Southeast Asian low-cost carriers see business take off

August 15, 2022

BANGKOK – Southeast Asia’s low-cost airlines (LCCs) are regaining momentum after battling a drop in passenger numbers due to the novel coronavirus pandemic.

The takeover of LCCs is likely to affect the business strategies of many Japanese and Japan-affiliated companies that value Southeast Asian markets.

Relaxed entry rules
Don Mueang International Airport, north of Bangkok, serves as a major hub for LCCs, which operate short-haul routes in Asia.

“Thanks to the low prices of LCCs, I can visit my hometown more often than before,” said a 41-year-old company employee returning to the Thai capital from southern Thailand.

Southeast Asian economies are heavily dependent on the tourism industry. Following the easing of coronavirus-related entry restrictions, many LCCs in the region have announced a major increase in flight services.

New airlines are also entering the market. In Indonesia last year, Super Air Jet began operating a number of routes, including one that connects Jakarta and the island of Bali. The company aims to attract young people – dubbed the “millennial generation” – to local beach resorts. In Malaysia, meanwhile, plans are underway to launch a new LCC in the near future.

Change of strategy
Many major Southeast Asian airlines are affiliated with the government, which has impacted their business efficiency. From the 2000s, LCCs, driven by the region’s economic growth, began to offer lower air fares.

Many LCCs have increased their presence in areas where the plane is an essential means of mobility. During the pandemic, Southeast Asia, like regions around the world, has seen a sharp drop in passenger numbers, leading to disastrous business results. An LCC – a joint venture between Thailand and Singapore – has gone into liquidation.

A number of LCCs have rewritten their respective business strategies. In January, AirAsia, a pioneering LCC based in Malaysia, changed the name of its holding company to Capital A. The holding company now devotes much of its energy to areas of digital services, such as ride-sharing services and delivery. of food. Tony Fernandes, who heads the holding company, said in a statement that AirAsia was “no longer just an airline”.

In the same vein, Vietjet Air of Vietnam has strengthened its cargo flight service and Nok Air of Thailand has improved its services at all levels to help it distinguish itself from its rivals.

fierce competition
Singapore’s Scoot and Cebu Pacific Air of the Philippines have introduced larger planes and increased flights on their medium and long-haul routes. Such moves are likely to affect the business strategies of Japanese rival firms.

In the second half of next fiscal year, ANA Holdings will begin operating a new subsidiary airline, Air Japan Co., which will provide premium services to ANA group company Peach Aviation Ltd. The two subsidiary airlines are considering service routes in Southeast Asia.

Of the Japan Airlines Co. group companies, Zipair Tokyo operates services between Narita Airport and Thailand, as well as Singapore.

Competition between LCCs is set to become increasingly fierce. A Japanese LCC official expressed a sense of urgency, saying, “Unless [Japanese LCCs] demonstrate unique Japanese advantages, such as high-quality services, it will be difficult for them to differentiate themselves [from foreign rivals].”

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