The future of LCCs: Where do we go from here?

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According to IATA, over 3.8 billion passengers will be transported via air in 2016 with this number dramatically increasing to 7 billion in 2024 of which 3 billion will be in ASEAN. There are tremendous growth opportunities for airlines in Asia, however, significant challenges are posed by poor infrastructure and lack of partnerships and collaborations between all aviation stakeholders, including airports, airlines and governments.

James Rhee, CEO – North Asia of AirAsia, Albert Burhan, President & CEO of Citilink Indonesia, Campbell Wilson, CEO of Scoot and Stephen Wang, President of Spring Airlines gathered at Aviation Festival Asia 2016 to discuss the biggest challenges facing low-cost travel in Asia and beyond. Here’s a brief summary on the discussion:

  • There is a high demand for LCCs in Asia, especially in North Asia, where the market is growing tremendously. Spring Airlines shared that there are currently 3-4 major LCCs in China market, which is way behind the growing demand. SEA is facing a different challenge – the demand is there, the supply is there, however, the infrastructure is constraining the growth significantly. According to Citilink Indonesia, almost all airports in Indonesia have already reached their maximum capacity.
  • Infrastructure is one of the key challenges faced by airlines in Asia as almost all airports in Asia have reached their maximum capacity. According to Citilink Indonesia, there were 15 new terminals built in Indonesia over the last couple of years, however, no new runways have accompanied these terminals due to land restrictions.
  • Another key challenge is human resources, especially a lack of highly-trained pilots. According to AirAsia, the biggest challenge is that the airline capacity is growing very fast, but training qualified pilots takes a very long time, creating an enormous talent gap. Indonesia is tackling this by opening up career opportunities for foreigners.
  • Regulatory restrictions in Asia are forcing airlines to form subsidiary companies to operate in different markets. AirAsia currently has 9 subsidiaries in ASEAN to tackle this challenge. James states that this helped AirAsia to gain a competitive advantage as other airlines are facing entry barriers that they have to overcome by creating local entities. Airlines are hoping for a complete ASEAN Open Skies policy to be implemented, however, they cannot predict when that would happen.

 To finish off the session, each of the CEOs shared their predictions on where the biggest opportunities and challenges will be.

Both James and Stephen suggest that LCCs need to focus all their efforts on simplicity- providing the lowest cost, on-time arrivals and departures and excellent customer service. Albert states that airport overcapacity and infrastructure will remain the biggest issue in the upcoming years. Campbell reveals that Scoot is looking to tap to China, India and Middle East markets next, so stay tuned.

Join us at Aviation Festival Asia 2017 to see if these predictions proved right!

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