost becoming bankrupt if not for the collaboration[2] with Air Asia in 2006.
Pollution,
1. Concept & Background
For many years the Airline industry in the Asia Pacific region has been tightly regulated and consequently stable as national governments had control over operations of their national carriers and bilateral agreements between states meant that full-fledged airlines could operate without facing any competition at all. With the reform in airline licensing and access to air routes highlighted in the report[1] of the Pacific Economic Cooperation Council (PECC) conference, new rules meant intra-Asian open skies and relaxation of ownership rules. This in turn led to the boom of low-cost carriers in the region. With the skies now clear of restrictions, low-cost or ‘budget’ carriers could now prey on air routes once dominated by full-fledged carriers. With business models based on low fares and no frills, meaning the absence of meals and the comfort of using aero-bridges at airports among others, low-cost carriers took the region by storm with Virgin Blue and Air Asia leading the pack.
1.2 Advantages & Disadvantages
The rapid ascent of destinations offered by low-cost carriers meant that budget conscious travellers could now travel to more places inexpensively. With increased visitor arrivals in the region, governments spruced up their cities and aggressively expanded to attract the crowds. Singapore and Hong Kong improved airport facilities while Indonesia released hectares of space along the beach for resort development. This helped close the gap among Countries but the preference of tourists for low-cost carriers compared to flag carriers on short-haul flights proved to be a bane for full-fledged airlines. Unlike low-cost carriers, the cost of labour among others meant that full-fledged airlines could not offer competitive prices like their counterparts. Japan Airlines and Malaysia Airlines took the hardest hit with the latter almost becoming bankrupt if not for the collaboration[2] with Air Asia in 2006.
Pollution,