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New airlines mark the decade in Asia Pacific

Written by: Staff

Sydney, Aug 9: Asia Pacific aviation has changed irreversibly in the past ten years through the advent of new entrants on short haul routes, encouraged by rising economic growth and increasing market liberalisation.

There have been two distinct elements of the evolution: defensive and offensive new entry strategy. Both have increased competitive pressures in the market, stimulating new levels of demand, said the Centre for Asia Pacific Aviation (CAPA).

The industry has experienced waves of discount start-ups and full service responses over the past decade, intensifying in recent years. A key strategic response to new entry -- the subsidiary carrier -- actually celebrated its tenth anniversary in this region last November with the launch of Air New Zealand's Freedom Air in November 1995.

Asian LCCs represent just six per cent of the region's total travel market at present although penetration rates are much higher in countries like Australia (about 47 per cent), the Philippines (41 per cent), India (27 per cent), Thailand (12 to 13 per cent) and Singapore (11 to 12 per cent).

These are markets that have either a deregulated domestic or liberal international market stance. The US and European common aviation markets have much higher LCC penetration rates than Asia which accounts for 26 per cent of the world's GDP and 62 per cent of its population. However, genuine international (bilaterally regulated) LCC operations occupy a much larger proportion of Asia Pacific air travel than elsewhere.

Several factors in the Asia Pacific region will open the door for a new wave of aviation activity: rapidly accelerating economic growth, increasing liberalisation (domestic, bilateral, then the eventual ASEAN multilateral), joint venture LCCs (with local partners) in offshore markets, with the related rise of region-wide LCC brands like Tiger Airways, Jetstar and AirAsia.

These factors will enable LCCs to expand their presence across the region to the levels seen in Europe and eventually the United States, the CAPA said.


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