Lion Air Group reportedly plans to launch a Thai LCC subsidiary, Thai Lion Air, with the carrier already recruiting staff, according to a report from Bangkok Post. Thailand’s Civil Aviation Department director-general Woradej Harnprasert said: “Lion Air's entry is good for more healthy competition, giving passengers choice.” The start-up will reportedly operate from Thailand’s Bangok Don Mueang International Airport, using up to six Boeing 737-800s. Mr Harnprasert said the start-up was yet to apply for an air operator’s certificate, and Thai entities are required by law to hold at least 51% ownership in the company. According to the CAPA Fleet Database, Lion Air Group currently operates 15 737-800s, with a further 11 on order.
Lion Air Group to start Thai LCC subsidiary, Thai Lion Air: report
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Southeast Asia continues to post some of the highest growth rates in the global aviation industry, driven primarily by expansion in the region’s booming low-cost sector.
LCCs now account for over 50% of capacity in Southeast Asia’s four largest domestic markets – Indonesia, Malaysia, the Philippines and Thailand. Even more impressively, LCCs have been able to rapidly claim about a 50% share in the intra-Southeast Asia international market.
But there has also been growth in 2013 at nearly all of the region’s flag carriers. A large portion of this growth has been on regional routes as full-service operators have been able to join the LCCs in taking advantage of the generally favourable economic conditions in Southeast Asia.
Lion Air looks to accelerate international expansion by launching more JVs, starting with Thailand
Lion Air has embarked on the first phase of an aggressive international strategy which is starting to see the fast-growing airline group diversify away from its roots in the Indonesian domestic market. The Mar-2013 launch of an affiliate in Malaysia, Malindo Air, is expected to be followed by joint ventures in other Asian markets, starting with Thailand. A low cost, but hybrid operator, Lion over time will also look to grow its now tiny international network from its home market of Indonesia.
Internationalisation with a focus on Southeast Asia is the right strategy for Lion as it cannot continue to rely almost entirely on the Indonesian domestic market. Indonesia has emerged as one of the world’s largest and fastest growing emerging markets. But with nearly 600 aircraft on order Lion needs to hedge its bets and not limit its growth to Indonesia, particularly given the threat that growing infrastructure constraints could lead to slower growth over the medium to long-term.
Lion, however, faces huge challenges as it starts to dip its paw in other markets. Establishing a strong brand and distribution network outside Indonesia will be Lion's biggest challenge. Competition in any new market Lion enters will be fierce as it will not have the first low cost mover advantage it had in Indonesia. Pan-Asian low cost airline groups like AirAsia, Jetstar and, to a lesser extent, Tiger, already occupy the high ground.