Three success stories of carriers that have carved their own niche

Snugly wedged between the highly acclaimed longhaul full-service carriers and the very aggressive low-cost carriers are three successful regional airlines – Dragonair, SilkAir and Bangkok Airways – who are by no means miniscule. Each of these three is bigger than some of the flag carriers in the region and are equally at home competing against or cooperating with much larger airlines. At a time when full-service longhaul carriers struggle to maintain market share and yield, these airlines ride on the vibrant regional economies and are performing robustly with better yields.

Although the circumstances leading to the birth of these three regional airlines are vastly different, their success is founded on a very similar formula – being based in a key aviation hub, being affiliated to a highly successful parent airline (with the exception of Bangkok Airways) and having a whole menu of interesting destinations to operate to within five hours’ flying time.

Over time, each airline’s network of destinations began to gain strength in specific markets – China for Dragonair, Indonesia for SilkAir and the Indochina region for Bangkok Airways.

The presence of small capacity aircraft in their fleets has allowed these carriers to be more adventurous and nimble in opening up services to destinations that larger carriers cannot profitably serve. And it is here that well-run regional airlines are desirable partners for hub-to-hub full-service carriers.

Dragonair
Dragonair in its current form is a wholly owned subsidiary of Cathay Pacific Airways and provides onward carriage for many of its passengers arriving in Hong Kong. Back in 1985, the gulf between the two could not have been greater as Dragonair was privately owned and aimed to challenge Cathay Pacific’s monster grip on Hong Kong. At a time when the Chinese market was a mere flicker of a very distant candle, Dragonair saw the potential of a market that Cathay Pacific missed. Fast forward to 2006, the incumbent and the challenger became one as Dragonair was fully acquired by Cathay Pacific in a strategic move that has proven to be valuable to both carriers and to Hong Kong.

Today, Dragonair operates its own aircraft to 22 Chinese cities, operating alongside Cathay Pacific on two Chinese routes – Beijing and Shanghai. Both airlines collectively operate about 400 weekly services to 22 cities in China.

Dragonair’s CEO, Patrick Yeung, said: “With the hub synergy, Dragonair is able to provide extensive connections for regional and international passengers via the extensive international network of sister airline Cathay Pacific.”

Recognising the value of Hong Kong as a gateway from and into the Pearl River Delta region, Dragonair provides a cross-border upstream check-in facility from six ports in five cities, namely Shenzhen Shekou, Shenzhen Fuyong, Dongguan Human, Zhongshan, Zhuhai Jiuzhou and Guangzhou Nansha. It also offers the same convenience at three locations in Shenzhen for those travelling overland to Hong Kong and travelling with Dragonair and Cathay Pacific.

Dragonair is no stranger to competition and faces 17 low-cost carriers at its home base, mostly from South-east Asia, China, Japan and South Korea. Together with Cathay Pacific, it is vehemently opposing the establishment of Jetstar Hong Kong, which only has a 33.3 per cent local shareholding and is seen by both as a franchise operation controlled from Australia. Indeed with slots at Hong Kong International Airport (HKIA) becoming increasingly scarce, the slots that are needed for organic growth will quickly fizzle out.

Cautioned Yeung: “HKIA is already very close to maximum capacity. Given that the lead time to construct the third runway is about 10 years, this means our home airport – so crucial to Hong Kong’s economic success – will reach saturation point even before the third runway is completed.”

Meanwhile, Dragonair continues to improve its value proposition, and in January 2013 it rolled out a major product enhancement, which includes its New Business Class and New Economy Class cabins together with a new inflight entertainment system named StudioKA.

SilkAir
SilkAir’s birth was unconventional and it took the form of Tradewinds, a tours and travel arm for Singapore Airlines (SIA). In February 1989, it finally emerged as an airline – unsurprisingly named Tradewinds the Airline. At the time, there was another British airline by the same name and in April 1992, the SilkAir branding was born and the travel and tour operating arm became a wholly owned subsidiary.

SilkAir’s CEO, Leslie Thng, said: “We play a role to extend the Singapore Airlines Group network by seeding and developing new and exciting destinations in the Asia-Pacific region.”

The strength of regional markets has allowed SilkAir to outperform even SIA in terms of yield. Today, China, Indonesia and India are the key markets that SilkAir continues to bet on. It currently operates to 11 cities in Indonesia, and by November 2013 it will reach a dozen with the addition of Jogjakarta to its network. It also serves eight cities in India and another seven in China.

In recent months, the load factor on SilkAir may have dropped but this is the result of a strategic move by the airline to grow its frequencies and capacities in these key markets at a pace that is slightly ahead of demand. It considers this to be medium- and long-term growth with the prospect of short-term bumps.

And often, the seeding function leads to both SilkAir and SIA operating parallel to one another to the same destinations – such as Surabaya and Yangon – to cater to different segments but more importantly, to hand over the already-developed higher-yield corporate market to SIA.

SIA and SilkAir provide strong cross-feeding into each other’s network and according to Thng, “the proportion of passengers from Singapore Airlines connecting on to SilkAir has been seeing a healthy year-on-year increase”. Currently, about half of its passengers are connecting from SIA flights. This allows SIA’s longhaul passengers to travel from London to Lombok on one fare and ticket with a single stop in Singapore.

SilkAir has also been extremely adapt at sniffing out city pairs where it does not face any competitor, and it currently enjoys this exclusivity on services to Changsha, Chiang Mai, Chongqing, Coimbatore, Danang, Davao, Kathmandu, Lombok, Manado, Palembang, Solo and Visakhapatnam.

In an order that underscores SilkAir’s confidence in the future, it ordered 23 Boeing 737-800s and the first of these will be delivered in February 2014. A parallel order for 31 Boeing 737-8Max will be delivered starting end-2017 or 2018.

Thng remarked: “Our new Boeing aircraft presents us with many exciting opportunities, one of which is the longer range on the B737Max compared to our existing aircraft. The new planes will allow us to fly farther, giving us the opportunity to look at expanding to destinations within a six-hour radius, compared to  five hours now.”

Bangkok Airways
Bangkok Airways’ existence dates back to 1968 when it was established under the Sahakol Air branding. At that time, it was purely aimed at supporting the booming oil exploration and mining industries in the region. In 1986, it was designated as Thailand’s first privately owned airline and in 1989, it took on its current name, Bangkok Airways.

To overcome its disadvantage of not having a parent airline with an extensive international network, Bangkok Airways has inked codeshares (with Etihad Airways, Malaysia Airlines, SilkAir and Japan Airlines) and prorate interlining agreements with many international airlines serving Thailand.

Bangkok Airways has yet another trump card – it built, owns and operates three airports at Koh Samui, Sukhothai and Trat. This offers comprehensive long-term spin-offs in the form of reduced user charges, aeronautical revenue (gained from other airlines wishing to serve Koh Samui) and non-aeronautical revenue from commercial space rentals at these airports. For some time, it successfully kept other airlines from serving Koh Samui but eventually relented.

The airline markets itself as Asia’s Boutique Airline, a branding that allows it to maintain healthy yields. The opening up of Myanmar has also brought a windfall. The carrier has been quick to ramp up capacity and frequencies to Yangon, and in September 2013 it added services to Mandalay and Nay Pyi Taw. It consequently holds the distinction of being the only international airline to serve Nay Pyi Taw.

Today, Bangkok Airways’ network comprises eight domestic cities (including its home base Bangkok) and 12 international destinations. Its coverage of China and India – markets that are of great importance to Dragonair and SilkAir – is extremely thin with only one destination in India (Mumbai) and none in China.

Although Bangkok Airways does not hold any orders for aircraft, it has in the last year acquired several previously owned Airbus A320s and A319s.

Back at its home base Suvarnabhumi Airport, congestion has resulted in the relocation of most domestic services by low-cost carriers to the re-opened Don Mueang Airport. This is a move that Bangkok Airways cannot consider in view of its valuable codeshare and interline arrangements with various airlines. In addition, the relief from moving LCCs away from Suvarnabhumi Airport was temporary and congestion is once again beginning to set in.

The future
The three regional carriers have very successfully maintained and stamped their position on the greater aviation landscape, embracing the nimbleness and ability to quickly pounce on potential new destinations yet consistently deliver a brand of service that more closely matches those expected of large full-service carriers – perhaps even with a dash of informality and casualness.

In the first of a two-part series, Laurenz Koehler, managing partner,  Duxton Consulting, offers insights into the minds of Millennials

Here’s what Millennials think of the travel industry, according to a Duxton Consulting Singapore study:

• does not pay well

• requires no brains, smarts

• does not value education and skills

• low-status jobs

• does not project a professional image   

Perception versus reality

The perception that Millennials have of the industry doesn’t reflect its reality. The travel industry requires brains and talent, and hence offers well-paid and high-status jobs as most other service industries do.

To my understanding, the travel industry is today more sophisticated and, marketing-wise, much better thought out than before. Given the amount of money spent on travel, expected growth of new and emerging markets as well as new budget airlines and much cheaper access to travel, the travel industry should hold better and wider opportunities for Millennials.

Plus travel is still very aspirational for most Asians since working in the travel industry is perceived to offer easier access to more and better travel options. In the eyes of Millennials, the travel industry is still attractive for the sheer fact that they are able to meet their aspiration to travel and see the world as well as meet and deal with diverse people from different international backgrounds.

However, the issue is that their perception is stuck at the low-end of the market: Millennials don’t see a clear path to progress or how they can move up the ladder. Even if entry-level jobs are indeed very hard and low-paying, Millennials would put up with this if they see the proverbial light at the end of the tunnel. But they don’t – they perceive the entire industry as low paying and are not interested in it.

Limitations of our study

Our fieldwork was done in Singapore only, so we cannot claim the findings to be true for regional or global Millennials. However, based on similar projects we have undertaken in Malaysia and other countries, we believe this mindset would be found across the region and maybe even globally.

Why they think that way

First of all, Millennials’ perception of the industry requiring low educational skills is formed by interacting mainly with lower-end personnel of the travel and tourism market.

Secondly, Millennials are very self-confident and believe they can tackle almost any challenge and opportunity due to their upbringing in the Internet age. They believe they are able to develop solutions for almost any problem when they graduate from college or university. However, they face problems adjusting to the reality of entry-level jobs where they tackle very simple challenges and adapt to a job scope they feel is undervaluing their skills. Unless they have a very good manager and/or a clear path of career progression that allows them to advance within the company or industry, they get fed up very easily. Millennials quit much faster once they feel stuck in a role with no immediate perspective to gain momentum for their career again.

What’s being done wrong 

Employer brand/image: most travel-related companies don’t have a very friendly and interesting employer brand or image. Many companies are seen to exploit talent and to be interested in the cheapest labour possible. Compared with the PR-driven employer brands the likes of Google and eBay, travel-related companies are perceived to have nothing to offer because just offering a job or a salary is simply not enough.

Career path: there is no clear outlook on how Millennials can develop, gain new knowledge and advance in their career. Also, there are minimal feedback mechanisms from their superiors and no real interest to invest in Millennials via training that goes beyond the basics.

Rigid job scope: there are very strict and boxed-up job descriptions in the industry, and not much leeway for an individual to make his/her own decisions and contribute beyond just fulfilling a simple task.

Look out for the second part of this series, where Koehler offers tips on how the industry can overcome these challenges and rebrand itself as an employer of choice.

By Laurenz Koehler, managing partner,  Duxton Consulting

As theme parks flourish in Asia, expert producers urge differentiation through storyline

Chimelong Ocean Kingdom

The year 2012 was a bountiful year for most of Asia-Pacific’s top 20 theme parks, with total attendance rising 5.8 per cent to 108.7 million visitors, according to the 2012 Theme Index Global Attractions Attendance Report by the Themed Entertainment Association and the Economics Practice at AECOM.

The year before that was rosy too, with the region’s top 20 players registering a total of 103.2 million visitors, up from 2010’s 96.1 million. That was despite the dip in attendance at Tokyo Disneyland and Tokyo Disney Sea (-3.2 per cent and -5.8 per cent respectively) in the aftermath of the 2011 Tohoku Earthquake. In fact, according to the 2011 Theme Index, the year was described as a bumper year for the region’s industry.

Industry players agree that the robust performance of Asia’s theme parks is due largely to the growing affluence of Asian consumers.

Mario O Mamon, vice chairman of the International Association of Amusement Parks and Attractions (IAAPA), noted that the region itself, with a population of 4.1 billion, provided a strong feeder market for Asian playgrounds.

Mamon, who is also chairman and president of Enchanted Kingdom theme park in the Philippines, added: “Furthermore, the exponential growth of low-cost carriers in this region has enabled more people to travel and make frequent trips. They want new attractions and experiences, thus creating a great need for theme parks to innovate.”

The crucial need to retain novelty is further compounded by the emergence of new attractions in the region and beyond.

Will Morey, chairman of IAAPA, and president/CEO of Morey’s Piers in Wildwood, New Jersey, US, described the growth of Asia’s attractions industry as amazing, pointing to the number of major projects on the horizon such as Shanghai Disney Resort and Chimelong Ocean Kingdom in Zhuhai, China.

The race to outdo existing and upcoming attractions has created  a “category of clients who want everything yesterday”, said Edward S Marks, executive and co-CEO of The Producers Group, a global attraction development and production specialist.

“These clients are willing to lose some originality (in order to open quick). They tend to point at existing attractions and say ‘we want one of those’. They are not a good fit for my company, as we design ideas,” said Marks. “We are also seeing a big trend worldwide towards media-driven attractions – rides that utilise 3D, 4D technology, for instance – and some attractions in China are completely media-driven.”

Theme park producers have, however, warned against relying heavily on high-tech rides to draw visitors. Karlson Yang, international business manager of Playfun Culture & Technology Co Shenzhen, which plans and designs amusement projects in China, explained simply: “Technology is easy to replicate.”

Natasha Varnica, CEO, global business development of US-based IdeAttack, said: “There is too much emphasis on the use of technology in theme parks. Any developer can create a high-tech ride or product that requires visitors to touch a screen and get a reaction, but few can perfect a unique storyline.”

Varnica pointed out that having a unique storyline was all the more important now, as “the young generation today is addicted to video games and game apps on smartphones”.

“One of the biggest challenges facing theme park developers today is to come up with a compelling experience that a video game or game app cannot provide,” she said.

Marks concurs, adding that the storyline is “the most overlooked aspect” of a theme park, a problem prevalent in Asia.

Fortunately, the growing presence of new, world-class theme parks and attractions in Asia is a boon for the industry, as it helps to raise the standards of properties, opined Paul Noland, president and CEO of IAAPA. He said: “The presence of world-class attractions helps to expand the market, as they educate the market on what truly world-class attractions are.”

Varnica said: “The positive effects of competition will be seen in China, when Shanghai Disney Resort opens. Theme park developers will be forced to raise their standards.”

According to Yang, the maturity of Chinese theme park developers and owners is already happening. “Future theme parks in China are already focusing on using the local culture and history to build a unique storyline, instead of just buying the latest high-tech rides.”

Numbers that matter

9 Of the top 20 amusement/theme parks in Asia-Pacific, determined by attendance figures, nine are in China. The strongest performing attraction is OCT East in Shenzhen, which drew 4.2 million visitors in 2012 and ranked ninth on the chart.

16 The number, in million, of people who visited Asia-Pacific’s top 15 water parks in 2012, registering a 7.4 per cent growth. This is the first time Asian water park attendance has surpassed that of North America.

From left: Cartoon Network Amazone; rest and play amid a scenic, natural environment at Villages Nature in Paris; hildren can fulfil various career ambitions at KidZania Singapore

Future wonderlands

Families and thrill-seekers are in for a treat, as new theme parks are emerging in exciting destinations across the world. TTG Asia highlights some of the attractions that will come online in the near future.

Cartoon Network Amazone, Thailand 

Turner Broadcasting System Asia Pacific, which operates multiple TV channels across Asia, is breaking new ground with the opening of the world’s first Cartoon Network-themed waterpark in Thailand.

Cartoon Network Amazone is scheduled to open in 1H2014 – later than the previously planned late-2013 launch – in Bang Saray, 10km south of Pattaya on the east coast of Thailand. The attraction covers about six hectares of coastal plains and is being developed in conjunction with Thailand’s Amazon Falls Co.

The waterpark takes inspiration from the Amazon rainforest and more directly, from characters on the Cartoon Network channel. Its 150 water attractions, some soaring over 20m into the air, are divided into 10 themed zones and include The Omniverse; Adventure Zone; Cartoonival; Riptide Rapids; Mega Wave and Surfarena. The rides introduce popular characters such as Ben 10 and The Powerpuff Girls.

Visitors can also enjoy an international selection of cuisine at Foodville.

CEO of Amazon Falls Co, Liakat Dhanji, said: “We anticipate approximately one million guests in our first year of operation, or an average of nearly 3,000 guests per day. We expect half of them to be Thai residents living within a 120km radius of the waterpark. The rest of our guests are likely to comprise international visitors, primarily from Russia, South-east Asia and China.”

The projected guest numbers will be welcome news for hotels and nearby attractions in the region, as families make multiple day trips to the area. Resorts such as The Tamarind, Palm Grove Resort and Sunset Park Resort & Spa will be well placed to serve large groups and families.– David Andrews

Chimelong Ocean Kingdom, China
Hengqin Island, one of the largest islands of Zhuhai, Guangdong province, will see the completion of phase one of the massive Chimelong Ocean Kingdom theme park later this year.

The attraction will comprise eight themed areas, each boasting unique rides, performances and animal shows. Highlights include what is said to be the world’s largest cetacea and shark aquarium, which will have capacity for 23,000m3 of sea water, as well as a two-kilometre roller coaster that will weave above ground and under, allowing visitors to enjoy sightings of polar bears and sharks.

For the convenience of theme park visitors, the complex will also feature the 1,888-room Chimelong Hengqin Bay Hotel. It will be among the first facilities to be ready, opening this month. Other facilities at the hotel include several dining destinations, a 3,000m2 ballroom, a 1,300m2 ballroom, 26 meeting rooms, an executive club lounge and a spa. These facilities, in addition to the recreational options offered by the theme park, make the complex suitable for incentive and teambuilding programmes.

To drive awareness of the new attraction, Chimelong Group will participate in the 2014 Chinese New Year Parade in Hong Kong, among other marketing initiatives.

Perfect Tours Taiwan’s planning manager, Tiffany Wu, believes that Chimelong Ocean Kingdom will enhance the appeal of Hengqin Island and Zhuhai. “Zhuhai is perceived as a low-class tourist destination among the Taiwanese. With a new product like Chimelong Ocean Kingdom, Taiwanese travellers, who love novel ideas, will be drawn to the area,” said Wu.– Prudence Lui

Enchanted Kingdom, the Philippines
Details are being worked out for a 10-year expansion masterplan that will transform Enchanted Kingdom, said to be the Philippines’ first and only world-class theme park, into an integrated resort with new attractions, commercial space, hotels and a convention centre.

Explaining the purpose of the redevelopment, Mario Mamon, president of the attraction in Santa Rosa City, Laguna, told TTG Asia: “We felt it is now time for us to realise our dream of turning our stand-alone theme park into an integrated resort concept – but without a gaming component. We like to follow the Disney model and have a product that offers wholesome family entertainment.

“We were able to acquire more land around the Enchanted Kingdom. It is now a 10-hectare park, but it will cover 35-40 hectares after expansion. I expect the first new attraction to open by end-2014 and the rest will open progressively.”

The future Enchanted Kingdom will feature a new attraction zone themed around the local culture, which will serve to “showcase (the Philippines) to the growing number of foreign inbound visitors and educate young Filipino children on their own culture”, revealed Mamon.

A new village showcasing Enchanted Kingdom’s mascot, Eldar the Wizard, and focusing on imparting family values is also being planned, along with a water park, retail and F&B space, two or three hotels with a target inventory of 500 to 1,000 rooms, and a convention centre with a main hall of at least 10,000m2.

“This development will…encourage our visitors to stay over the weekend. Our visitors now spend an average of four to six hours here, which is so because we have no hotels to offer them,” said Mamon, adding that the convention centre will allow the company to target business events and corporate groups.

Meanwhile, the Enchanted Kingdom has partnered a local film company to launch a new attraction later this month. It will be themed after Shake, Rattle & Roll 13, a popular local horror suspense film. – Karen Yue

Villages Nature, France
An idea that sparked between Pierre & Vacances Center Parcs and Euro Disney in 2003 led to the joint development of Villages Nature, an eco-friendly resort in Paris that will comprise more than 2,000 cottages and apartments, an iconic 2,500m2 outdoor geothermal lagoon, a waterpark, lush gardens, footpaths, a horse-back riding trail and an organic farm with educational activities for children.

Villages Nature will sit six kilometres south of Disneyland Paris and close to the La Vallée Village outlet shopping destination, making it a “very convenient retreat for travellers who still wish to be among the highlights of Paris”, said Pierre & Vacances CEO, Isabelle Wavrechin.

Phase one of Villages Nature, which will cover 180 hectares and include 1,730 cottages and apartments, a lakefront promenade with shops and themed restaurants as well as most of the recreational facilities, is expected to complete in 2016.

To fulfil Villages Nature’s sustainable commitment, 90 per cent of the resort will be retained as green space, construction will rely on sustainable methods and materials, 75 per cent of organic waste will be made into compost, geothermal energy will be used to supply heat across the resort and motorised vehicles will be prohibited in the compound, among other things.

“We will ask our guests to use the foot paths and the bike and horse-back riding trails instead. With such beautiful landscaping, going around the resort on foot, bicycles or horses will be very enjoyable and relaxing,” said Wavrechin.

“Villages Nature will be a familiy-oriented property,” she added. “It will appeal to Asians who tend to travel as one big family. With families in mind, our cottages and apartments are designed with well-equipped kitchens.” – Karen Yue

The Wizarding World of Harry Potter, Japan
Universal Studios Japan in Osaka is keeping its adventures fresh for theme park fans with the creation of The Wizarding World of Harry Potter. Slated to open late-2014, the new attraction zone will be the first of its kind outside the US. Costing approximately US$482 million to build, The Wizarding World of Harry Potter will house replicas of Hogwarts and Hogsmeade Village, and several rides that have already won the hearts of Harry Potter fans in the Orlando theme park.

KidZania Singapore
Singapore will offer another option for families with the opening of an indoor edutainment theme park for children on Sentosa island in 2015.

KidZania Singapore will be the anchor tenant of the new Family Entertainment Centre at Palawan Beach and will span 7,600m2, with capacity for 1,700 people at any one time. It has an annual target of 500,000 visitors.

The park is a kid-sized city where children aged four to 14 can role-play more than 90 different occupations, earn ‘money’ to pay for goods and services, and manage an ATM card.

Originally a Mexican concept, the S$90 million (US$70.5 million) Singapore franchise is owned by Malaysian company, Themed Attractions and Resorts, which also owns and manages KidZania Kuala Lumpur, and Legoland and Hello Kitty Town in Johor.

To ensure a unique flavour for distinction from other KidZania theme parks, Themed Attractions vice president for branding and group communications, Waikuan Wong, said KidZania Singapore would offer “localised and international role-play activities”.

Six industry partners have so far been secured for KidZania Singapore, namely Maybank, Discovery Networks Asia-Pacific, Yakult, Canon, The Soup Spoon and Killiney Kopitiam – the latter two being local F&B companies.

Through a pretend environment, Maybank will teach children financial literacy; Discovery Networks Asia-Pacific, behind-the-scene filmmaking; Yakult, lab research work; Canon, photographic know-how; and The Soup Spoon, healthy eating and cooking.

Killiney Kopitiam comes in as F&B retailer for the park.

Themed Attractions will continue to forge partnerships with more industry brands during the period leading up to the park’s opening. It is targeting 30-plus partners.

Themed Attractions’ plan is “not to compete with the other more established attractions in Singapore but rather, complement them”, according to Wong.

He added: “Unlike other theme parks, Kidzania will not offer any rides or arcade games.”

Wong said Themed Attractions would be working with industry partners, Singapore Tourism Board and Sentosa Development Corporation, on a series of pre-opening marketing campaigns. – Kathy Neo