Asian Aviation Must Face Up To Low Cost Challenge

Centre for Asia Pacific Aviation (CAPA) Executive Chairman, Peter Harbison, warned on Tuesday, that Asia’s major incumbent carriers risk becoming irrelevant, or even face extinction, if they fail to grasp the changes in the market occurring due to LCCs.

Opening the Low Cost Airline Congress in Singapore, Mr Harbison said, “The aviation world will never be the same. Any new entrant must be low cost and any existing airline not heeding this message will become an ex-airline. We haven’t yet seen a major international airline shut down in this region – although Ansett Australia’s collapse was contributed to by the entry of LCCs domestically – but it will happen.”

Mr Harbison observed there are now a variety of airline models in Asia, where previously all were similar “department store airlines”.

“Hybrid models are evolving with characteristics specific to their own environment, like Virgin Blue, while others are taking on a special Asian characteristic, like AirAsia X and VIVA Macau. We are also seeing the rapid development of low cost long-haul models, like Oasis Hong Kong and Jetstar”.

“These hybrids are defying many of the “basic” rules. But they have one common ingredient - a passion for cost reduction”, said Mr Harbison.

Mr Harbison predicted that there will be twice as many Asian international airlines in five years than today. “Talk of the coming consolidation among airlines is a nonsense” said Mr Harbison.

“Who is going to consolidate? Not Singapore Airlines and Thai Airways? There will certainly be some market exits, but large scale consolidation won’t happen – it’s just too difficult and the market is expanding too fast,” he said.

Mr Harbison also stated that 2007 will be an important year for liberalisation of aviation access by governments, but he warned of a growing logjam caused by government “inertia”.

“As governments recognise the political and economic benefits of liberalising, it is more a question of how we get around the sticky cobwebs of the bilateral system. ASEAN 2008 is just around the corner and most states have so far paid it little more than lip service. It needs concerted action – and quickly”.

“It’s wake up time. The only thing preventing economic expansion for hundreds of thousands of people, especially in regional centres, is the dead hand of government aviation policy. We need to shout that message at every opportunity”, added Mr Harbison.

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