Big Growth Seen for Asia’s Budget Carriers

SINGAPORE ~ Asia’s budget airlines are set to expand their share of the regional aviation market to 20 percent within three years from less than one percent in 2001, an industry consultancy has said.

The strongest growth will be seen in India, Indonesia, Malaysia, Thailand and Australia, the Sydney-based Centre for Asia Pacific Aviation said in a report received here.

The predictions were based on announced aircraft orders by Asian budget carriers that will increase their seat capacity sharply over the next few years, said Peter Harbison, executive chairman of the consultancy.

Last year also provided evidence of the budget carriers’ phenomenal growth, with overall capacity up 55 percent over 2005 while full-service carriers only saw a 0.9-percent increase, he said.

“Based on recent LCC growth rates and aircraft orders, their share could reach 20 percent by the end of this decade, with much higher levels of penetration in such markets as India, Thailand, Australia, Malaysia and Indonesia,” said Harbison, referring to low-cost carriers.

“The LCC share in Asia was less than one percent in 2001. Such an outcome would eclipse the pace of LCC development in every other geographic region, albeit a delayed development in this region,” he said.

According to Harbision, the aviation sector in Asia is essentially a “two-speed market” with full-service carriers growing more slowly than the budget airlines as well as counterparts in India and China.

Asia’s low-cost airline sector, particularly in Southeast Asia, has undergone remarkable growth in the last few years despite initial skepticism the region is not ready for no-frills air travel.

The phenomenal success of Malaysia’s AirAsia, the leading budget airline in Southeast Asia, demonstrated the no-fills concept can work and has sparked the set-up of similar outfits elsewhere.

Despite the upbeat growth assessments, Harbison cautioned that it could result in staff shortages as recruitment of qualified air personnel steps up, which can drive up the wage bills of both full-service and budget carriers.

“Staff shortages, and the likely consequent pressure on wage levels, will force some airlines to reassess their options for expansion,” said Harbison.

He estimated the region and Middle East would need 10,200 pilots, 36,400 cabin crew, 26,800 maintenance engineers and 38,500 ground handlers over the next five to seven years.

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