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Asian budget carriers taking off

Friday, November 04, 2011 - 03:29

Nov. 4 - Competition among Asian budget carriers heats up as demand for affordable flying is set to surge with a quarter of seats in Asia likely to be filled by low cost carriers by 2015. Kei Okamura reports.

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It's take off time for Asian budget carriers. Growing demand for cheaper travel in Asia could be one of the few bright spots in a turbulent 2012 for global aviation. Demand for affordable flying is expected to surge --a quarter of seats in Asia will be filled by low cost carriers by 20-15, according to one estimate. AirAsia has been a pioneer in budget travel. From its base in Malaysia, it expanded across Southeast Asia. Analysts expect the airline to see double digit earnings growth in the next 12 months. Full-service carriers now want in. Both Thai Airways and Singapore Airlines are looking to set-up their own budget units by next year. AirAsia's showman CEO says he's not surprised. (SOUNDBITE) (English) TONY FERNANDES, AIRASIA CEO, SAYING: "I think many airline CEOs would be looking at me with envy. We are in a growth curve that's driven by the economic growth of Asia." The battle for the skies will be fought largely in North Asia. Japan and South Korea are opening up their markets after heavily regulating their air spaces. Carriers are pouncing on the opportunity. In Japan, they are setting up joint ventures for low cost carriers. Qantas announced a tie-up with Japan Airlines while AirAsia teamed up with All Nippon Airways. ANA's President and CEO Shinichiro Ito. (SOUNDBITE) (Japanese)SHINICHIRO ITO, ANA PRESIDENT & CEO, SAYING: "The capital region has a population of about 30 million people, which hasn't been tapped by low cost carriers and I think there's a plenty of opportunity to create new demand." (STANDUP) (English)KEI OKAMURA, REUTERS REPORTER, SAYING: "Japan is the latest hot destination for budget carriers. But these skies are part of a bigger and bolder blueprint for these airlines -to conquer the North Asia market between here, South Korea, and Greater China." Routes between cities like Seoul or Shanghai remain under-utilized by budget carriers. Other low cost airlines like Philippines' Cebu Pacific are also looking to fill that gap. Cebu Pacific's CEO Lance Gokongwei. (SOUNDBITE) (English) LANCE GOKONGWEI, CEBU PACIFIC CEO, SAYING: "Cebu Pacific is in the position to service the very fast growing markets for Korea, Japan, Taiwan and especially China. So our strategy has really been let's focus on building up these North Asian routes." Still, there are risks. Take China. It's expected to see passenger traffic surge in the next several years, but airlines face regulatory hurdles -- like state control over airline schedules. However, China has hinted it will relax its grip. And that could unleash a wave of passengers looking to fly on the cheap. Peter Harbison, Executive Chairman of CAPA-Centre for Aviation. (SOUNDBITE) (English) PETER HARBISON, CAPA-CENTRE FOR AVIATION EXECUTIVE CHAIRMAN, SAYING: "The Korea, Japan, China triangle, we've done some rough estimates based on city pairs, GDP growth and removing any international restrictions on access, you can look seriously at seeing a couple of hundred million passengers a year flying on that triangle." It's looking like a turbulent year ahead for global aviation. But for budget carriers in Asia, it could be a smooth flight as the region opens up its skies. Kei Okamura, Reuters Tokyo.

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Asian budget carriers taking off

Friday, November 04, 2011 - 03:29