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 Asian airlines have faced extremely challenging market conditions in 2014, resulting in an alarming amount of red ink. Of the 17 airlines in Southeast Asia that report earnings only four posted operating profits in 1H2014 compared to 12 in 1H2013.
Among the nearly 50 airlines based in Southeast Asia, excluding small regional and charter operators, approximately 80% were not profitable in 1H2014. Losses are likely to continue through at least 3Q2014 but there are indications market conditions will start to improve by 4Q2014 or 1H2015.
Several Southeast Asian airlines have responded to overcapacity by and cutting capacity or slowing their expansion. Markets that have seen political and economic instability are also starting to stabilise.
Lion Air Group rate of fleet expansion kicks into a higher gear while AirAsia slows down
Lion Air Group’s pace of expansion is about to accelerate as it takes delivery of its first A320 and increases its 737 delivery rate. The group plans to add over 30 aircraft in 2H2014 as it increases its overall average monthly intake from three to five aircraft – a rate it will maintain in 2015, resulting in a staggering 60 deliveries next year.
At the same time AirAsia Group is slowing its fleet expansion, particularly in the Southeast Asia market. AirAsia is growing its Southeast Asian fleet by only six aircraft in 2H2014 and may not add any aircraft in 2015 as the focus will be on spooling up new affiliates in India and Japan.
If Lion does not follow AirAsia in slowing down growth in Southeast Asia it will quickly shoot past AirAsia. There is a risk market share gains will come at the expense of yields and profitability as several Southeast Asian markets are already suffering from overcapacity - but there is a larger strategic game being played out now.