Asia’s Low-Cost Carriers in the Crosshairs

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Malaysia Airlines (MAS) is allowing its turboprop operation, Firefly, to add 737-400s.

 

Firefly operates a fleet of seven ATR 72-500s out of Subang Airport, but the move to jets means it must establish a second base at Kuala Lumpur International Airport (KLIA), AirAsia’s base. The Malaysian authorities do not allow scheduled passenger airlines to serve Subang with jets.

 

Some industry executives are concerned that a second base at KLIA will be costly to Firefly’s business and add complexity, because its staff will have to shuttle between airports.

 

Firefly managing director, Eddy Leong, is tight-lipped about when the airline will start operating 737-400s, but later this year seems probable as Firefly has already advertised for 737-400 pilots.

 

Leong also declines to say where the 737-400s are coming from. But MAS, which starts phasing out its 737-400s in October as its on-order 737-800s begin to arrive, seems the likely source.

 

Garuda Indonesia mainline has steered clear of competing in the low-fare segment because it has succeeded in catering to the local business traveler. But when it completes its initial public offering in the coming months, it plans to expand its low-cost carrier, Citilink.

 

“We need to fix our main[line] business first and then we need to focus on Citilink,” because the low-fare market is where the growth is, says Elisa Lumbantoruan, Garuda executive vice president for corporate strategy.

 

The premium travel market in Indonesia has single-digit growth, whereas the low-fare market has double-digit growth, he says.

 

By 2014 they want Citilink to account for 40% of Garuda group revenue, whereas now it is less than 5%, he says.

 

Citilink has six 737-300/-400s and Garuda plans to transfer its -400s to Citilink as Garuda takes delivery of 737-800s, he adds.

Garuda President/CEO Emirsyah Satar also says they plan to order 20-25 new aircraft next year for Citilink. A320s, 737-700/-800s, Bombardier regional jets and Embraer regional jets are being considered.

 

Garuda is also looking for Citilink investors, but Garuda will maintain majority control, he says, adding that Citilink will get its own air operator’s certificate rather than continue to use Garuda’s.

 

While it’s early times for Citilink’s expansion, Airphil Express’s plans are well advanced.

 

Airphil Express, previously known as Air Philippines, is the sister carrier to Philippine Airlines and operates two A320s, three Bombardier Q300s and four Q400s.

 

The carrier’s chief executive adviser, Brian Hogan, says it is taking delivery of one A320 in September followed by one A320 in October and two in November. All are leased. Six A320s will be added next year; leases have been secured on three.

 

The airline serves 24 domestic destinations and plans a daily service from Manila to Singapore in October, marking its first international foray.

 

“We’re also looking at serving Singapore and Hong Kong from Cebu,” says Hogan. Other planned destinations include Jakarta, Indonesia, and Kuala Lumpur, Malaysia, as well as Bangkok and Beijing. Japan and South Korea are also being considered.

 

Hogan, who formerly worked at Philippine carrier Cebu Pacific, says Airphil Express will grow by stimulating the market, rather than by cannibalizing market share from others.

 

“When Cebu Pacific grew, Philippine Airlines’ traffic was still growing.” The country is large enough to support Airphil Express’ expansion, Hogan says.

 

“In 2009, 45 million [Filipinos] traveled by ferry. All we need [is] 10%” of that group and carriers here will have double-digit passenger growth, he says.

 

Potential for large market growth is evident in most Asia-Pacific countries.

 

The region boasts 62% of the world’s population, yet only accounts for 28% of global passenger traffic, according to AAPA, which forecasts that from now to 2028, Asia-Pacific’s traffic growth will average 6% per annum. In 2028, Asia-Pacific RPKs would have overtaken Europe and North America.

 

From:AviationLeak & SpyTechnology