flee 5 Report post Posted January 29, 2015 Asia’s widebody LCCs look to translate potential into profits The Asia-Pacific region has become the epicenter of the long-haul, low-cost airline trend. But despite the rapid growth of these carriers—and with much more pending—it is still yet to be proven that the model can be successful. In many ways Asia has been the perfect petri dish for the long-haul low-cost carrier (LCC) experiment. Growth of the middle class in huge population bases is creating new leisure travel demand, and markets in the region are often separated by vast distances. This has prompted the development of AirAsia X, based in Kuala Lumpur, Scoot in Singapore, and the long-haul unit of Jetstar which is based in Australia but focused on Asia. All three operate widebody aircraft in contrast to the traditional budget carrier reliance on narrowbodies. Financial success has remained elusive, however. The long-haul LCC operations are either yet to breakeven, or have not come close to the levels of profitability of their affiliated short-haul LCCs. This is in large part because they are still in expansion or fleet modernization mode. It also must be recognized that beyond the numbers, they have great strategic value to their airline groups. But in each case, the carriers are fine-tuning their formulas with the expectation that they must become sustainably profitable. There is undoubtedly potential in the long-haul LCC model, as evidenced by the proliferation of joint-venture franchises being set up by the three main players. And more of the short-haul LCCs are also branching into long-haul operations, such as Cebu Pacific. But the biggest vote of confidence is the fact that many of Asia’s long-haul LCCs are subsidiaries of the giant full-service airlines. Jetstar was created by Qantas, and Scoot is wholly owned by Singapore Airlines. The majors have not been slow to recognize the threat—and opportunity—presented by the new type of LCC. AirAsia X—the largest of the long-haul LCCs—is not linked to a full-service carrier. It is an independently traded company, although it remains affiliated to the broader AirAsia LCC group. AirAsia X has in many ways been the standard-bearer for the long-haul LCC model in Asia. While AirAsia X has not achieved solid profitability, this is only because of the rapid growth it has undertaken since it was founded in 2007, says CEO Azran Osman-Rani. He emphasizes that the business model itself is extremely sound, and the airline’s financial results will soon prove this as its early expansion phase levels out. The airline now has a fleet of 23 Airbus A330-300s, including two each in a pair of offshore joint ventures. The total has more than doubled from the 11 aircraft the carrier had at the end of 2012. More: http://aviationweek.com/commercial-aviation/profits-elusive-asia-s-long-haul-lccs Share this post Link to post Share on other sites
