Start-up Airlines

AirAsia Group completes first step in its bid to launch an LCC in India

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”.

Bankruptcy of Denmark’s Cimber Sterling will leave no long-lasting network gaps

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.

Thai Smile settles on unique hybrid model with premium economy and mixed network

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 expands Asian strategy with Jetstar Hong Kong venture with China Eastern

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.

REDjet’s woes show unwillingness of Caribbean countries to liberalise

REDjet’s failure to execute a low-cost model in the Caribbean reflects the long-standing realities of governments in the region refusing to fully liberalise to allow any meaningful competition in the market.

The Barbados-based carrier began 2012 with ambitious plans to add up to eight new destinations and end the year with 14 points in its network potentially spanning the Caribbean, northern South America and possibly central America.

See related article: Lack of liberalisation in the Caribbean poses major roadblock to REDjet expansion

But REDjet’s ambitions to establish a true Pan-Caribbean airline vanished less than a year after its launch as the carrier claimed subsidised carriers undercut its fares, which REDjet during the lead-up to its May-2011 debut claimed were 65% lower than what rivals were charging.

Bodi Group to launch a new domestic carrier for Mongolia – Mongolian Airlines

Bodi Group, one of the largest corporate conglomerates in Mongolia, is launching Mongolian Airlines, a new domestic airline in Mongolia. The carrier, which appears to be affiliated with MIAT Mongolian Airlines, will compete with former MIAT subsidiary company Aero Mongolia (owned by Newcom Group) and Eznis Airways (owned by Monnis Group). According to reports in the local media, an agreement on the establishment of the airline has been signed between Bodi Group and MIAT, enabling Bodi to ultimately benefit from the planned privatisation of MIAT in coming years. 

Why Tony Fernandes' new possible premium airline isn't a competitor to Qantas' Asian premium carrier

It is tempting to portray Tony Fernandes's possible new premium airline as being in contention with Asia's only other planned premium carrier, the one from Qantas, an airline that has ties to Mr Fernandes. But the premium market in Asia is nascent, and based on the few known details of the carriers, they are pitched at different segments. A closer look is in order.

IAG to establish new LCC subsidiary Iberia Express

International Airlines Group (IAG), the parent company of British Airways and Iberia, will launch a new subsidiary called Iberia Express from summer 2012 in a bid to boost margins on Spanish short- and medium-haul services. Iberia Express is being established to provide a more competitive offering in the Spanish domestic and European market amid rising challenges from the high-speed rail network and LCCs, notably Ryanair and easyJet, which both have bases at Madrid Barajas and Barcelona El Prat.

Ryanair and easyJet operate large and growing domestic and European networks, and have overtaken Iberia as the two largest operators of services between Europe and Spain. Iberia has found it a challenge to compete with these carriers in light of its high flight crew costs and lower productivity.

The LCC strategy is also part of efforts by IAG to reduce the carrier’s cost base and return Iberia to profitability.

Tibet Airlines preparing for Jul-2011 launch; CAAC sets limit of three new airline approvals p/a

Tibet Airlines, Tibet’s first airline, on 20-Jun-2011 received its public air carrier's licence from CAAC, after receiving approval from the aviation authority in Mar-2010. Tibet Airlines will be the first and only airline based in Lhasa when it launches operations next month and will benefit from the booming Tibet market.

Air Canada considering launch of new leisure LCC as competition in leisure market intensifies

Air Canada is drawing up a business plan to launch a new leisure LCC as a competitive response to its low cost rivals in the Canadian market, according to reports in the Globe and Mail. LCCs, led by WestJet and including Porter Airlines, Air Transat and Sunwing Vacations, have been growing at a faster pace than Air Canada in recent years, eroding the market share of the nation’s largest carrier. Air Canada has launched two other LCCs, Tango and Zip, in the past, both of which operated for less than two years.