Budget carriers are booming despite the economic downturn.
Budget-conscious travelers are increasingly in favor of cheaper air travel alternatives such as AirAsia, Ryanair and other low cost at the expense of established rivals, amidst the biggest downturn in the airline industry in over two decades.
Major airlines such as British Airways and Cathay Pacific who once dominated the skies are optimistically expecting on an economic recovery, but may find it difficult to regain the growth levels they experienced prior to the crisis.
Derek Sadubin of the Centre of Asian pacific said “Full-service airlines have a bit of a conundrum on their hands”.
He believes that low-cost carriers would become so entrenched in corporate travel and airports and that it would be extremely difficult for full-service airlines to claw their business back.
The airline industry as a whole has suffered since oil prices soared two years ago, with the current price half the level of its peak price.
Established full-service carriers have been the worst hit by the crisis, as premium class travel is down, but accounts for 40% of revenue.
Budget carriers are weathering the recession well with a low-cost model which relies heavily on high passenger volumes and by cutting costs by using cheaper landing slots at airports and by having customers pay for full-service features.
Budget aviation has grown exponentially in Asia since 2000, and now has a share of 16% of the travelling market.
It is predicted that budget carriers could reach up to 20% of the market within the next two years as they expand and allow passengers to access much cheaper fares than offered by full-service airlines.
AirAsia, based in Malaysia, recorded a profit of £34.6 million this quarter up 26% from the previous year, as passenger volume increased by 21% to 3.15 million in the same period.
The airline has ordered new aircraft and has already commenced new flights from Kuala Lumpur to London and has plans to enter the US market.
The airline claims to be the ‘McDonald’s’ of the airline industry, as people look for value, chief executive Tony Fernandes said.
Competition from budget airlines has had a major impact on full-service carriers, as British Airways announced cutbacks of meals on short-haul flights and that it will not fit out new aircraft with first class.
Its not all bad news, as one of Asia’s top carriers, Singapore Airlines remains confident of a recovery in the premium market. The airline has cut fairs but says they will not cut back on the number of premium class seats.
Thanks to AP for the above quotes.
