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Canadian start-up carrier Canada Jetlines believes a “dive to the middle” by the country’s two largest carriers Air Canada and WestJet has created an opportunity for the pure-play ultra low-cost business model to manifest itself in Canada as fares continue to climb.
The new carrier’s thesis is it can stimulate traffic by offering lower fares to passengers that would otherwise travel by car and adopt the ultra low-cost carrier strategy of extreme unbundling – charging for nearly every aspect of travel outside of a seat. It is a strategy that has worked for Spirit Airlines in the larger US market.
It is not a certainty the ULCC model can be easily replicated in Canada; but if Canada Jetlines does ultimately become airborne perhaps the carrier to feel most of the heat is WestJet, an airline that is moving up market, but still has significant dependence on cost-conscious leisure travellers.
FlySafair’s ambitions to launch services on South Africa’s biggest domestic route between Johannesburg and Cape Town from 17-Oct-2013 have been dealt a severe blow by a High Court interdict issued on 8-Oct-2013 restraining FlySafair from operating scheduled domestic passenger services pending a review of South Africa’s Air Service Licensing Council’s (ASLC) decision to grant the carrier a licence to operate.
The interim injunction has stalled, temporarily at least, a looming battle in the South African domestic market into which FlySafair and fellow LCC start-up SkyWise are planning to launch, ending a brief period where the South African Airways and Comair groups enjoyed a duopoly following the demise of LCC 1time in Nov-2012.
Comair, which operates as LCC Kulula, and the full service British Airways franchise combined forces with would-be competitor SkyWise to block FlySafair’s launch by challenging the ASLC’s decision. Comair and SkyWise claim that FlySafair does not meet South Africa’s maximum 25% foreign ownership limit to operate domestic services and that one of its directors is not a resident of South Africa.
On 06-Mar-2013, India's Foreign Investment Promotion Board (FIPB) granted permission for AirAsia to invest in a proposed joint venture with the Tata Group and Telestra Trading to launch an LCC in India. AirAsia, seeking to expand its dominance beyond the ASEAN region, believes that its model, which operates under the ‘now everyone can fly’ mantra, is well-suited to the highly-competitive yet high-potential domestic Indian aviation market, which is expected to almost triple to 160 million passengers annually by 2021.
The quick decision by the FIPB and the clarification that foreign airline investment is not limited to existing carriers but is also applicable to start-ups is a welcome move. However FIPB approval is just the first step of the regulatory process and AirAsia India will now need to apply for a licence from the Directorate General of Civil Aviation (DGCA).
AirAsia India will enter the market as a well-backed group with the support of a USD100 billion conglomerate, the Tata Group, together with Telestra Trading. The LCC will operate with a strong focus on low-cost/low-fare operations in a market that AirAsia Bhd CEO Tony Fernandes says is “now ready for a true low-cost carrier”.
Several airlines have moved quickly to fill the void left by the grounding last week of Cimber Sterling, although not one specific carrier will make major inroads. The LCC/regional operator accounted for only about 8% of seat capacity in its Danish home market and the market is highly fragmented. SAS is the largest carrier in Denmark and provided about one third of total seat capacity prior to Cimber Sterling’s bankruptcy while Norwegian Air Shuttle is the country’s second largest airline, with about a 14% share of capacity (seats), according to data from Innovata.
Copenhagen Kastrup Airport is Norwegian’s third largest base in terms of weekly seat capacity after Oslo and Stockholm Arlanda. It was the first airline to take the plunge and open a base at Copenhagen when Sterling went bankrupt in 2008. Cimber Sterling’s failure will create opportunities for Norwegian to further build its Copenhagen base with additional Boeing 737s and increased frequencies on routes on which it competed with Cimber Sterling such as Barcelona, Malaga, Nice, Prague and Rome Fiumicino. Even before the grounding of Cimber Sterling, Norwegian had planned to base more aircraft at Copenhagen as of Jun-2012.
New Thai Airways unit Thai Smile is gearing up to launch services on 07-Jul-2012 following a unique hybrid model aimed at allowing it to compete against LCCs at the back while meeting the needs of premium passengers, including those connecting from Thai-operated flights, with a light premium economy type of product at the front. Thai Smile’s initial network will feature a mix of new destinations for the Thai Airways Group and existing destinations, where the new carrier will look to supplement existing Thai Airways-operated service.
Thai Smile’s first destination, Macau, will be international but managing director Woranate Laprabang tells CAPA that about 30% of the new carrier’s capacity will be allocated to domestic routes. Mr Laprabang now expects to be managing a 20-aircraft all-narrowbody operation by the end of 2015.
Qantas has announced a bold initiative to set up a new low-cost carrier joint venture in Hong Kong with its long-time Chinese partner, China Eastern Airlines. Jetstar Hong Kong will operate short-haul routes within Asia – including to mainland China, Japan, South Korea and Southeast Asia – from 2013 with an initial fleet of three A320s, growing to 18 A320s by 2015.
It is a key stepping-stone for the Qantas Group as it grows its Jetstar brand across the region. Jetstar currently has entities in Singapore with Jetstar Asia/Valuair and in Vietnam with Jetstar Pacific. Jetstar Hong Kong will be the group's fourth Asian affiliate as Jetstar Japan, a new joint venture with Japan Airlines that was announced last year, will be launching services in Jul-2012.
The Jetstar group will bring considerable low-cost experience to the new venture, which will become the first short-haul low fares airline to be based in Hong Kong. The LCC model is, however, a new concept for China Eastern, which is following the pattern of several of its full service counterparts in Asia in working with an experienced partner in the establishment of a LCC offshoot.