New strategies target Asia-Pacific as traditional markets falter, writes Raini Hamdi

The mighty Pilatus and Lake Lucerne, Switzerland (photo by Michael Faes)

Switzerland Tourism, which opened a South-east Asia office in Singapore in June, is sealing partnerships with tour operators in the region to develop new itineraries targeting specific market segments.

In Singapore, for instance, it is working with STA to attract youth travel. Special itineraries for 18- to 25-year-olds are being sewn up, aimed at debunking the perception that the destination is out of reach for youths due to high costs.

Said Urs Eberhard, Switzerland Tourism’s executive vice president-markets & meetings: “They (youths) don’t know that Switzerland can be modestly-priced. You can travel by train, stay at youth hostels, have an outdoor adventure. They don’t know that there’s incredible nightlife and lots of fun in Zurich, Lausanne, Basel – look at the Zurich Street Parade (on August 11), where nearly a million people turned up to dance, to club, to party.”

Apart from youths, the NTO is targeting Asian MICE groups, multi-generation family travel, seniors, premium travellers, culture lovers, train travellers and romantic/honeymoon clients.

Its tactical strategy of going after specific market segments with new itineraries arises from the need to spread out Asian arrivals beyond the usual hotspots and make them stay longer, at a time when Switzerland is seeing massive drops from its traditional markets.

The European debt crisis wiped out some CHF470 million (US$482 million) in income from traditional markets in the last five years. New visitors from markets like China, India, South-east Asia, South Korea, Australia, Russia and Eastern Europe brought in over CHF300 million during the period. Alas, tourists only visited must-see icons like Luzern and Interlaken, said Eberhard.

“The issue is, the new markets go to only 10 to 20 per cent of the destinations in the country, so the growth is concentrated on only a few hotspots, while the loss from the traditional markets are spread throughout, since these markets have been coming to Switzerland for the last 100-150 years and visit all places throughout the year.

“Therefore, our strategy, as a national tourist office, is really to diversify and spread the growth. We need to encourage second-time travellers from the new markets, or those who seek a deeper or mono-European tour, to go to new routes. This is why we’re really trying to give new itineraries and ideas to tour operators and ground operators, so they feature both the hotspots and creative themes. By doing this, we hope people will also spend more than two or three nights in Switzerland.

“We are also working with tour operators to create new ideas, like the best of Switzerland, discover Switzerland as a mono-destination, or, instead of eight European countries, why not just three nights in Italy, Switzerland and France, and explore them deeper.”

Switzerland Tourism will jointly market the new itineraries to travel agencies and consumers.

“Our approach is an integrated one, working with tour operators to create new itineraries, working with agencies so that they are educated about these itineraries and are able to sell them well, doing joint marketing activities to educate the consumers that there is more to the country than they think,” said Eberhard.

South-east Asia is Switzerland’s fourth booming market after China, India and Russia. Singapore is its largest South-east Asian market, accounting for some 35 per cent of the South-east Asia total arrivals, followed by Thailand (30 per cent). However, growth is fastest from Indonesia, up 46 per cent last year, Eberhard said.

“For leisure travel, Asia is growing still – and on an extremely successful 2011. In the first six months, China grew 24 per cent, South-east Asia 15 per cent, Australia almost 10 per cent, India, Japan, South Korea 10 per cent each,” said Eberhard.

Aided by growing air access, at least one country is in hot pursuit of Asians, says Gracia Chiang

With Machu Picchu as its star attraction, Peru remains a firm favourite in itineraries

It once appeared inevitable that any airline with a decent network would eventually join one of the three airline coalitions – Star Alliance, SkyTeam and oneworld. Until recently, it seemed certain that none of the major Gulf carriers saw any value in joining alliances and, to be fair, it seemed equally certain that none of the alliances welcomed them.

Qantas blamed the runaway growth of the Gulf carriers for its ailing global operations and the Australian government for granting the latter liberal rights. In September, Qantas terminated its 17-year-old agreement with fellow oneworld member British Airways (BA) and took up a decade-long alliance with Emirates.

Speculation of Qatar Airways joining oneworld soon surfaced even as CEO Akbar Al Baker continued to deny the alliance rumours. Hours before Qatar’s oneworld membership was confirmed on October 8, Abu Dhabi-based Etihad Airways stole the limelight by announcing that airberlin – a new oneworld member in which it has an almost 30 per cent stake – was breaking its oneworld allegiance to ink a commercial partnership with Air France-KLM from the SkyTeam alliance instead.

In the same dignified manner that BA declared its break from Qantas as amicable, oneworld bravely sanctioned its members’ flirtations with airlines outside the coalition. Indeed, this is not without precedence as oneworld member Cathay Pacific holds a stake in Air China, a Star Alliance member, while Chile’s LAN from oneworld has also merged with TAM, a Brazilian carrier aligned with Star Alliance. Emirates is now in talks with American Airlines (AA), a founding oneworld member, to explore a commercial partnership of sorts.

In one fell swoop, three major Gulf carriers are now aligned with oneworld. Qatar is the only one to directly join oneworld, while Emirates and Etihad have the side-door entry through Qantas and airberlin respectively. If alliance memberships are like marriages, oneworld members appear to be particularly polygamous.

Malaysia Airlines (MAS) and SriLankan Airlines, both oneworld members designate, were looking to their pending membership in oneworld to enhance their sustainability, but now face the prospect of having to work with Qatar from within the alliance. If BA – having sponsored Qatar’s entry into oneworld – were to partner the Gulf carrier on the Kangaroo Route, what is the likelihood of it returning to serve the London-Kuala Lumpur route? Similarly, the Qantas-Emirates alliance questions the likelihood of Qantas serving Kuala Lumpur since it has sponsored MAS’ entry into oneworld. And if Air France-KLM partners Etihad on flights to Australia, it could potentially hurt KLM’s existing cooperation with MAS on the Kuala Lumpur-Australia sectors. Could this be the reason for MAS’ sudden decision to divert its Airbus A380s from the Sydney route to Paris?

Amid the flurry of airline partnerships, a oneworld member seems to embrace the sanctity of its marriage to the alliance – Japan Airlines (JAL). Thus far, it has inked significant relationships with MAS, BA and AA, all within the alliance. On the fringe, it has fewer codeshare agreements with a slew of airlines globally.

When asked by TTG Asia if JAL would seek commercial partnerships with a non-oneworld member, president Yoshiharu Ueki gave an emphatic “no”.

Additional reporting from Liang Xinyi

From left: A Qatar Airways cabin; SIA’s in-flight entertainment system; Singapore Airlines’ (SIA) Airbus A380-800; Qatar Airways’ A320

Although the world’s economic centre of gravity has in recent years shifted towards Asia-Pacific, it has not immunised airlines in this region from the fallout of ailing economies in Europe and the US and, for a brief period, the Arab Spring. A falling demand for Chinese goods in the West has dampened China’s efforts to emerge from a economic slowdown and its ability to power the entire region, but this seemed to have bottomed out by October. While economic challenges are not new to the airline industry, their timing and duration coincide with high oil and food prices, natural calamities and rising unemployment in many markets, thereby conspiring to bring about a perfect storm. In spite of this, airlines operating in this region have defied the odds and submitted report cards that bring some cheer as 2012 comes to a close.

Singapore Airlines

Despite being one of the most acclaimed carriers worldwide, Singapore Airlines (SIA) has not been spared the negative impact of the economic woes in Europe and the US, strong competition from the powerful Gulf airlines and low-cost carriers as well as high oil prices. The airline appears to have arrested the decline in quarter earnings, and in September, carried 1.5 million passengers (an increase of 6.1 per cent year-on-year) and raised its passenger load factor by one per cent to 80.6 per cent – powered by strong summer travel originating in the Americas and Europe. This rebound comes amid positive news that the Chinese economy appears to have bottomed out too.

CURRENT DESTINATIONS SIA and Virgin Australia have expanded their codeshare arrangement in August to cover Vietnam, Thailand, Malaysia and Sri Lanka, as well as additional cities in Australia and China. Both airlines can expect to benefit from Qantas’ decision to operate its Kangaroo Route services to London through Dubai instead of Singapore.

After Lufthansa ceased its Munich-Singapore-Jakarta route in October, SIA restored its Singapore-Munich-Manchester route to a daily service.

Growing demand for business travel to Myanmar has also led to SIA’s decision to launch daily services to Yangon, replacing seven of 16 SilkAir services on Airbus 320s with its own 323-seater Boeing 777-200.

PLANNED DESTINATIONS For the summer 2013 season, SIA has already announced additional services from Singapore to Fukuoka (from five-times weekly to daily service), to Moscow and Houston (from five-times weekly to daily service) and to Osaka-Kansai (from 11 to 14 weekly services).

According to a reliable industry source, SIA has been granted permission by the Italian authorities to operate between Milan and New York, which if proven true, could be a high-yield ‘Bankers’ Route’.

From 4Q2013, SIA will cease its nonstop Singapore-Los Angeles and Singapore-Newark routes, ending two of the world’s longest commercial flights.

FLEET Since August, SIA has announced a slew of planned improvements to its products, in-flight connectivity and in-flight entertainment systems, which will be rolled out on its new fleet of eight B777-300ERs, 15 A330-300s (delivery of both will begin in 2013) and 20 A350XWBs (delivery beginning in 2014).

With 19 A380s already in operation, SIA has placed a new US$7.5 billion order for five more A380s and 20 A350s for delivery in 2017, adding to the earlier order for 20 A350s. It now has firm purchase or lease orders in place for 68 widebody aircraft, excluding the 20 B787 Dreamliners that will be transferred to low-cost subsidiary Scoot.

OTHER DEVELOPMENTS The SIA group has also grown its overall footprint with expansion by SilkAir, Tiger Airways and Scoot – the latter pair have agreed to introduce passenger and baggage interlining to tap the growing travel demand between South-east Asia, India and Australia via the Singapore hub.

SIA is also spending S$20 million (US$16.4 million) to upgrade its SilverKris lounges in various cities, starting with the Sydney Airport in mid-2013.

Japan Airlines

Japan Airlines (JAL) declared bankruptcy in January 2010 and underwent restructuring as it sought protection from the all-too-familiar Chapter 11 of the US. Once safe from creditors, the airline shed tens of thousands of employees, terminated loss-making routes, grounded and sold many non-fuel efficient airplanes, closed down its dedicated freight operations and went through an attitude reform beginning with admitting that its dire situation resulted from internal mistakes and not external forces. The entire company embraced the multi-pronged JAL philosophy of simplifying the business, striving for perfection and working earnestly.

The Enterprise Turnaround Industry Corporation injected ¥350 billion (US$4.4 billion) into JAL, and as its current president Yoshiharu Ueki continues to steer the company into stability and profitability, the airline was able to repay this investment together with a dividend of ¥300 billion. In the process, JAL restored the tsuru (crane) logo ditched in 2003 and listed its shares on the Tokyo Stock Exchange in September. When JAL received the first two of 45 Boeing 787 Dreamliner orders in March, Ueki said: “We will concentrate on improving our service, product and network, and the Dreamliner allowed us to achieve this.”

CURRENT DESTINATIONS In addition to adding a third daily service between Tokyo and Singapore in late-October, it will also launch services to San Diego and Helsinki in December 2012 and February 2013 respectively, with both routes being operated on B787s.

PLANNED DESTINATIONS On a visit to India, Ueki disclosed that JAL is seeking to increase services to New Delhi, and is also exploring establishing services to Myanmar, Cambodia, Bangladesh and Sri Lanka.

Ueki disclosed that JAL is targeting to increase capacity – measured in available seat kilometre – by 25 per cent in the next five years.

FLEET Deployed on flights to Moscow, Boston, Beijing, New Delhi and Singapore and on longhaul trans-Pacific flights, the B787 is up to 18 per cent more fuel-efficient than the B777.

The B787 also enjoys tremendous popularity with passengers as a result of its revolutionary features such as dimmable windows – which are already the largest on an airline – higher cabin humidity and pressure (both factors mitigate the effects of long-distance flights and jet lag), stability in flight and quieter cabin.

JAL has customised the mood lighting in the B787 cabin with pastel green and pink hues to match the green shoots and the cherry blossoms of spring respectively, with corresponding colours to match other seasons.

The Japanese carrier expects to have 10 B787s by the end of the current fiscal year and 33 B787s by the end of its 2016 fiscal year.

OTHER DEVELOPMENTS Going forward, JAL, which already has a joint business agreement with American Airlines, has inked a similar agreement with British Airways, thereby allowing it to share revenue, coordinate flight timings to maximise connection possibilities and coordinate fares.

Customers can also choose a combination of one-way segments on the airlines in a single round-trip itinerary, which are offered at unprecedented fares available for such flexibility.

In transitioning from a bankrupt airline to becoming one of the most profitable at the time of its relisting on the Tokyo Stock Exchange – a period spanning about 973 days – JAL has proven that the phoenix, or in this case, the crane, can rise from the ashes and fly proudly again.

Qatar Airways

The Gulf carriers continue to make headlines throughout the aviation industry, most recently for their earth-shaking moves made in the airline alliance arena. While Emirates inked a 10-year alliance with Qantas that caused the latter to realign its Kangaroo Route, Qatar Airways was courted by oneworld member British Airways and in early October, confirmed its entry into oneworld. Pending all necessary due diligence, Qatar is expected to join oneworld within 18 months.

In an interview with Bloomberg, Qatar Airways’ CEO Akbar Al Baker said: “Several years ago, I have said that the future of the airline industry will somehow or the other belong to an alliance. I was never against an alliance.” He described the International Aviation Group’s CEO Willie Walsh as “very forward-looking”.

With a touch of irony, Al Baker noted that Qatar Airways’ first codeshare flights with an European carrier were with Lufthansa. “Unfortunately, their strategy was to kill competition,” he said.

CURRENT DESTINATIONS This year, the airline added 12 new destinations including Baku, Tbilisi, Baku, Zagreb, Erbil, Baghdad, Perth, Kilimanjaro, Yangon, Maputo, Belgrade and Warsaw. Significantly, Qatar Airways grew its footprint Down Under with Perth added to Melbourne – its first Australian destination launched in 2009.

PLANNED DESTINATIONS The airline intends to launch 15 or 16 new destinations in 2013. The Doha-Ho Chi Minh City service will be extended to Phnom Penh starting February 20, 2013. Three more destinations – Gissim, Najaf and Chicago – have also been announced for the first four months of next year. Al Baker has let on that Qatar Airways has plans for another three destinations in the US: Detroit, Atlanta and Boston.

FLEET As the Gulf carriers stamp their mark on the airline industry, Qatar Airways continues with its stellar growth in both fleet and network.

The airline has a current fleet of 111 aircraft – 67 of which are widebody aircraft, including seven freighters – with an impressive tally of more than 250 aircraft on order and option. This includes a firm order for 10 Airbus A380s, the first of which will be delivered in January 2014 for deployment to airports that face severe slot restrictions. It also has an order/option for up to 80 A350s and is currently considering a further order for 20 Bombardier CSeries aircraft (with a further option for another 20).

The airline has begun to reduce the size of its fleet of Airbus A330, with Air Seychelles receiving one that will eventually be deployed to China.

Qatar Airways’ first B787 Dreamliner has already been handed over by Boeing, but will only enter service after being fitted with in-flight connectivity at Charleston in the US. Its B787s will be the first in the world to have this facility, and these will initially be deployed to London. Further deployments will be decided depending on the aircraft’s performance on the Doha-London route.

OTHER DEVELOPMENTS The New Doha International Airport is nearing completion and, pending successful trials, should open in 2013. Besides offering Qatar Airways a sparkling new home base, the airport will also provide it with ample room for growth.

Myanmar Airways International

For the longest time, inbound travel into Myanmar existed under the shadow of the country’s political struggles and international trade sanctions. As Myanmar continues to introduce political reforms resulting in the easing of sanctions in many countries, travel to the country has kicked into high gear. Airline seats and hotel rooms are now in short supply, and international airlines are lining up to restore services or launch new services to Yangon.

CURRENT DESTINATIONS Myanmar Airways International (MAI) commenced a Yangon-Bangkok-Singapore service on October 28. The Yangon-Kuala Lumpur service has also been increased from five-times weekly to daily, while the nonstop Yangon-Singapore service has been increased from 10 weekly to 12 weekly, although it will revert to the former frequency from January 1, 2013.
In China, MAI currently only operates to Guangzhou, and will continue to feed traffic through this gateway.
The airline also has a thrice-weekly service from Mandalay to Bodhgaya in India, but the aircraft is deployed out of Yangon.

Although MAI has no traffic rights to launch domestic services, it recently gained permission to operate once- or twice-weekly services between Yangon and Mandalay starting November. Seats on this route can only be sold outside of Myanmar, but this is a timely infusion of capacity into Upper Myanmar during the upcoming peak winter season.

PLANNED DESTINATIONS In the longer term, MAI hopes to gain permission to base aircraft in Mandalay to operate direct services to Bangkok and elsewhere, such as Singapore. It is awaiting the allocation of slots before launching thrice-weekly flights from Yangon to Hong Kong. Further expansion to South Korea in 2013 and to Japan from 2014 is being considered. Other routes in the making are Yangon-Mandalay-Gaya (thrice weekly) and Yangon-Mandalay-Bangkok (four-times weekly).

Said Ye Jhan, MAI’s country manager Thailand and Cambodia: “There are many Myanmar workers in Dubai, but the airline is actively considering operating to Abu Dhabi because we do not have the strength to compete head-on with the likes of Emirates and Qatar Airways.” Qatar Airways has just re-launched thrice-weekly flights between Doha and Yangon.

FLEET Faced with the possibility of a reduced market share as airlines clamoured to launch flights to Myanmar, MAI quickly supplemented its fleet of four owned Airbus A320 with a further two on lease from Bulgaria’s BH Airlines. Unlike seasonal leases of an A321 in the summer of 2010 and 2011, the latest leases are for a longer term and will be used to operate the year-round Yangon-Bangkok-Singapore service.

Ye Jhan revealed that MAI is considering A330 or similar-sized aircraft, with ongoing discussions with both Airbus and Boeing as it looks to operating in the Middle East.

OTHER DEVELOPMENTS To support MAI’s expansion, managing director Si Thu spoke of the critical need to implement efficient IT systems. It is relying on its decade-long relationship with SITA to introduce new systems for passenger management (multi-channel distribution including an online booking engine, and working with codeshare and interline partner airlines), passenger processing at the airport (check-in at the counter, kiosks and via mobile devices, baggage handling and security), as well as airport and flight operations over the next three years.

Lao Airlines

Although recent political changes in Myanmar has made it the star of the Mekong region, Laos – and in particular Lao Airlines – is not keen to bask in the shadow of its larger neighbour.

CURRENT DESTINATIONS A year after introducing two Airbus A320s and thrice-weekly services between Vientiane and Singapore, Lao Airlines is embarking on further expansion in the last quarter of 2012. This includes ramping up the flight frequency on the Vientiane-Singapore route from thrice- to four-times weekly.

PLANNED DESTINATIONS A thrice-weekly Vientiane-Guangzhou service will be kicked off on November 29 using A320, while a thrice-weekly Vientiane-Danang service using ATR72-500 will begin on December 4.

Scheduled charter flights from Seoul-Incheon (A320) and Busan (A320) will also start on December 21 and December 31 respectively.

FLEET In late-2012 and 2013, Lao Airlines will take delivery of two new 70-seater ATR72-600 turboprop aircraft, adding to the four ATR72-500s already in operation. The airline is progressively retiring its fleet of Chinese-made MA60 aircraft and reconfiguring them to pure freighters.

OTHER DEVELOPMENTS Despite not having the capacity and capability to operate to longhaul markets, Lao Airlines has not been deterred from targeting longhaul visitors. Departing in the evening, its Vientiane-bound flights from Singapore are timed to maximise longhaul feed from Europe and Australia arriving via Changi.

Jet Airways

Jet Airways was in the red for five quarters in a row, but in 3Q2012 posted a net profit of US$5 million against a net loss of US$24 million a year ago.

CURRENT DESTINATIONS In March, Jet Airways boosted its connection from tier-two Indian cities, such as Raipur, Bhopal and Nagpur, as well as southern cities, including Hyderabad, Bengaluru, Chennai and Kochi.

Since September 10, Jet Airways suspended its Brussels-New York JFK service, but continues to serve the Chennai-Brussels route on a daily basis, with Brussels remaining a ‘scissor hub’ for its Mumbai-Brussels-Newark and New Delhi-Brussels-Toronto routes. The airline also suspended its Mumbai-Johannesburg, Chennai-Kuala Lumpur and Chennai-Dubai services.

PLANNED DESTINATIONS  Having been granted capacity increases, Jet Airways will add 14 weekly flights to Singapore, and seven each to Dhaka, Chittagong, Male and Dar es Salaam, the last three being new routes. The airline has also received the thumbs up for 56 new flights to the Middle East, of which 14 will be used for Kuwait.

FLEET The airline has 11 Airbus A330-200s, five Boeing 777-300ERs, 47 B737-800s, seven B737-700s, two B737-900s and 18 ATR72-500s. On order are 10 B787 Dreamliners, five  A330-200s, four A330-300s, 46 B737-800s and five ATR72-600s.

OTHER DEVELOPMENTS There are rumours that Jet Airways is being courted by Star Alliance over its rival Air India. 

Additional reporting from Shekhar Niyogi