The boom in LCAs in the PATA region is going the same way
as in North America and Europe. In the US, the aviation market was
deregulated in 1978, leading to the formation of Southwest Airlines. Europe
followed with its own deregulation in 1993.
It took another 10 years for mindsets to change
sufficiently to realize that aviation had to be nourished to facilitate
economic growth in Asia Pacific, which is divided by large geographical
distances and tracts of water.
LCAs also went through a learning curve. In the early
days, they were ignored, rejected as being undercapitalized and referred to
as fly-by-night operators with restricted route networks. It was felt that
air travel was not quite affordable by the masses.
They would pose no threat to the mainstream ‘legacy’
airlines that enjoyed government protection, were the ‘designated’
carriers in air services agreements and had priority when it came to the
allocation of traffic rights. The legacy airlines also had the advantage of
massive alliances and frequent flyer programs.
But the international economic and political crises of
the last few years led to vigorous cycles of discounting in the leisure
travel sector, and cost-cutting and downsizing in the corporate world.
Business travel was downgraded, especially on the short
and medium-haul sectors. Because the ‘legacy’ airlines had a cost
structure that could be trimmed only to a limited extent, the field was wide
open for new entrants with a totally new cost-base.
Today, dozens of LCAs are flying all over the world. They
include Southwest, JetBlue, ATA, Air Tran, WestJet, America West and
Frontier in North America; Ryanair, EasyJet and German wings in Europe; Cebu
Pacific, Tiger Airways, Valuair, Lion Airlines, Virgin Blue, Pacific Blue,
OzJet, Freedom Air, One-Two-GO, Nok Air, Air Deccan and Jetstar in the PATA
region.
After years of one crisis after another, the advent of
low-cost airlines (LCAs) has helped lift spirits in the Asia Pacific travel
industry. Also known as no-frills or low-fare airlines, their appearance and
robust growth in a number of PATA countries are set to trigger a boom in
intra-regional and domestic travel.
Effectively, LCAs are bringing regional air
transportation down to the same level as buses and trains, and slotting
themselves into the vast price gap that existed between surface and air
transport. Their growth plans fit perfectly with small regional
destinations’ desire for more aviation access, as well as national
objectives to promote greater regional economic integration via free trade,
upgraded infrastructure development and decongestion in the mainstream
mega-cities.
The language now used to describe the impact of LCAs on
the aviation industry - such as ‘revolution’ and ‘agent of change’ -
applies equally well to their potential impact on travel and tourism. While
some say it is democratizing travel by making air transport affordable for
more people than ever before, others say it commoditizing travel by making
it no different from any other product; soon to be available in
supermarkets.
According to PATA’s aviation analyst Mr. K.C. Sim,
“What is certain is that many will be swayed to travel more frequently and
more impulsively to destinations served by LCAs. Long weekends will become
gold mines on the calendar and the reasons for travel will become
increasingly tied to the pursuit of individual whims and fancies. Niche
segment stakeholders such as spas and golf course operators, dive site
operators, shopping and culinary destinations or just simply rest-’n-relax
resorts, stand to gain.”
This huge surge in aviation capacity has significant
implications for Asia Pacific travel, especially when China (PRC) and India
are included in the equation. Student and backpacker travel will boom. Money
saved on transport can then be spent on shopping, spurring sales of
handicrafts and other low-cost items, the income from which generally goes
directly to local communities.
At the national level, this surge of LCA-driven travel
will grow the economies of Asia’s secondary cities, creating jobs and
business opportunities and helping to reduce migration into the mega-cities
and all the social, environmental and financial problems that often ensue
from that.
More jobs will be created in aviation, ranging from cabin
crew to engineering and maintenance. Over time, national tourism
organizations and the private sector will be forced to take a fresh look at
how and where they spend marketing dollars, leading to a potential shift
away from Japan, Europe and North America towards intra-regional sources.
In Asia Pacific Aviation Outlook 2004, Centre for
Asia-Pacific Aviation (CAPA) managing director, Peter Harbison said, “It
could and should be the best year ever for aviation. The signs ahead are
positive. Liberalization of air services is accelerating rapidly and
consumer sentiment is positive in most countries. Underlying economic
conditions across the region are currently favorable in a way which has
rarely occurred, with all countries synchronized in favorable growth
patterns.”
Harbison continued, “In these circumstances, provided
airlines manage capacity effectively, this growth should flow straight to
the bottom line. It should also be good news for aircraft manufacturers, as
profitability and demand coincide. Similarly, airports and the tourism
industry should experience solid results. In this climate, the investment
prospects for an array of airport privatizations across the region are
correspondingly strong.”
Juthaporn
Ruengron a-sa, Tourism Authority of Thailand’s deputy governor for
domestic marketing, at the seminar held at the Imperial Mae Ping Hotel.