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Date [ 2014-02-12, 06:06 ]

They now dominate a sizeable chunk of the skies.

New kid on the block 0 Vanilla Air

(Kuala Lumpur=Koreanpress) by Ramani Rathir = The first commercial flight began on January 1, 1914 with a flight from St Petersburg to Tampa in Florida, USA. So it is now a century since commercial airplanes took to the skies. That first flight had just one passenger. Compare that to last year, when more than 8 million passengers a day were carried to various destinations. In the interim they supported 57 million jobs and US$2.2 trillion in economic activities.
 
Whereas in the previous years, when one talked about flying it meant the standard commercial or legacy flights. But a few years back an upstart appeared on the scene in the US – the Low Cost Carrier (LCC). Just as its name implied the frills were cut down and passengers were flown from Pont A to Point B.  The early birds in Europe were Virgin Airlines, Ryanair, Easyjet and others.

If the Big Aviation Boys thought these would soon come crashing down, they were in for a rude shock. Instead some of them formed their own LCCs.   Air Canada went rouge with Rouge Air, Air France set up Transavia, Luftansa took wings with Germanwings and the latest with sweet waft of fragrance, Vanilla Air from All Nippon Airways.

From Europe the scene moved to Southeast Asia where the growth has been explosive. Leading the pack is Air Asia which is now the major carrier in the region.

Its success has led to Singapore Airlines unleashing Tiger Airways while Qantas shot up with Jetstar. Air Asia meanwhile introduced Air Asia X and was soon flying to Europe, Australia, China, Taiwan and the Middle East.

The airline responsible for this trend was Southwest Airlines in Dallas, Texas. The airline came out of the red in 1973 and has remained that way ever since. It vindicated former lawyer, Herb Kelleher’s belief that it would be viable to operate LCCs.

In terms of passenger load, Southwest is now North America’s biggest airline and the second biggest airline in the world. Unlike many of today’s LCCs, it has no plans to expand to international flights.

As we move further in 2014, there will be more changes in the aviation industry in the coming 100 years. There is no doubt the LCCs too will roll with the times and adapt to survive.

Today LCCs operate on every continent and have opened up new aviation markets. In Asia, the LCC share of the aviation market has grown from zero pre-2000 to close to 20% of the Asian aviation market today.

When it is narrowed down to Southeast Asia, the growth of LCCs is even more remarkable. They now make up more than 50% of the intra-Southeast Asia market, a phenomenal growth from less than 5% just ten years ago.

Of the top 15 busiest LCC international routes, nine are found in Southeast Asia. The largest three LCC international routes in the world originate from Singapore: to Jakarta, to Kuala Lumpur and to Bangkok.
 
Profit figures aside, what is more meaningful in the LCC story is, like what Air Asia says – NOW EVERYONE CAN FLY! In short LCCs have brought air travel to the mass market, a particularly significant point for Asia given the region’s fast expanding middle class.

The increasing number of Indian tourists seen in Malaysia is a reflection of this. With their business model, LCCs have also brought air travel to many secondary points that were previously not viable.
 
LCCs are still evolving and transforming. The traditional LCC eschewed interlining and focused on short-haul operations. However, many LCCs are now emphasising connectivity to improve their value proposition to passengers. As such, LCCs today interline and even code-share on legacy carriers.

In Asia, they have also set up affiliates in different countries to take advantage of the air rights in those countries, to expand and form a denser and better inter-connecting network   In 2010, once rivals but now business partners, Air Asia and Jetstar formed an alliance.

A first for LCCs. Eighteen months of recession has made them move towards a bottom-line savings of around USD250 million, tied up with their operational savings of joint fuel purchases, maintenance, sharing of spare parts and ground handling in the Asian airports where both carriers operate. Both have promised to pass on the savings to their passengers.

What is emerging is that LCCs are looking to ground their current staple workhorse, the A320s and go for more fuel efficient jets. Airline manufacturers have been told to design aircraft bodies with stronger undercarriages that are better able to withstand repeated landings and take-offs. Also new maintenance schedules, door placements able to handle well the short turnarounds of a 180-passenger load.

With some of the LCCs having about 200 aircrafts on the order books, they certainly can dictate or at least influence designs on emerging aircrafts. As it stands, both Airbus and Boeing, in the most recent Global Market Forecast and Commercial Market Outlook, report demand for narrow-body aircraft over the next 20 years are at 19,518 and 23,240 units respectively.

Another trend emerging is that of long and medium-haul LCCs, many of them based in Asia. Virgin Atlantic is bridging the gap between short haul and long haul with 3+ hour flights.

On long haul flights, food, blankets and entertainment are much more important to travelers than on short hop flights. This "pick and mix" style of upgrades provides more comfort for travelers and more profit for the airlines, provided they can anticipate their customers” needs correctly. Jetstar offers this package on eight-hour flights between South East Asia and Australia.

More and more LCCs are offering in-flight entertainment. One of the earliest was JetBlue, an American LCC that gave live TV and satellite radio with pay per view channels. Another incentive is the choice of seats, usually two classes are offered, economy with a shorter seat pitch and luxury.
 
So the future for LCCs as the competition between them and legacy airlines heat up? Perhaps Singapore’s Minister for Transport, Lui Tuck Yew summed it up well at the Singapore Airshow Aviation Leadership Summit 2014 this February.

He announced, “To fully capture the benefits that LCC can bring, governments would need to embrace the LCC sector and facilitate its growth.”

abc@koreanpress.net

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