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CEO Panel: three LCCs, three different models

(Singapore: 10 November 2006) In the third CEO Panel at Outlook 2007, three chief executives from Southeast Asian low cost carriers outlined the distinctly unique applications of the LCC model they are using to pursue profits.

Outlook 2006

Chong Phit Lian, CEO of Jetstar Asia, explained the Singapore-based carrier’s model maximises its Qantas links by focusing on connectivity, a departure from strict low cost orthodoxy. Ms Chong, whose carrier this month took delivery of its tenth A320, noted that Jetstar Asia focuses on higher-yielding business traffic by operating out of the Changi’s main terminal, operating longer routes into the main airports in regional business hubs and by making connectivity – both with Qantas and other Jetstar operations – a big part of its offerings.

In contrast, Tony Davis, Chief Executive of Singapore’s other LCC, Tiger Airways, noted the airline represents the “pure” application of the low cost model. He stated that Tiger, which yesterday was named CAPA Low Cost Airline of the yaer, has removed all unnecessary costs from the system and is thriving at Changi’s Budget Terminal, which he likened to “essentially Singapore’s secondary airport.” Looking to the liberalised era to come, Mr Davis predicted that he would have few friends among the bus operators connecting Singapore with Kuala Lumpur, “when I offer fares cheaper than theirs.”

Andrew Pyne, CEO of soon-to-launch Viva Macau, was the last chief executive to address the panel, which was moderated by Chief Executive of CAPA Consulting, Andrew Miller. Mr Pyne, which has taken delivery of two aircraft with which it will launch services from Macau to Jakarta and the Maldives before the end of November, says that Viva Macau will operate a “fusion” airline model. The carrier has chosen widebody aircraft because they allow it to operate medium-to-long-haul routes (services to Europe, Australia and the Middle East are planned for early 2007), and because of their cargo capabilities.

“We anticipate a predatory response from the immediate region’s established carriers,” explained the former Cathay Pacific executive, “and cargo – which we ultimately anticipate accounting for 23% of revenues – provides a cushion to help us withstand that.”

Outlook 2007 is the Centre for Asia Pacific Aviation’s annual examination of the prospects for the Asia Pacific airline industry. Convening in Singapore with the participation of 30 CEOs and 380 vital stakeholders from all components of the aviation sector, Outlook 2007 and the CAPA Aviation Awards for Excellence is the year’s premier gathering of the region’s aviation decision makers, providing a forum for dialogue between leaders from the airline, airport, supplier and regulatory communities.  

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