the development of low-cost carriers in...
TRANSCRIPT
A UNWTO Report on
The Development of Low-Cost
Carriers in Asia-Pacific
Steve Pan, PhD
Kaye Chon, PhD
Haiyan Song, PhD
School of Hotel and Tourism Management
The Hong Kong Polytechnic University
2
Introduction
A follow-up study on the report of Mega-
trends of Tourism in Asia-Pacific published in
June 2006.
A joint research project between UNWTO and
the School of Hotel & Tourism Management,
The Hong Kong Polytechnic University.
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Research Context
Research Method: Content Analysis
Data Set: Aviation Analyst, TTG Asia, Travel
Weekly, and academic literature.
Research Components:
(a) A SWOT analysis of LCC development
(b) Identify specific LCC developments in
each of the four sub-regions within Asia
Pacific
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Air transport has to become
a low-cost industry.
- IATA chief Giovanni Bisignani
at the 54th PATA annual conference
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Definition of Low-Cost Carriers (LCCs):
“An airline that operates a point-to-point
network, pays employees below the
industry average wage, and offers no frills
service.”
- Najda (2003)
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Low-Cost Carriers’ Characteristics
Up to 50% lower fares than traditional
airlines
No or few frills cabin service
Ticket sales mostly made through Internet
Photo: Kaye Chon
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LCC Development Trends in Asia- Pacific (1)
Blurring of boundaries
Enter into long haul & inter-continental
service
Traditional airlines establish own LCCs
Large-scale fleet expansion in South &
South-east Asia
8
LCC Development Trends in Asia- Pacific (2)
Construction of low-cost terminals
Strategic alliance
Regional or global LCC alliance
Offering flight connections
Targeting SME business travelers
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A SWOT Analysis (A Dynamic Process)
Facilitator Impediment
Internal
(attributes of
the
organization)
Strengths
Weaknesses
External
(attributes of
the
environment)
Opportunities
Threats
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SWOT - Strengths
Low fares and costs
Entrepreneurship and innovation
Low expectation → pleasant surprise
Attracting short haul business travelers
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SWOT - Weaknesses
Unit cost gap is narrower in Asia-Pacific
Need to stick to its pure business model
Fight for market share from incumbent
airlines
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SWOT - Opportunities
ASEAN open skies
153 cities with population more than 1 million
(in Asia by 2015)
Underutilized secondary airport facilities
Strategic alliance
13
SWOT - Threats
Human resource shortage
Regulated environment
Aviation fuel pollution tax
Traditional airlines establish their own LCC
subsidiaries
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LCCs in Asia Pacic (by sub-region)
9
15
9
4
0
5
10
15
20
NE Asia SE Asia S Asia Oceania
Sub-regions
No. o
f LC
Cs
As of July 31, 2006
15
NE Asia SE Asia S Asia Oceania
BB 1 1 0 1
FE 1 3 10 1
FSC-S 0 3 1 2
IC 3 2 4 2
LCT 0 3 0 0
SA 3 3 2 0
BB: Blurring Boundaries FE: Fleet Expansion FSC-S: Full Service Carriers
Subsidiary
IC: Inter-Continental
Operations
LCT: Low Cost
Terminals
SA: Strategic Alliance
Asia-Pacific LCC Trends by Sub-
regions
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LCC Development in NE. Asia
New LCCs enter into long haul & inter-
continental service
Lack of open sky policy
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LCC Development in SE. Asia
Full service carriers establish their own
LCC subsidiaries
Building low-cost terminals
18
LCC Development in S. Asia
Large scale fleet expansion (more than
US$10 billion)
India to become world’s largest LCC
market
India to achieve a 70% market penetration
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LCC Development in Oceania
Full service carriers establish their own
LCC subsidiaries
Enter SE Asia market (Jetstar Asia)
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NE Asia – Fueling SE Asia - Climbing
S. Asia – Taking Off Oceania – Cruising
Created by PAN, Tung-kwei
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Conclusion and Implications
Lead to fast growth of tourism in the region
Reduce the market power of FSCs
Business model – Pushing the envelope – Enter long-haul markets, offer connections and provide more in-flight
services
Concerns:
– Social exclusion – Vicious cycle of poverty for elderly, unemployed and disadvantaged
– Environmental concern – Global warming
