Abacus arms travel consultants with new weapons to drive business

October 16, 2014

ABACUS International has unveiled a slew of new products to help travel consultants overcome content fragmentation and distribution challenges online as well as service customers on mobile.

Speaking to TTG Asia e-Daily, Martin Symes, chief marketing officer, Abacus, highlighted key breakthrough product Abacus WorkSpace as the “point of sale system of the future”.

“This open-source platform brings a multitude of content distribution opportunities which will help streamline workflow and optimise operational efficiency, content aggregation and automation – all on a single desktop,” he said.

Built on the Sabre Red workspace product, the new platform will also give travel consultants access to the new web-based booking system Abacus ContentPlus.

Consultants therefore no longer have to log on to multiple systems given that all content sources are now accessible within a single point-of-sale – with super-PNR integration between Abacus ContentPlus and the Abacus GDS.

Other products and solutions announced during the biennial Abacus International Conference include travel itinerary app TripCase, Abacus Travel Plus aimed at wholesalers, and Abacus Mobile Connect, a tool that allows travel agencies to launch their own apps.

Asked what differentiates Abacus in the competitive GDS environment, Symes referred to the company’s regional strength in Asia-Pacific paired with Sabre’s global reach.

Steven Ler, senior vice president and head of supplier relations, UOB Travel Planners Singapore, said: “These (new products) are all good stuff but the question for travel agencies is will they know what is good for them…what travel consultants want may be different from what they truly need.

Ler suggested that Abacus offer advisory services to help agencies understand the requirements of their own businesses and situations.

Anthony Baby John, CEO of India-based Trinity Air Travel & Tours, whose company adopt some of the new Abacus products, said: “There are definitely major changes that we need to make, but we have to do it to keep up with the changing times.”

Abacus launches virtual payment solution for corporates

By Paige Lee Pei Qi

October 16, 2014

AIMED at offering travel management companies and corporate travel agencies enhanced security and control over transactions, Abacus is launching a new virtual payment solution in partnership with technology provider Conferma, slated to roll out by the end of this year.

Robert Bailey, president and CEO of Abacus, said Virtual Card Numbers (VCNs) are a “new standard” for online payments and can radically improve businesses’ ability to measure and manage its corporate spend.

While traditional corporate payment products – plastic corporate cards – have a 16-digit number that is used for multiple transactions, the new virtual payment technology means that each transaction is assigned its own unique 16-digit number for booking and payment, hence providing greater security.

Upon reaching the payment stage for a booking, Abacus VirtualPayment automatically collects the booking data and asks for details required by the traveller’s employer. In return, it will generate a one-off 16-digit VCN.

According to Bailey, VCNs can have many different controls applied, including specifying or limiting the amount to be paid, or specifying when a payment must be completed.

Bailey said: “The scale and diversity of bookings managed by Abacus (agencie make the process efficiencies in VCN technology very significant.

“What makes a VCN exceptional is that it becomes the unique identifier for both the booking and the payment. That means booking and payment data are automatically reconciled, removing the need for labour-intensive and time-consuming manual reconciliation or accounts payable processes,” he added.

Greg Thompson, banking partner development manager of Conferma, is bullish about the rising trend of virtual payment solutions. He said: “People are beginning to accept the idea of virtual cards today because it is so secure and it is risk-free.

“I am predicting that within five years, at least 90 per cent of all corporates will be switching to virtual cards,” Thompson added.

In March this year, eNett International rolled out a Virtual Account Numbers payment system in Singapore that automatically generates 16-digit MasterCard numbers for each booking transaction and enable automatic reconciliation at point of sale.

Better online content, tools needed for business travel managers

By Hannah Koh

October 16, 2014

A ONE-STOP source consolidating content such as hotels, car rentals, air fares and ancillaries could be the solution to issues of non-compliance corporate travel managers face today.

The point was raised during a panel discussion on disruptive technology at yesterday’s CAPA 2014 Asia Pacific Corporate Travel Innovation Day held in Singapore.

Ian Heywood, vice president, global supplier strategy, GDSs, Travelport, said: “Life is currently a nightmare for travel management companies (TMCs). There’s an overload of information that isn’t coming in in a sensible manner, you’ve got to go to multiple websites to access it, and airlines continue to have different product differentiation.

“This is breaking down booking models. The corporate traveller may go out and book it themselves, or the TMC may book the flight but can’t book the ancillary and has to go to the airline website. And this is costing a lot more money. No one in this industry is making the returns they need to make.”

For technology to successfully enable TMCs, Heywood argued: “You need all of the content in one place to be able to access, whether that’s LCCs or full-service carriers. It means the fares (and ancillaries) on the same aggregated shop list, not different systems on the same page.”

“Basically, you want a one-stop shop. You need the TMC or travel consultant to be able to book all of this content in the same workflow very effectively and efficiently.”

Serko’s head of strategic sales & market development, Michael Thorburn, commented that travel apps in the travel space today were narrow in scope but deep in content and functionality. “For instance in India, you can use the IndiGo app, but what about the other airlines? SpiceJet? Jet Airways? And what about managing the other components of the trip? The taxi, the hotel, and so on.”

“To make a decent mobile solution for business travel, it must sit on top of a single, substantial data source,” Thorburn commented.

But Andrew Wong, regional director, Asia, TripAdvisor, pointed out that current technology already allows for this. “At TripAdvisor we have APIs that you can stick into the GDS, etc. Content is out there, but the problem is the willingness to break down those walls to make things available.”

Similarly, a travel manager and procurement specialist who wished to remained anonymous told TTGmice e-Weekly that such content was already in place, although she admitted that the online booking tool used by her company “could be better”.

Asked how then could business travellers be encouraged to book within policy, she said: “More education needs to be done to tell business travellers why online fares are better. When travellers book on their own they ignore factors such as safety and the need for the company to capture data

Double leg-up for Subic with new eco-centric events

By Rosa Ocampo

October 16, 2014

SUBIC has received a shot in the arm with the confirmation of rights to host the Global Summit of Youth in Environmental Sustainability back-to-back with the Subic International Eco-Film Festival on February 25-27, 2015.

Some 500 graduating university students will attend the summit, to be held at the Subic Bay Exhibition & Convention Centre (SBECC), while the Eco-film Festival will be graced by about 100 film practitioners at the International School of Sustainable Tourism (ISST).

The youth summit aims to build the capacity of students and young community leaders to understand the issues and benefits of protecting the environment and to incorporate them in their daily lives.

The eco-film fest, on the other hand, will tackle the challenges faced by environmental film producers with a discussion on environmental and commercial films.

Both inaugural events are the brainchild of ISST and are expected to boost Subic’s positioning as an eco-tourism and MICE destination.

ISST president and former tourism secretary, Mina Gabor, said the eco-film fest will include an eco-film competition with entries from countries including Japan, South America, Iceland, and the Philippines.

“We’re starting small to get our feet wet but we have some good films,” she said, noting that there are many good commercial films about the environment, including the highly successful Avatar.

Participants at the youth summit will be encouraged to attend the screening of the eco-films.

International Music Summit to reach a peak at W Singapore

By TTG Asia

October 16, 2014

W SINGAPORE – Sentosa Cove will this December become the stage for the Asian edition of the International Music Summit (IMS), which has its roots in the electronic music capital of Ibiza.

Come December 11, IMS Asia-Pacific will bring together the leaders of the electronic music genre from this region and the West for a series of panel discussions, keynote interviews and speeches, workshops, and tutorials.

Discussions will be relevant to the Asia-Pacific region and feature input from headline talent, regional industry icons, as well as big-name players from around the world.

IMS co-founder, Ben Turner, said: “This event has been created to unite the Asia-Pacific industry but also to educate and entertain delegates from around the world about this incredible frontier which is finally opening up in a huge way to electronic music culture.”

The event was also deliberately scheduled to coincide with Singapore’s annual ZoukOut dance festival. Said Turner: “We’ve positioned ourselves the day before the ZoukOut to help further the focus on this festival into a powerful business forum, and Zouk’s founder Lincoln Cheng has been a guiding light for all the IMS partners for the last 20 years.

“It is a huge honour for us to bring IMS to Asia-Pacific and to help galvanise this region for the future of the genre we know and love.”

The decision to hold the event at W Singapore – Sentosa Cove is an extension of IMS’ existing agreement with W Hotels Worldwide.

Arnaud Champenois, Asia-Pacific senior brand director, commented in a release: “To celebrate this partnership, we have also prepared a series of happenings that will feature an industry icon and headlining talent at W Singapore – Sentosa Cove and W Retreat & Spa Bali, Seminyak.”

Empowering event planners at Suntec Singapore through 3D

By Paige Lee Pei Qi

October 16, 2014

LEVERAGING the exponential power of technology, Suntec Singapore has launched its new customer portal for virtual event planning, allowing MICE planners real-time access to their booking information.

Set to transform the way Suntec Singapore work with its planners, the interactive portal provides organisers a ‘live’ dashboard displaying the full details of their bookings including meeting space, furniture, equipment, F&B items, and digital signage allocation.

Marc Bakker, assistant director of marketing & communications, Suntec Singapore, said: “Organisers and planners are now firmly in control of their events from proposal to booking and the final delivery.”

The portal provides an interactive 2D blueprint for clients to visualise the layout of their spaces. The floor planning tools allow them to move the furniture, audiovisual equipment, and decorative items according to their requirements.

Further to that, the 3D-viewer with 360º panning ability promises clients a comprehensive view of the space.

Bakker said: “The collaborative and real-time nature of the online portal and easy sharing capabilities ensure seamless communication between Suntec Singapore, organisers, and third-party suppliers, enabling all parties to be more effective, saving time and travel costs of site inspections.”

Arun Madhok, chief executive of Suntec Singapore, said: “Our smart use of technology is increasingly making the entire customer experience easier, faster and more effective for our growing client base.

“Our clients – for the first time – will be able to fully visualise, modify and control their event spaces,” he said.

Nevertheless, the human service is still necessary as Madhok added: “Our staff will be working closely with our clients and service teams to ensure their expectations become a reality.”

Last month, Suntec Singapore launched virtual tours of the convention centre through the Google Maps’ Street View.

Visitors can preview the customer portal here: http://bit.ly/1tZv52H

Chatterjee joins Bangkok Marriott Hotel Sukhumvit as GM

By TTG Asia

October 15, 2014

RAJAT Chatterjee has been appointed general manager of Bangkok Marriott Hotel Sukhumvit since September 2014.

Hailing from India, Chatterjee is a veteran hotelier with more than 20 years of experience in the field. He started his hospitality career with the Oberoi Hotels & Resorts as a management trainee in 1992 after getting his post-graduate degree from the Oberoi School of Hotel Management.

Chatterjee first joined Marriott International in 2002 as director of rooms operations, before becoming director of operations at JW Marriott Hotel Mumbai and opening general manager for the Courtyard by Marriott Chennai. He has further polished his leadership experience in several of the company’s brands, with his most recent appointment at Dubai Marriott Harbour Hotel and Suites.

Mid-east carriers power ahead

By Sim Kok Chwee

October 15, 2014

With bigger aircraft coming into service over the next year, the much-feared ME3 airlines are using the chance to enlarge their network and enhance their product. Sim Kok Chwee looks at the trio, plus an up-and-coming competitor

Airlines from the Middle East have enjoyed a growth trajectory that is already stellar by historical standards but to the dismay of their counterparts from other parts of the world, there will be no let-up. On the contrary, the competition posed by carriers from the Middle East looks set to grow.

From orders placed in recent years, these carriers are receiving bigger and ever more fuel-efficient airplanes that further improve the bottom line and passenger appeal. The much-feared ME3 – Emirates, Etihad Airways and Qatar Airways – may just be joined by Turkish Airlines, which similarly aspires to ambitions equal to that already achieved by the trio.

In addition to growing organically through fleet and network additions, each of the four carriers has embarked on its own strategy. Two of these – Qatar Airways and Turkish Airlines – have decided to join global alliances, while Emirates has secured a strategic alliance with Qantas Airways to make it the midpoint on the Kangaroo Route, replacing Singapore, Hong Kong and Bangkok. Etihad Airways takes a completely different tack, electing instead to acquire a whole slew of airlines as well as inch closer to SkyTeam carriers.

EMIRATES

Being the powerhouse of the Middle East, Emirates has sent more than ripples across the oceans of the world. Its growth is phenomenal and is perhaps adequately illustrated by the number it carries.

In the year ending March 31, 2010, Emirates carried 27.5 million passengers. In the year ending March 31, 2014, the number carried was 44.5 million, a growth of 62.2 per cent. This is a feat no carrier of this size could match, and the trend continues with more A380s being delivered and a whole new fleet of technologically advanced airplanes on its order books.

Emirates has now received more than 50 of the 150 A380s it has ordered, making it the largest A380 operator by a long shot. It is therefore no surprise that the airline opened an A380 hub at Dubai International Airport in January 2013 to facilitate the massive waves of connections. Costing US$3.3 billion, the hub has 20 A380 gates with 13 remote stands. This terminal alone has the capacity to handle 15 million passengers annually and comes complete with 202 rooms of four- and five-star standards.

The airline had to temporarily reduced the size of its operation this April and May while maintenance works were carried out at its home base. However, since then expansion of capacity has resumed, with more to come:
• Deployment of A380 to Frankfurt from September 1
• Second daily A380 service to Mauritius starting October 26 – replaces the B777-300ER
• Dubai-Dar es Salaam, Tanzania from 7 to 12 weekly starting October 26
• Dubai-Rome adds a third daily service from October 26
• Dubai-Johannesburg from 3 to 4 daily from October 26
• Dubai-Budapest new daily service from October 27
• From December 1, service to Bahrain from 3 to 4 daily, Doha from 6 to 7 daily, Kuwait City from 5 to 6 daily and Muscat from 2 to 3 daily
• Expansion of A380 services to San Francisco (December 1) and Houston (December 3)
• Deployment of bigger B777-300ER on daily Dubai-Brussels starting February 1, 2015 – replaces B777-200LR

Asian footprint
For its size, it is surprising that Emirates is not serving more Chinese destinations. It currently operates to Beijing, Shanghai, Guangzhou and Hong Kong, but in south Asia, it operates to 10 cities in India, five cities in Pakistan as well as Dhaka, Colombo and Male. Clearly India and South Asia are an important market for Emirates, with huge numbers travelling via Dubai to Europe and North America. Australia and New Zealand also represent a key market that Emirates has successfully tapped into with the Qantas alliance.

Where its coverage in South-east Asia is limited to just seven cities, it makes up with high frequencies to cities such as Bangkok, Kuala Lumpur and Singapore. With more A380s and B777-300ERs being delivered, China will probably feature more strongly.

ETIHAD AIRWAYS

Long viewed as the other carrier from the United Arab Emirates (UAE), Etihad Airways is beginning to assert its position as UAE’s national carrier. As is the business model for each of the ME3, Etihad is riding on connections across the world with Abu Dhabi as its hub. As such, many of its passengers arriving in Abu Dhabi connect onto flights fanning out across the Middle East, Europe, Africa and the east coast of North America.

Like Qatar Airways, Etihad is also a late operator of the A380, but the carrier has utilised this advantage to push the innovation boundary in conceptualising its premium class product onboard. The delivery of its first Airbus A380 in the final quarter of 2014 will facilitate its deployment on one of the three daily services to London-Heathrow. By March 1, 2015, the A380 will also be deployed on a second daily service to London-Heathrow and by May 2015, all three services will be operated by the A380. On June 1, 2015, the A380 will head in the opposite direction to Sydney, thus offering a homogenous A380 product along the entire Kangaroo Route.

Etihad is also close to receiving its first B787-9 Dreamliner, which will be deployed next year to destinations including Dusseldorf, Moscow, Brisbane, Mumbai and Washington DC.

The induction of these two types has allowed Etihad to up the ante in the premium class arena, especially with the A380 where the airline will have four classes. In the uber-luxurious segment, Etihad has unveiled The Residence, promising a VIP travel concierge service from the moment a booking is made. Up to two travellers will have a living room, a separate bedroom and an ensuite bathroom – touted as the only three-room suite in the sky. For first class, Etihad’s answer on the A380 is the First Apartment – besides the amenities one finds in a suite, it also features a wardrobe and a bathroom complete with shower facilities.

On the B787-9, the First Suite will offer privacy with ambient lighting, a personal wardrobe, a chilled drinks cabinet and space to entertain another guest.

On both the A380 and B787-9, Etihad will also have the Business Studio, which converts into a fully flat bed of up to 80.5 inches. Every one of these studios will have aisle access.

And in economy, a new Smart Seat comes complete with a fixed wing headrest, adjustable lumbar support, mobile and Internet access.

Complementing these hardware upgrades, Etihad’s home hub, Abu Dhabi Airport, is also constructing a mid-field terminal that will be completed in 2017.

Etihad maintains a keen lookout for strategic assets to acquire – mainly airlines (mostly in different degree of distress). These airlines have been valuable for the feed they provide to Etihad’s own services and these include: Aer Lingus (Ireland), Air Berlin (Germany), Air Serbia (Serbia), Air Seychelles (Seychelles), Alitalia (Italy), Darwin Airlines – rebranded as Etihad Regional (Switzerland), Jet Airways (India) and Virgin Australia (Australia).

Etihad has also actively pursued codeshare arrangements with various carriers, and some of the more recent partners include Philippine Airlines and Air Malta (July) and Gol – a carrier from Brazil (September). It has also formed strong codeshare bonds with SkyTeam members such as KLM, Air France and Garuda Indonesia.

Capacity expansion on existing routes include:
• Karachi, Pakistan (from once to twice daily service starting October 26)
• Kuwait City (from 33 to 35 services weekly starting October 26)
• Astana, Kazakhstan (from 1 to 2 weekly from September)
• Almaty, Kazakhstan (from 4 to 5 weekly from September)

In June 2015, Etihad will also delink its current service to Singapore and Brisbane. Singapore will be served daily with an A330-300 turnaround service while Brisbane will be served non-stop with the B787-9.
New destinations for 2015 include:
• Kolkata (February 15)
• Madrid (March 29)
• Entebbe, Uganda (May 1)
• Edinburgh (June 8)
• Hong Kong (June 15)
• Algiers, Algeria (June 17)
• Baku, Azerbaijan (October 1)
• Tbilisi, Georgia (October 2)
• San Francisco (November 18)
• Dar es Salaam (December 1)

Asian footprint
Etihad currently serves Asian markets stretching from Kazakhstan to South Korea and New Zealand and unlike its fellow ME3 carriers, key markets are China, North Asia, Australia/New Zealand and South-east and South Asia. These markets offer connecting traffic to Europe, Africa and the Americas.

QATAR AIRWAYS

Almost 21 and certainly coming of age, Qatar Airways continues to solidify its position as a pre-eminent Middle Eastern carrier. Having received the first of 10 Airbus A380s on order on September 17, Qatar Airways has set October 10 for its inaugural deployment of the A380 to London-Heathrow, with a second daily deployment scheduled to begin on December 1. Paris too will be served with the A380 on a daily basis starting November 1. By end-2014, Qatar Airways will have received four A380s and is also expected to become the first airline to receive and operate the Airbus A350-900XWB.

On its newly introduced Airbus A380s, Qatar Airways will have three classes with a total seat count of 517. Both premium class cabins are located on the upper deck of the A380, as is a private lounge and a small section for economy class. The main deck is completely configured for economy class.

Going forward, Qatar Airways is planning what it described as a substantial revolution in the business class cabin.

Chief executive Akbar Al Baker promised it will be a “first class product sold as business class”, but reveals nothing of its form and flavour. This move is not surprising given that the airline is following a worldwide trend to reduce first class service. It is also steering clear of another trend towards premium economy class, considering its new economy class product equal to premium economy, “but at a cheaper price”.

In the race to end-2014, Qatar Airways will be adding two new destinations, beginning with a daily non-stop flight from Doha to Phuket operating an A330-200 from October 26. This will be followed by a twice-weekly A320 service to Asmara in Eritrea. It will also return to the Doha-Denpasar route with a daily non-stop service using the B787-8 – this service was previously operated via Singapore.

Capacity growth is also planned for the following routes:
• B787-8 replaces the A320 on daily flights to Vienna starting September 1
• Doha-Bucharest-Sofia from 5 weekly to daily starting October 1
• Doha-Dubai from 13 to 14 daily and Doha-Dubai Al Maktoum from 3 to 4 daily, both starting October 26
• Deployment of a B787-8 to Moscow on a daily basis starting November 1, replacing the A320 on one of two daily services
• Madrid will be served 10 times weekly starting November 16, up from a daily frequency
• A fifth weekly flight to Miami will be added starting November 17
• An additional frequency will be added each week to Nairobi starting November 20
• For the month of November, one of two daily flights to Frankfurt will be operated with the higher capacity B777-300ER instead of the B787-8
• Fourth daily service to Bangkok will be reinstated starting December 16

As a significant portion of passengers arriving into Doha connect to another flight within a short span of time, the airline’s value proposition has become more attractive since April when it moved to the newly opened Hamad International Airport. Although it will initially have the capacity to handle 29 million passengers annually (thrice the designed capacity at the former Doha International Airport), plans are in place to boost this to 50 million passengers per year, with potential for further growth that could place it second only to Dubai Al Maktoum Airport.

Asian footprint
China, Japan and Australia and South and South-east Asia are key markets, with much of its traffic connecting to Europe, the Middle East, Africa and even the east coast of North America. The airline is also strongly promoting connections to Sao Paulo in Brazil. As is the case of most carriers operating to Asia, China remains the market with the greatest promise. Australia too holds promise, but it is a destination that has seen a glut of international capacity. Chinese carriers are increasingly making inroads into this market and pitching themselves as a cheaper alternative from Australia to the rest of Asia and Europe.

TURKISH AIRLINES

The success of the ME3 carriers inevitably leads others to emulate their success. Interestingly, a dark horse has emerged in the form of Turkish Airlines whose home base interestingly straddles two continents – Europe and Asia. A Star Alliance member, Turkish Airlines has inked a number of codeshare agreements including those with fellow members, LOT Polish Airlines and Singapore Airlines.

It plans to increase its fleet from 267 aircraft in April 2014 to 450 in 2023. In 2013, Turkish Airlines’ operating revenue hit US$9.8 billion – a strong 19 per cent year on year. The airline expects this to grow 17 per cent to US$11.4 billion in 2014. Fuelling such lofty growth ambition is the development of a new international airport in Istanbul slated for completion in 2019. The airport will cost a whopping US$35 billion and be able to handle 150 million passengers annually.

New routes and capacity include:
• Istanbul-Malta from 5 to 7 weekly from October 2
• Istanbul-Hannover from 14 to 17 weekly from October 26
• Istanbul-Stuttgart from 25 to 28 weekly from December 2
• Istanbul-Luanda, Angola new twice-weekly service from January 4, 2015
• Istanbul-San Francisco new 5 weekly service from April 13, 2015, which will increase to daily frequency by May 11, 2015
• Istanbul-Chicago with B777-300ER replacing A330-200 starting May 11
• Istanbul-Jakarta served daily with nonstop service. It is currently served via Singapore

Asian footprint
Turkish Airlines has a fairly even spread of destinations in North, South-east and South Asia, but its Asian network currently ends with Jakarta as its southern-most point. Australia and New Zealand are mostly served via its strong codeshare agreement with Singapore Airlines, but signs are evident that the airline has Sydney on its radar.

This article was first published in TTG Asia, October 10, 2014 issue, on page 12. To read more, please view our digital edition or click here to subscribe.

Ascott launches serviced residences in Hangzhou, Hamburg and Jakarta

By TTG Asia

October 15, 2014

THE Ascott Limited has rolled out its first serviced residences in Hangzhou and Hamburg, while opening its second Ascott-branded serviced residence in Jakarta and securing a management contract for its second Ascott-branded serviced residence in Dubai.

The 104-unit Citadines Intime City Hangzhou is Ascott’s 35^th property in China while the 185-unit Ascott Kuningan Jakarta is the company’s eighth in Indonesia, reinforcing Ascott’s position as the largest international serviced residence owner-operator in China and Indonesia respectively.

The 127-unit Citadines Michel Hamburg is Ascott’s fourth serviced residence in Germany, following Berlin, Munich and Frankfurt. The 117-unit Ascott Culture Village Dubai, slated to open in 2017, will bolster Ascott’s portfolio in the Gulf Cooperation Council (GCC) to 12 properties in Bahrain, Qatar, Oman, Saudi Arabia and the UAE.

Lee Chee Koon, Ascott’s CEO, said: “There are significant growth opportunities for serviced residences globally. We have opened two new properties in China and Germany, which are key growth markets for Ascott. Indonesia and the GCC also offer immense potential for serviced residences.

“Having our first property in (Hangzhou) will enable us to capture the demand as we also prepare to open Ascott Raffles City Hangzhou in 2017.”

Lee also added that Ascott has about 60 properties in its global pipeline over the next few years.

Airlines pursue different hybrid strategies to stay lean

By Hannah Koh

October 15, 2014

WHILE hybridisation has been touted as the way forward for full-service carriers saddled with traditional cost structures amid growing competition from LCCs, panellists at the CAPA Asia Aviation Summit & LCC Congress presented a mixed bag of responses.

Peter Harbison, executive director of CAPA – Centre for Aviation, said in his opening keynote address on Monday that in the near future, longhaul LCCs will hybridise – offer both low-cost and premium services – and begin to occupy much of intra-regional capacity.

Azran Osman-Rani, CEO of AirAsia X, on the other hand, baulked at the use of the term “hybridisation” when speaking on yesterday’s panel on how full-service carriers under stress should adapt in an LCC world. “This is my bugbear – labelling airlines purely by the services and frills they offer.”

He pointed out that airlines could offer the same features but remain distinct in their costs, and how the product is marketed and sold. “It’s not necessarily hybridisation just for the sake of ticking off boxes (in what the airline offers) but these products are fundamentally different. As long as there are LCC models with cost structures that are more than 50 per cent lower than full-service models, that difference is key.

“It becomes an issue when you start losing that advantage.”

Garuda Indonesia president and CEO, Emirsyah Satar, added that the market is segmented between those who fly full-service and budget, and the industry needs to face the fact that budget traveller growth is higher than premium customers.

“Garuda created Citilink to compete with him,” he quipped, indicating fellow panellist, AirAsia X’s Osman-Rani. “We want to tap both markets, and the key thing is for full-service and LCC to have totally separate managements. People who manage the LCC should not come from Garuda, because (it’s a different culture). They’re strict and disciplined about cost.”

To maintain airlines’ value proposition in an age of LCCs, airlines therefore need to decide which target market to pursue while also keeping an eye on costs.

Asked if he sees full-service carriers narrowing the cost gap by learning from LCCs, Osman-Rani replied: “It depends where you sit on the spectrum of the mass market, the lowest price point on one end and the highest quality premium product on the other. Once you go international, you are competing with many players in the industry, and the problem is when you are stuck in the middle of the spectrum.

“Then neither can you command that product or service premium nor do you have the cost advantage to compete with the mass market.

Citing American legacy carriers as an unfortunate example of airlines with higher cost structures than competitors that provide better-quality products, he elaborated: “Your business model is not going to be sustainable until you’re on one of either end of the spectrum, you’ve got to make a choice.”

Emirsyah agreed: “You’re either low-cost or premium, and it’s hard to survive in between because your branding is important.”