Comment
No guarantees for LCCs
July 1st 2013
Across most of the Asia-Pacific the growth of low-cost carriers (LCCs) has been a heady success story. In some domestic markets, such as Thailand and the Philippines, budget operators are carrying more than half the passenger traffic. Read More »
But as our coverage in this issue clearly shows, ease of entry and success is by no means guaranteed. The dissolution of the AirAsia-All Nippon Airways joint venture, AirAsia Japan, last month proves what many suspected: Japan would be a tough nut to crack.
Japanese travellers are culturally conservative and prefer the frequent schedules and superior service of legacy carriers. Japan Airlines chairman, Masaru Onishi, believes it will take years to change and the progress of LCCs is likely to be slow and painful.
Meanwhile, Qantas Airways and China Eastern Airlines (CEA) have been struggling to acquire an air operator’s certificate for more than a year for their joint venture, Jetstar Hong Kong.
The main stumbling block has been how one defines an airline’s principal place of business. Hong Kong requires its airlines to be based and run from the city. To help their case, Qantas and CEA acquired a Hong Kong partner, Shun Tak, last month only to find days later they had been trumped by Hong Kong Express, a regional carrier that announced it was re-launching as an LCC in October.
Elsewhere, in Singapore (Jetstar Asia), Indonesia (AirAsia Indonesia), Thailand (Thai AirAsia) and Tokyo (Jetstar Japan), regulators have clearly accepted that while these carriers have local management, in truth they make no major decisions without the say so of their masters offshore.
It has been a way for expanding airline businesses to circumvent local ownership and control rules and side-step cross-border merger regulations that prevent much needed consolidation.
Cathay Pacific Airways says it does not fear competition and is coping with LCCs on its regional international routes. Yet there is no doubt it has been arguing its case about the legal issues of the Jetstar application.
Many analysts believe the new Hong Kong-based LCCs will bring additional traffic that will boost the local economy. It appears inevitable that LCCs will be part of Hong Kong’s aviation industry. The cards are falling the sector’s way.
Everyone wants liberalization of aviation markets and putting barriers in the way of new budget operators is hardly the way to do it.
