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A Low-Cost Challenge for North Asian Governments

(KITAKYUSHU: 05 August 2005) The Governments of North Asia need to embrace deregulation or the low-cost revolution will pass them by, the Centre for Asia Pacific Aviation has warned.

Mr Peter Harbison, the Managing director of the Centre, says that economic development in regional centres would “accelerate rapidly” with low-cost airline entry; there would be an opening up of new routes and increased services to smaller destinations.
 
He called on regional governments to adopt a pro-active role in encouraging low-cost airline development by easing restrictions on market access and establishing more conducive environments for growth.
 
Speaking at the opening of the Low Cost Airline Symposium in Kitakyushu, Japan, Mr Harbison says that a number of factors indicate that the presence of low-cost airlines in North Asia will offer considerable opportunities.
“Many regional centres are under-served, and there is exceptional city pair concentration on hub cities,” he says. “Add to that the extremely high GDP per capita across the region, and there exists the perfect recipe for low-cost airline development.
 
“First though, concerted efforts have to be made by governments to overcome the existing barriers to entry. Various issues need to be addressed, not least restrictions on access to international routes and the high cost regimes operating, particularly in Japan and Korea.”
 
Operators face high fuel and lease prices, rising labour costs and the prospect of generally strong competitive responses from incumbent airlines. “All of this creates an uninviting environment for investors and prospective operators.”
Mr Harbison says that other parts of Asia and the Middle East are already experiencing the tremendous benefits offered by low-cost carriers. He says that 26% of the 1,000-plus aircraft currently on order in these regions will be taken by low-cost operators.
“Most routes between North Asian countries are strictly capacity limited,” he told the conference. “As there are only three or four multiple designation gateways in Japan, two in Korea and four in mainland China, there is little competition on smaller routes and growth there is heavily restricted.”

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