Budget Airlines in Asia Join Forces to Reap Benefits.

Saturday, 8th February 2014 at 10:30am

With intense competition for passengers in India, budget airlines are looking to form alliances and cooperation agreements to share profits. Since there is so much overcapacity between the 47 carriers operating in the region, the carriers have no choice but to form agreements to share flights and passengers.

A 2014 report released by CAPA, an aviation industry consultant said that "there will be no turning back as the momentum that low-cost carriers have steadily built up in Asia over the last decade continues to gain steam." With budget carriers increasing their market share from 2 percent 10 years ago to 15 percent now, they are becoming a real threat to the more established airlines in the country.

And they can do even better by collaborating, they have realized with Scoot, Jetstar and Tiger Airways, AirAsia, IndiGo and Spring Airlines doing just that.

"We will see more alliances between budget airlines in Asia. It is partly being driven by a need for the medium-size and smaller players to create scale so that they can compete more effectively withAirAsia and Lion Air, which now account for over 35 percent of budget capacity in Asia," said CAPA chief analyst Brendan Sobie.

These alliances have already been taking over the European market with the Indian budget carriers looking to follow a similar model and reap similar benefits. Budget airlines are also joining international organizations such as the IATA which would help coordinate the marketing and ticketing arms of the carriers even better.

Only AirAsia is not a member with their CEO Osman-Rani saying "If there is a meaningful, tangible benefit that we can gain from an IATA membership, then we will consider [it]. It has not been an immediate focus for us."

Even major carrier alliances are looking to add budget airlines to their ranks with Markus Ruediger, spokesman for Star Alliance saying " There are certain geographic regions where some cooperation could well be feasible. Our aim is to promote a worldwide network as there are some markets where there is little or limited coverage by legacy carriers."

IndiGo is in talks with Qatar Airways to form a codesharing agreement while SpiceJEt has an agreement with Singapore based Tiger Airways. Tiger Airways will also work with Cebu Pacific.

Tigerair and Cebu Pacific…[will] join forces and create the largest budget airline network between Asia and the Philippines… [We] look forward to achieving greater cost savings from the coordinated operations…," said Tigerair Group CEO Koay Peng Yen. "The partnership is not that deep�"at least not initially. But it has broader potential ramifications for Asia's dynamic and fast-growing LCC sector…More partners will follow, including, potentially, Thai Airways' LCC affiliate Nok, which has a new partnership with Scoot," said CAPA.

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