The surge of low-cost carriers in Asia

By Mike Eggleton, Director, Research and Intelligence

A few years ago, there were only a handful of low-cost carriers (LCCs) operating in Asia. Now there are more than 50 with several more planning to launch in the near future.

After taking full effect in 2015, the ASEAN Open Skies agreement clearly enabled an influx of LCCs with their numbers steadily increasing, even though their market share fluctuates across countries. For example, in China, their market share is just 11%, but in South Korea, they hold 53%.

Just like their counterparts in other regions, Asian LCCs originally focused on leisure traffic at the lowest possible fares. But they are slowly starting to target corporate travel. The good news for the business traveler is that LCCs represent a solid alternative to traditional carriers, especially on shorter flights.

This is evident by the fact that over 527 million passengers were transported in 2019 on an operating fleet of 1,628 aircraft, which is set to grow by 2,500 in the coming years.

How is the LCC surge affecting individual Asian markets?

• Cambodia only has one low-cost carrier, launched in 2017, but it has yet to have a major impact on the market. It operates a fleet of just four aircraft and accounts for only 4% of flight departures across Cambodia’s key markets.
• China has eight local LCCs that cover 98% of all LCC flights domestically. Yet, this represents less than 11% of all flights in the country, despite the large fleet of close to 500 currently operating aircraft. The largest LCC in this market is Spring Airlines with a 25% passenger share.
• India is host to the largest Asian LCC, IndiGo, which carried almost 75 million passengers at a 54% market share in 2019. SpiceJet and Go First are two additional India-based carriers that are in the top ten of Asian LCCs.
• Indonesia has five LCCs. Lion Air is the third-largest carrier in all of Asia, carrying over 25 million passengers. This market also has order plans for over 450 aircraft that will increase total operating aircraft to more than 600 planes by 2026, making it one of the largest aircraft buyers for both Boeing and Airbus.
• In Japan, most LCCs are owned or affiliated with either ANA or JAL and together these carriers transport 89% of passengers among all Japanese LCCs. Peach is a 100% subsidiary of ANA Group that also has a minor stake in Skymark Airlines, both being the two largest LCCs in the market. Meanwhile, JAL has partnered up with Qantas to oversee the operations of Jetstar Japan, the third-largest LCC in the country by passengers carried. Starflyer and Spring Airlines are the only truly independent local LCCs, carrying just 11% of the passengers.
• Malaysia is home to one of Asia’s largest and most successful low-cost carriers, AirAsia, which also has subsidiary airlines in Thailand, Indonesia, Japan, and the Philippines. AirAsia accounts for 94% of all domestic LCC flights and long-haul sister airline, AirAsia X, plans to resume scheduled flights in February, with a weekly service to Sydney.
• In Myanmar, LCCs account for 17% of all scheduled flights operated in the market, but Myanmar has only one LCC of its own, Golden Myanmar Airlines. It operates only a single aircraft. Despite this, Golden Myanmar still accounts for 21% of the flights conducted by all LCCs.
• In the Philippines there are ten LCCs currently in operation, making up around 55% of all scheduled flights. However, only three LCCs cover 97% of all LCC flights. Together with its regional division Cebgo, Cebu Pacific operates 81% of LCC flights, leaving the local AirAsia subsidiary with 16%.
• Singapore is home to two LCCs. The largest is Scoot, which is wholly owned by SIA Group and has a share of 37% of all LCC flights. Qantas has a 49% stake in the second competitor, Jetstar Asia which accounts for 25% of LCC departures.
• A very competitive market has developed in South Korea, where eight LCCs are battling for a share of the pie. Jeju Air is the largest, having carried close to 14 million passengers according to recent figures. Legacy carrier Korean Air is in the process of acquiring the other full-service competitor, Asiana, and once completed will own Jin Air, Air Seoul, and part of Air Busan, dealing them a market share of 44% of LCC passengers.
• In Taiwan, the local market is only represented by one LCC, Tigerair Taiwan, which is completely owned by China Airlines and operates just four routes with Taipei as the hub to Macau, Osaka, Seoul, and Tokyo. The majority of LCC flights are covered by foreign carriers.
• Another booming market for both domestic and international LCCs is Thailand. Twenty carriers operate in the country of which five are local airlines, and four of these occupy the top four places in the market. The largest, however, is Thai AirAsia (Malaysia) capturing a market share of 47% from a total of 47 million passengers in 2019.
• In Vietnam, ten LCCs presently serve the Vietnamese market, but just two are locally based airlines. VietJet is the largest LCC, operating a fleet of 56 aircraft and carrying more than 23 million passengers in 2019. It accounts for 87% of all LCC flights in the market. It also has an affiliate airline operating in Thailand. With a fleet of seven aircraft, Pacific Airlines is a much smaller operation, carrying 6 million passengers in 2019.

What role should LCCs play in a corporate travel program?

Unlike their counterparts in the U.S. and Europe, Asian LCCs have much longer average flight distances. Many of the carriers in Asia are also subsidiaries of national airlines and often offer hybrid service concepts with limited frills like meals, frequent flyer points, transfers, or code-sharing with other airlines.

Low-cost carriers represent a solid alternative for business travelers within Asia. You can find business class seats on LCCs like Scoot and Jetstar at similar prices to non-restricted economy class tickets on traditional airlines. And while business travelers may miss out on the latest in-flight entertainment systems and full-flat beds, they still offer plenty of legroom and a host of other benefits. However, there are some constraints that travel managers should consider:

• LCCs are not necessarily cheaper than traditional airlines, especially if you don’t book flights well in advance. In China, LCC fares can be just as expensive as traditional carriers, particularly in the high season.
• Some of these airlines are not on the GDS, so reservations must be made directly through their websites. This booking process is much less efficient as the travel agent must go into the LCC’s website, source the fare and as they await authorization, the fare may change. Data tracking for security purposes must then be manually input to be consolidated. Furthermore, in APAC, payment challenges arise if the traveler does not have their own credit card.
• With new LCCs popping up almost overnight in Asia, we recommend you stick with airlines that are well established in the marketplace.

At the end of the day, deciding whether or not to incorporate APAC LCCs in your business travel program mix means asking yourself the same questions as with any other supplier: Does their offer support your company’s travel patterns, service, safety and policy requirements and program goals?