Crowded skies squeeze Asia's budget carriers

Singapore: Asian airlines, particularly budget carriers, may be taking off on a high-risk strategy -- ordering hundreds of aircraft to offer new routes and more flights, just as growth in low-cost travel is seen slowing.
Over the next five years, budget carriers from Malaysia's AirAsia to Singapore's Tiger Airways will take delivery of over 500 planes, meaning a capacity increase of 15 percent a year -- double what some observers are forecasting.
The real prospect that some budget carriers, and the full-service airlines they compete with, may not survive the dogfight could, in turn, mean billions of dollars of cancelled orders for Boeing and Airbus.
Asia has become the largest market for the two big planemakers, accounting for a third of outstanding orders.
"Not all airlines will survive," said Terence Fan, assistant professor at Singapore Management University. "Mid-double-digit growth is a lot to achieve, and the aviation industry has had a lot of ups and downs."
"We're already seeing Thai Airways, for example, reduce its short-haul flights from Bangkok because of competition from low-cost carriers," Fan added.
Fan, who last year published a paper on Europe's passenger airline industry, noted around 130 airline start-ups there in the 10 years to 2006. Only about 50 survived, and that number has since fallen further.
While Ryanair and Easyjet have thrived and become major players in Europe, others such as SkyEurope, described by consultancy Skytrax as the best low-cost carrier in Eastern Europe, have gone bankrupt, Fan said.
Asian low-cost carriers have grown rapidly over the past decade and now account for 14 percent of intra-Asia travel, according to Airbus estimates.
05/02/10 Reuters/Economic Times

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Categories: Foreign Feb 2010, Low Cost General Feb 2010, Singapore Airshow 2010