Budget air in Asia benefits in current economic climate
Asia’s budget airlines should benefit from bargain hunting travelers amid a global economic slowdown, as long as government barriers don’t stifle expansion of this still young business, industry experts said. Low-cost carriers are poised to take advantage of falling fuel costs and increased demand for cheap fares as full-service airlines struggle with a global collapse in consumer demand, they said.
"These times are very good for low-cost carriers," Bruce Buchanan, chief executive of Melbourne-based Jetstar Airways, said at a conference. "We’re seeing quite strong demand. Six months ago it was a much tougher environment."
Budget airlines have flourished this decade in Asia as the region opened routes to competition. However, governments could scuttle that growth by returning to protectionist policies in a bid to save jobs at national flagship carriers, many of which are state-owned, said Peter Harbison, an industry consultant at the Sydney-based Centre for Asia Pacific Aviation.
Tiger Airways Chief Executive Tony Davis said that while a surge in protectionism is the industry’s biggest risk, governments also face pressure to boost tourist revenue.
"I don’t think protectionism will flourish in this market," Davis said. "Progress is being made."
Budget airlines expect to save millions of dollars on fuel costs this year after crude oil prices fell from near $150 in July to about $40 this month. Davis said Singapore-based Tiger flew 50 percent more passengers in the last quarter from the same quarter a year earlier.
"A two-thirds reduction in your single-largest expense is enormous," Davis said. "We will translate that into lower airfares and high passenger margins." Full-service airlines won’t likely fare as well.
Karen
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