Eight LCCs form Value Alliance – but where are Jetstar and AirAsia?

CEOs and stewardesses of all eight partner LCCs

EIGHT budget carriers yesterday formed the world’s largest and first ever pan-regional LCC alliance.

The Value Alliance’s founding airlines are Cebu Pacific (including subsidiary Cebgo), Jeju Air, Nok Air, NokScoot, Scoot, Tigerair Singapore, Tigerair Australia and Vanilla Air.

CEOs and stewardesses of all eight partner LCCs

Explaining the nature of the partnership, Campbell Wilson, CEO of Scoot, said: “This is a sales and distribution alliance. It is to expand our distribution reach beyond each of our departments, to open the networks we ourselves operate in.”

This means that customers will be able to view, select and book flights from any of the eight airlines in a single transaction, directly from each carrier’s website, once the technology is fully implemented.

Developed by Air Black Box (ABB), this new technology also offers guests the full suite of ancillary choices available from all the LCCs in one itinerary.

Wilson elaborated: “You’ll be able to book one, two, or more than two airlines in a single transaction and payment. You’ll be able to select your seats, baggage requirements, meals (and other inflight features) on all of the carriers. You’ll be able to complete your entire booking in a single website, in a single transaction, and receive a single itinerary. It’s basically a one-stop shop.”

Michael B. Szucs, Cebu Pacific’s chief executive adviser, added: “This is about giving visibility to our partners’ products on our own respective websites. (It is about) making (the booking process) seamless and providing one transaction for those who want to connect on a multi-leg journey.”

According to Wilson, there was no good technology in the market that allowed interline sale of ancillary products, hence the need for ABB.

He said: “GDS distribution is not exactly desirable. We wanted to avoid some of the challenges that exist with other systems. There are existing products out there, but they do a poor job of interline sale of ancillary products, and ancillary products for Scoot (and the other LCCs) is more than 20 per cent of our revenue. There is a clear opportunity cost, and that’s why it is so critical to develop technology that facilitates sale and real-time pricing.”

For example, Lee Lik Hsin, CEO of Tigerair Singapore said that his company and Cebu Pacific already have an interline partnership in place. However, ancillaries cannot be booked on the current platform. With the new alliance and platform, the booking of ancillaries has been made possible.

“That is the added advantage,” said Lee.

Szucs said: “The emphasis (of this alliance) was to leverage off each partner here, in terms of the power of their own web distribution.

“In each of our markets, our dot com web distribution is powerful. Cebupacificair.com is powerful in the Philippines, but it not the first place some will go to in Korea or Thailand or Australia. But I have partners here who have powerful brands in those markets, and that efficient technology that links to their own web distribution is what we’re trying to achieve.”

Yet, two notable LCCs – AirAsia and Jetstar – were not present at the unveiling.

When asked about their absence, Wilson said: “The objective is to expand our distribution and our network. We do this for our own strategic reasons, so the fact you don’t see some airlines here is self-explanatory.”

He added: “However, this is not a closed alliance. We are open to new members joining the alliance. Who and where obviously we cannot say yet.”

A shared loyalty programme is also absent in the Value Alliance, and there are no plans to have one as of now.

When asked why, Szucs said: “At the moment, we need to focus on the huge value we can bring to each other in terms of sales distribution. What is core to what we do is maintaining the lowest cost, as that means we can pass on the lowest fares to the consumers. We’re about low fares to stimulate travel for people who have never flown before.”

The Value Alliance airlines will serve more than 160 destinations with a collective fleet of 176 aircraft across the Asia-Pacific. In 2015, the eight airlines collectively carried 47 million travellers.

Currently, Scoot, Nok Air and NokScoot are already offering each other’s flights and fares powered by the new ABB technology. Other alliance members will come online in the next six to nine months.

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