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Asia-Pacific 2014 outlook: faster growth for low-cost airlines as LCC fleet reaches 1,000 aircraft

Low-cost carriers in the Asia-Pacific region enter 2014 operating a combined fleet of nearly 1,000 aircraft. With over 1,500 orders in place, 1,000 aircraft is just the tip of the iceberg for Asia’s booming LCC sector.

2014 will see a record level of start-up activity as about 10 LCCs are launched, bringing the total number of LCCs operating in Asia-Pacific to nearly 60. Most of the region’s 47 existing LCCs are also planning more rapid growth for 2014. Most added capacity at a double-digit clip in 2013 and are not about to slow down as competition intensifies.

There will be no turning back as the momentum that LCCs have steadily built up in Asia over the last decade continues to gain steam. LCCs now account for only 15% of the region’s fleet and slightly over 20% of seat capacity but approximately 50% of orders. Ten years ago LCCs accounted for only about 2% of total capacity in Asia-Pacific.

Asia-Pacific LCC sector: 47 carriers and 992 aircraft

There are currently 47 LCCs operating in the  Asia Pacific region, including 23 in Southeast Asia, 16 in North Asia, six in South Asia and two in Australia. These 47 carriers ended 2013 with a combined in-service fleet of 992 aircraft, according to the CAPA Fleet Database. The 1,000-aircraft milestone will be reached in Jan-2014.

The total in-service commercial aircraft fleet in Asia-Pacific was about 6,800 aircraft as of 31-Dec-2013, giving LCCs almost 15% of the total fleet. Of the 4,500 narrowbody aircraft and medium/large turboprops in the Asia-Pacific fleet, LCCs account for about 21%.

Indonesia’s Lion Air is the largest single LCC, with a fleet of 94 in-service aircraft, according to the CAPA Fleet Database. But AirAsia is still Asia’s largest LCC group, with an in-service fleet as of 31-Dec-2013 of 172 aircraft compared to 133 for the Lion Group.

The Lion figure includes Lion Air, Indonesia-based regional subsidiary Wings Air, Malaysian affiliate Malindo Air and new Thai affiliate Thai Lion Air but excludes the group’s Indonesia-based full-service subsidiary Batik Air. The AirAsia figure includes the six carriers that now operate under the AirAsia brand regardless of their ownership structure or parent company – Malaysia AirAsia, Indonesia AirAsia, Thai AirAsia, Philippines AirAsia, Philippines-based Zest Air and Malaysia-based AirAsia X. Malaysia AirAsia, Indonesia AirAsia and Thai AirAsia are all among the 10 largest individual LCCs in Asia-Pacific.

See related report: Lion Air and Garuda Indonesia to overtake Singapore Airlines with largest fleets in Southeast Asia

The Jetstar Group ended 2013 with 116 aircraft, making it the third largest group as Tigerair ended the year with a much smaller group fleet of 51 aircraft. Jetstar Airways and Malaysia AirAsia both ended 2013 with 74 aircraft, which is second most behind Lion Air. IndiGo, India’s largest LCC and the largest LCC in Asia-Pacific that is not affiliated with a group, ended the year with 73 aircraft.

Asia-Pacific low-cost carriers ranked by fleet size: as of 31-Dec-2013

Rank

Carrier

Country 

LCC Group 

Aircraft as of

31-Dec-2013

1

JT

Lion Air

Indonesia

Lion 

94^^

2

AK

AirAsia

Malaysia 

AirAsia 

74

3

JQ

Jetstar Airways

Australia 

Jetstar 

74

4

6E

IndiGo

India 

(independent) 

73

5

SG

SpiceJet

India 

(independent) 

56

6

5J

Cebu Pacific Air

Philippines 

(independent) 

48

7

9C

Spring Airlines

China 

Spring* 

39

8

FD

Thai AirAsia

Thailand 

AirAsia 

35

9

BC

Skymark Airlines

Japan 

(independent) 

33

10

QZ

Indonesia AirAsia

Indonesia 

AirAsia 

30

11

IW

Wings Air

Indonesia

Lion 

27

12

TR

Tigerair

Singapore 

Tigerair 

25

13

QG

Citilink

Indonesia 

(Garuda

24

14

OX

Orient Thai Airlines

Thailand 

(independent) 

22

15

DD

Nok Air

Thailand 

Nok* 

21**

16

IX

Air India Express

India 

(Air India

21

17

3K

Jetstar Asia

Vietnam 

Jetstar 

19^

18

D7

AirAsia X

Malaysia 

AirAsia X* 

18

19

GK

Jetstar Japan

Japan

Jetstar 

18

20

G8

GoAir

India

(independent) 

17

21

8L

Lucky Air

China 

(Hainan Airlines

17

22

7C

Jeju Air

South Korea 

(independent) 

13

23

Z2

Zest Air

Philippines 

AirAsia 

13

24

S2

JetLite

India 

(Jet Airways Airlines) 

13

25

PN

West Air

China 

(Hainan Airlines) 

13

26

HD

Air Do

Japan

(independent) 

13

27

TT

Tigerair Australia

Australia 

Tigerair 

12

28

LQ

Solaseed

Japan 

(independent) 

12

29

MM

Peach

Japan 

(All Nippon Airways

11

30

BX

Air Busan

South Korea 

(Asiana Airlines

11

31

7G

Star Flyer

Japan 

(independent) 

11

32

VJ

VietJet Air

Vietnam 

VietJet*

10

33

OD

Malindo Air

Malaysia 

Lion 

10

34

LJ

Jin Air

South Korea

(Korean Air

10

35

RI

Tigerair Mandala

Indonesia 

Tigerair 

9

36

ZE

Eastar Jet

South Korea 

(independent)

9

37

TZ

Scoot

Singapore 

(Singapore Airlines

6

38

TW

t'way

South Korea 

(independent) 

6

39

BL

Jetstar Pacific

Vietnam 

Jetstar 

5

40

DG

Tigerair Philippines

Philippines 

Tigerair 

5

41

UO

Hong Kong Express

Hong Kong 

(Hong Kong Airlines) 

4

42

MJ

Mihin Lanka

Sri Lanka  

(SriLankan Airlines

3

43

Y5

Golden Myanmar Airlines

Myanmar 

(independent) 

2

44

SL

Thai Lion Air

Thailand 

Lion 

2

45

PQ

Philippines AirAsia

Philippines 

AirAsia 

2

46 

JW

Vanilla Air

Japan 

(All Nippon Airways) 

2

47

VF

Valuair^

Singapore

Jetstar 

0

 

 

 TOTAL

 

 

992 

Lion and AirAsia dominate Asia’s massive LCC order book - of 1,591 aircraft

The Lion and AirAsia/AirAsia X groups also account for 964 or over 60% of the 1,591 aircraft on order by the Asia-Pacific LCC sector. The Jetstar Group accounts for another 125 orders but Tigerair, which could place a new order in 2014, only has 18 aircraft on outstanding order. A fifth emerging Asian LCC group, VietJet, has 70 aircraft on order when including its MOU with Airbus from Sep-2013.

See related report: VietJet Air places major A320 order. Is there room for another pan-Asia low-cost airline group?

The VietJet aircraft are included in the 1,591 figure as the MOU is expected to be converted into a firm order shortly. The 1,591 figure includes orders directly with manufacturers and announced commitments from leasing companies but does not include lease commitments for second hand aircraft or undisclosed commitments for new aircraft with lessors.

While the affiliates of all the big groups rely primarily on new aircraft sourced from their parent company order books, most of the smaller independent LCCs rely on leasing second hand aircraft and therefore their expansion plans are not generally factored in when looking at the total orders. Some of the bigger independents however have relatively large orders, including IndiGo with 191 and Cebu Pacific with 48.

Asia-Pacific aircraft orders by LCC group: as of 31-Dec-2013

Group      Current fleet On order*
Lion 133 576
AirAsia/AirAsia X 172 388
Jetstar 116 125
VietJet 10 70
Tigerair 51 18

There are currently almost 3,200 aircraft on order in Asia-Pacific when including the still to be completed VietJet deal. LCCs as a result account for almost exactly half of the total order book.

The 1,591 orders include only 84 widebody aircraft. The rest are narrowbody aircraft and large turboprops. Of the approximately 2,200 narrowbody and medium/large turboprops currently on order, LCCs account for almost 70%.

The actual portion of these 2,220 aircraft that end up with LCCs will likely be even higher as several LCC subsidiaries of full-service carriers do not have their own order books and rely on their parents including: Air India Express (parent: Air India); JetLite (parent: Jet Airways); Lucky Air (parent: Hainan Airlines); Hong Kong Express (parent: Hong Kong Airlines/Hainan Airlines), Air Busan (parent: Asiana), Jin Air (parent: Korean Air); and Mihin Lanka (parent: Sri Lankan Airlines). These will more than offset the aircraft in the Lion order which end up at Batik, which is the only full-service subsidiary of an LCC. (Other LCC subsidiaries have their own orders including Garuda’s Citilink and SIA's Scoot. Jetstar and Tigerair are also subsidiaries/affiliates of full-service groups but have their own orders.)

2014 will see 10 start-ups and more growth at the existing 47 LCCs

The 2013 storyline for the Asia-Pacific LCC sector was focused on new start-ups plus rapid growth among several of the existing major players. This storyline will repeat and accelerate in 2014.

There were five LCCs launched in Asia in 2013 – Golden Myanmar, Malindo, Hong Kong Express, Thai Lion and Vanilla Air. Hong Kong Express represented a re-launch of a carrier that previously following the full-service model while Vanilla represented the re-launch of an LCC which ceased operation earlier in 2013. There were six LCCs that launched in 2012 (including AirAsia Japan, which has now re-launched as Vanilla following the sale of the AirAsia stake to All Nippon Airways).

2014 will see about 10 new LCC launches in Asia-Pacific, an unprecedented number. This includes Thai AirAsia X, Thai VietJet, NokScoot, AirAsia India, Jetstar Hong Kong, Spring Airlines Japan, China United Airlines, Jiu Yuan, Tigerair Taiwan and a yet to be named LCC subsidiary of TransAsia Airways.

China United, which is a subsidiary of China Eastern, will be a re-launch of an airline that now follows the full-service model. The other nine launches are completely new airlines although seven will be affiliated with existing LCC groups. The other two will be subsidiaries of existing full-service airlines.

Asia-Pacific LCC launches planned for 2014

Carrier  Country Airline group owner(s)
AirAsia India India AirAsia
China United China China Eastern
Jetstar Hong  Kong Hong Kong Jetstar (Qantas) and China Eastern
Jiu Yuan China Juneyao Airlines
NokScoot Thailand Nok (Thai Airways) and Scoot (Singapore Airlines)
Spring Japan Japan Spring Airlines
Thai AirAsia X Thailand AirAsia X
Thai VietJet Thailand VietJet and Kam Air
Tigerair Taiwan Taiwan Tigerair (Singapore Airlines) and China Airlines
V Air Taiwan TransAsia Airways

As CAPA reported on 16-Dec-2013, not all of the planned start-ups may end up launching by the end of 2014. But the unprecedented figure of 10 new Asian LCCs should be reached, or potentially exceeded, as other new LCCs that have not yet been announced or established could also commence operations by the end of 2014, including Indonesia AirAsia X, AirAsia Korea, a potential second LCC in Myanmar and more new LCCs in China in addition to China United and Jiu Yuan.

See related report: Tigerair Taiwan and NokScoot usher in more change and growth for Asia’s dynamic low-cost sector

North Asia has huge potential but Southeast Asia is still where most of the action is

Much of the storyline in recent years has been about making inroads for the first time in North Asia, where LCCs only account for about 10% of intra-regional capacity compared to over 50% within Southeast Asia and within South Asia. But while the penetration rates in North Asia are now starting to creep up, most of the aircraft being added are in Southeast Asia. Southeast Asia also accounted for three of the start-ups in 2013 and will account for at least another three start-ups in 2014.

Southeast Asian LCCs expanded their combined fleet by about 100 aircraft in 2013 (this is a net figure and factors in retirements). Southeast Asian LCCs currently have about 500 in-service aircraft and therefore account for approximately half of the total number of LCC aircraft currently operating in the Asia-Pacific region.

See related report: Southeast Asia airline market sees more rapid growth & high international low-cost penetration rates

LCCs now account for slightly over 30% of the nearly 1,600 commercial aircraft in service in Southeast Asia. South Asia has a similar trend line, with LCCs accounting for about 27% of the approximately 600 aircraft in service. But in North Asia this figure is only about 10%.

The paltry figure for North Asia will increase significantly in 2014 and beyond. But there will also continue to be equally impressive LCC growth in South Asia and Southeast Asia. These regions are seeing some of the fastest economic and middle class growth in the world – providing favourable conditions for LCC expansion based purely on demand rather than further market share gains. There are also some countries and routes within these regions that remain relatively under-penetrated by LCCs.

Asia-Pacific's LCC sector: the story is still unfolding

Only the first chapter of Asia’s LCC story has been written. Reaching the 1,000 aircraft milestone is big achievement, particularly given the miniscule fleet the Asia LCC sector had just a decade ago.

But to put things in perspective the (42 year-old) Southwest Airlines group alone has an in-service fleet of about 700 aircraft while Ryanair and easyJet have a combined 500 aircraft between them. Asia-Pacific has the bigger overall aviation market, a much higher growth rate and economic conditions that are particularly favourable for LCCs.

2014 is an important juncture for the still emerging Asian LCC sector as over 100 aircraft from the gigantic orders book of the leading groups are placed into service and as 10 more carriers are launched. More major orders will also almost certainly be placed in 2014. We are only at the beginning.

This is a uniquely dynamic market with more major developments almost weekly.

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