PARTNERSHIPS are enabling the region’s LCCs to gain better scale and reach amid a competitive landscape, according to speakers at this year’s CAPA Asia Aviation Summit & LCC Congress in Singapore.
Speaking during a panel on LCCs in North Asia, Jeju Air CEO, Ken Choi, highlighted the benefits of scale that come with airline partnerships: “Even though Jeju Air is the number one LCC player in terms of number of planes, routes and revenue, interestingly the second and third players are subsidiaries of full-service carriers. They exercise complementary network strategies and provide codeshare services (with parent companies).
“Being independent is great but provides some limitations on route strategies,” he noted, adding that small-scale LCCs like Jeju Air cannot build franchise models such as Tigerair or AirAsia. The carrier designs routes to be complementary to other Asian LCCs, said Choi.
Kwan Yue, CEO of Tigerair Taiwan, which received its air operator’s certificate last month, expects the new carrier’s affiliation with Tigerair Singapore to pay off in future, especially with the rise of multi-destination travel.
“Taiwan is strategically located for North and North-east Asia travel, while Singapore is the established hub for South-east Asia. In Taiwan we (can) almost serve the whole of South Korea and Japan. Once China opens up, that would allow for a lot of growth and where the most potential is,” he commented. “So we’re the two major ports serving Tigerair, and we cover almost the entire Asian region.”
Similarly, Jetstar Asia CEO, Barathan Pasupathi, shared that collaborations are important to the airline given that Singapore has “no domestic market”. There are six to seven new links with full-service carriers still in the pipeline for the LCC, which announced a partnership with Emirates earlier this year.
“We are moving to the next stage (of growth), which is where we are cultivating high-yield traffic. In order to achieve 95 per cent load, we can’t simply be offering one-dollar fares – that would be irresponsible in terms of revenue management. So we’ve got to reduce capacity and consolidate.”
Paul Jebely, global head of aviation finance of Clyde & Co, a global law firm focused on industries including aviation and marine trades, remarked that LCCs already – and should continue to – have exchanges in terms of aircraft leasing, although there were obvious sensitivities involved. Speaking to TTG Asia e-Daily, he said: “Partnership is critical. It’s fundamental – you can’t operate in a vacuum.”
On the other hand, Vanilla Air, executive VP – operations, Hiroshi Kitahara, said that while parent company All Nippon Airways (ANA) and Vanilla Air currently work separately, collaboration is likely but at least a couple of years away.