AirAsia

Singapore Changi traffic growth to slow as Qantas drops hub and AirAsia closes base

Passenger growth at Singapore is slowing significantly, making it very unlikely Changi will expand in 2013 its current streak of three consecutive years of double-digit expansion. Growth in the low to mid single digits will provide some breathing space for authorities to tackle increasing congestion problems. But Singapore authorities should still accelerate airport expansion, particularly the opening of a third runway, because the current congestion has already become an impediment to growth.

In the latest blow to Changi, AirAsia has decided to close its Singapore base. Shifting back to Malaysia the group’s small contingent of Singapore-based crews will have a very slight impact on total passenger figures at Changi. But it signals the challenges Changi faces as its LCC growth figures start to slow down while other airports in the region continue to record rapid increases.

The AirAsia decision follows Qantas moving its transit hub for European services from Singapore to Dubai, leading to a reduction in total Changi capacity of more than 2%.

AirAsia X selection of Bangkok as second base increases pressure on Thai Airways

AirAsia X is close to finalising plans for establishing an affiliate in Thailand, a fast-growing market with favourable conditions for long-haul low-cost operations. The new joint venture project between AirAsia X and Thai partners, which will almost certainly include sister short-haul carrier Thai AirAsia, will put further pressure on the Thai Airways Group.

Thai Airways has already been struggling to fend off increasing LCC competition in the domestic and regional international market, which it has responded to by increasing its involvement in short-haul LCC affiliate Nok Air and launching new hybrid carrier Thai Smile. AirAsia X will bring new LCC competition to some of Thai’s strongest medium-haul markets, particularly Australia, Korea and Japan.

Thai Airways has been studying potential long-haul low-cost options and the launch of an AirAsia X affiliate in Thailand, which will likely commence services within the next year, adds urgency. Thai Airways has already been slightly impacted by Asia’s two other long-haul LCCs, Jetstar and Scoot, but having to compete with a local long-haul LCC represents a much bigger challenge.

AirAsia Philippines and Zest Air outlook improves following tie-up, but challenges remain

This is the second part of a series of articles looking at the outlook for Philippine carriers. The first part, published on 19-Mar-2013, analysed the strong position of market leader Cebu Pacific.

Part 2 looks at the recent tie up between AirAsia Philippines and Zest Air, which along with new Tiger Airways affiliate SEAir are looking to improve their relatively weak positioning in the highly competitive Philippine market. Part 3 will look at flag carrier Philippine Airlines and the recent rebranding and strategy shift at PAL Express, previously known as AirPhil Express.

AirAsia Philippines and privately owned Zest Air unveiled a strategic partnership on 11-Mar-2013 which included an equity swap, with AirAsia Philippines taking a 49% stake in Zest in exchange for a 15% stake in AirAsia Philippines. The partnership is expected to result in the AirAsia brand entering the Manila market, using the slots and traffic rights held by Zest. AirAsia currently only serves Manila's alternative airport, Clark.

Lufthansa weighs future in Asia Part 2: Amassing scale for partnership/new airline will be critical

With Lufthansa looking to revamp services to India and Southeast Asia, which can be unprofitable, CAPA in part 1 of this report looked at Lufthansa's disadvantaged cost base to European, Asian and Middle Eastern peers as well as the carrier's challenge in maintaining an effective presence in Asia.

Part 2 considers the necessity of amassing scale for whatever Lufthansa does: whether that is to launch its own long-haul low-cost carrier or enter a partnership with an existing LCC. Lufthansa may be worried about the number of destinations Middle East network carriers serve, but a local LCC will have a far wider network.

This presents a partnership opportunity for Lufthansa – and any airline – but also a threat in that Lufthansa's competitors have realised the strength and opportunity of Asia's LCCs.

Lion's Malindo breaks AirAsia-MAS duopoly in Malaysian domestic market. Next stop: Delhi...and Asia

Lion Air Group affiliate Malindo launched services on 22-Mar-2013 with seven daily flights spread across Malaysia’s two largest domestic routes – Kuala Lumpur to Kota Kinabalu and Kuching. With its hybrid business model and low fares, Malindo will impact both AirAsia and Malaysia Airlines (MAS), which were previously the only two carriers on domestic trunk routes within Malaysia.

Malindo is planning rapid domestic and international expansion, leveraging Lion’s huge order book for 737s. India is poised to become Malindo’s first international destination with service to Delhi starting in Jun-2013, exploiting a market which is under-served due to cuts last year at AirAsia X. Several planned destinations in India and China will allow Malindo to increase aircraft utilisation and tap into the lucrative Malaysia-India and Malaysia-China markets. It also seeks to tap the fast-growing Indonesia-India and Indonesia-China markets, which Malindo will serve by offering connections to Lion.

Indonesia’s Lion Air Group has the growth opportunities to support the 600 aircraft on order

The Lion Air Group has a massive 600 aircraft on outstanding order following its landmark order for 234 A320 family aircraft, which was signed on 18-Mar-2013. The figure at first glance seems overly ambitious given the intensifying competition in Southeast Asia’s low-cost carrier market. But Lion enjoys a very strong position in its massive and fast-growing home market of Indonesia, which could easily support, over the next decade, at least half of the additional aircraft it has committed to acquiring.

Lion also has ambitions of establishing new affiliates and subsidiaries, following the model of rival LCC group AirAsia. The Lion Air Group is launching Malindo, a joint venture carrier in AirAsia’s original home market of Malaysia, on 22-Mar-2013.

The group also has the option of placing some of the 600 aircraft it has on outstanding order with airlines outside Lion through its new leasing subsidiary. This gives Lion unique flexibility should its growing portfolio of airlines not require all 600 aircraft for their own growth and replacement needs.