Outlook 2023: Asia-Pacific LCCs are leveraging favourable market conditions


The outlook appears bright for Asia-Pacific LCCs as they capitalise on surging leisure demand by rapidly increasing their capacity.

During the COVID-19 pandemic many observers theorised that the LCCs would recover more quickly than their full service brethren - and in some cases this appears to be true.

For Asia-Pacific LCCs, the focus in 2023 will be on continuing to rebuild their networks and returning to their pre-pandemic growth trajectories.

Leisure travel in this region is rebounding faster than business and premium travel, and some airlines believe that business travel will not return to its pre-pandemic level.

These dynamics are obviously favourable to the LCC sector.

  • Asia-Pacific LCCs are rapidly increasing their capacity to capitalize on surging leisure demand.
  • Leisure travel is rebounding faster than business and premium travel in the region.
  • LCC subsidiaries of legacy airline groups are expected to play a larger role in future network strategies.
  • HK Express, a subsidiary of Cathay Pacific, is recovering faster than its full-service parent airline.
  • Scoot, a subsidiary of Singapore Airlines, is expanding its network by taking over routes formerly operated by SilkAir.
  • AirAsia expects to reactivate its entire fleet by the second quarter of 2023 and believes LCCs may fare relatively well in the event of a recession.


  • HK Express is expected to reach 2019 capacity levels by Mar-2023. The LCC is rebounding faster than the Cathay Pacific full service carrier.
  • Scoot has recovered sharply, taking over routes formerly operated by SilkAir.
  • AirAsia plans to have all of its fleet reactivated by the second quarter of 2023.
  • LCCs may be better placed than FSCs if recession occurs, AirAsia believes.

LCC subsidiaries of legacy groups set to play larger role in future network strategies

Many of the Asia-Pacific LCCs are owned by legacy airline groups. This is the case for the LCCs Scoot, Jetstar, HK Express, Peach and others.

These LCC subsidiaries are likely to play an even larger role in the network plans of the parent groups, as the multi-model approach allows them to prioritise resource allocation between LCCs and full service airlines. There has been a noticeable trend of some routes being transferred to LCCs as market dynamics change.

Developments at HK Express and Scoot provide good examples of how LCCs are ramping up rapidly in the post-pandemic environment.

AirAsia is also looking to continue its growth path, although it is running into the same challenges that other airlines are facing in reactivating aircraft.

Cathay Group's LCC subsidiary is recovering more quickly than its other units

HK Express is part of the Cathay Pacific group, having been purchased by the parent airline in 2019.

The LCC subsidiary is proving to be the fastest to recover out of the group's four main business lines, said Ronald Lam, who is currently Cathay Pacific's chief customer and commercial officer and the group's CEO-designate.

Since Hong Kong's quarantine requirements were relaxed in Sep-2022 there has been "a sharp increase in demand for LCC travel out of Hong Kong," Mr Lam told analysts during a 25-Nov-2022 briefing. HK Express has benefitted from this dramatic increase in leisure travel sentiment, he said.

The LCC has an advantage because its main customer base is Hong Kong residents flying outbound. It is less reliant than other airlines on visitors coming into this market, said Mr Lam. And it is the outbound segment that has recovered fastest since restrictions were eased first for Hong Kong residents.

HK Express was only operating to four destinations at the start of 2022. By the end of Oct-2022 its network had rebuilt to 12 destinations, with more to be added in subsequent months, Mr Lam said.

The LCC has brought all of its parked aircraft out of storage - although not all are in service - so it will have its full fleet of 26 narrowbodies ready for continued demand growth.

Admittedly, HK Express faces different challenges from the parent airline as it is a fraction of the size. But the trend is still clear.

By Mar-2023 HK Express expects to have reached its pre-pandemic capacity levels, Mr Lam said. In contrast, the Cathay Pacific Group is forecast to reach a third of its 2019 capacity levels by the end of 2022, 70% by the end of 2023, and full recovery by the end of 2024.

HK Express' capacity, as measured in weekly seats, ramped up steeply from Sep-2022. It had reached 32.9% of 2019 levels in the week of 28-Nov-2022, and the rate of increase will stay relatively high.

HK Express: system capacity, as measured in weekly seats, 2019-2022

Taking over SilkAir routes is helping Scoot expand its network

Scoot, a subsidiary of the Singapore Airlines (SIA) Group, has also undergone a steeper capacity increase than its parent in recent months. Scoot has "scaled up quite aggressively" since Apr-2022, when Southeast Asian markets began to open up, said Scoot CEO Leslie Thng during a recent SIA briefing.

The SIA Group has been allocating some former SilkAir routes to Scoot - SilkAir was a full service subsidiary of SIA but ceased operations in 2021.

As an example, Scoot has been taking over some of the former SilkAir routes to Indonesia, said Mr Thng. The LCC had increased to eight Indonesian routes by Nov-2022, compared to five before the pandemic.

Scoot plans to add another three routes to Indonesia in coming months.

Moves such as these are helping to "densify and solidify" Scoot's Southeast Asia network, Mr Thng said.

Scoot's system capacity had recovered to 86.5% of 2019 levels by the week of 28-Nov-2022. This is only slightly ahead of Singapore Airlines' 84.3% recovery, although Scoot's rate of improvement has been steeper than the parent's since mid-Aug-2022.

Scoot: system capacity, as measured in weekly seats, for the week of 28-Nov-2022

AirAsia expects improvement to continue - even if recession arrives

AirAsia is one of the region's largest independent LCCs.

The airline has also been benefitting from an increase in travel demand - particularly in its core Southeast Asian markets.

The AirAsia group - including airlines in Malaysia, Thailand, Indonesia and the Philippines - expects to be operating 73% of its pre-COVID domestic capacity and 48% of its international capacity by the end of 2022. The overall system recovery rate is forecast to be 62%.

For the core Malaysian unit alone, the system recovery is expected to be 59% by the end of 2022.

Data from CAPA and OAG shows that capacity - as measured in weekly seats - had reached 58.7% by the week of 28-Nov-2022. International capacity has been climbing steadily since the second quarter of 2022.

AirAsia (Malaysia): international capacity, as measured in weekly seats, 2019-2022

Tony Fernandes, CEO of AirAsia's parent Capital A, predicts that financial performance will improve. There are positive signs, such as oil prices easing and Southeast Asian currencies strengthening against the U.S. dollar, he said.

While there is the risk of a global recession, LCCs should also fare relatively well in such a scenario, Mr Fernandes believes.

"Any recession will actually be a positive for us in the low-cost aviation space as people trade down to shorter flights and cheaper flights", he said.

AirAsia is reactivating its fleet - although not as quickly as it would like

Based on its demand expectations, AirAsia is looking to continue its fleet recovery.

The four airlines in the group were operating a total of 125 aircraft in Nov-2022 and it expects to finish 2022 with 140 aircraft in service.

The group forecasts that it will have all its aircraft - a total of 205 - operational by the second quarter of 2023.

However, reactivating aircraft can sometimes be problematic. AirAsia said that, like many other airlines, it is faced with a shortage of MRO slots needed to get more of its fleet operational.

The airline stressed that it is not able to resume as many flights as it wants, as it is still constrained by a lack of aircraft.

Its A320s must undergo heavy maintenance checks as they come out of storage, but MRO bottlenecks mean that this is taking longer than usual.

LCC strength proves worth of dual-model approach for Cathay and SIA in particular

Early predictions that LCC demand would fare particularly well in the post-pandemic period appear to have been accurate.

The experience of some of the Asia-Pacific region's large airline groups, such as Cathay Pacific, underline this - they are seeing strong growth in their LCC units relative to their full service carriers.

Across the region, LCC fleets and capacity are being expanded to capture the surging leisure demand.

Something else that is becoming even clearer is the advantage offered by having a multi-model approach within an airline group. The flexibility of this combination is well suited to the changing nature of the current airline market.

AirAsia may not have a dual-model approach, but it does gain flexibility through its multiple units across Southeast Asia. It also has a medium-haul widebody operation - AirAsia X - and is in the process of aligning it more closely with the short haul units.

Want More Analysis Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More