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'No Frills' Takes Flight.(AirAsia)
When AirAsia started flying out of Kuala Lumpur two years ago, it quickly became the cheapest of the cheap, the lowest-cost airline in the world. AirAsia says it spends only 2.5 cents to fly one passenger one kilometer, compared to 4.5 cents for Ryanair and 7.5 cents for Southwest--the discount leaders of Europe and America. AirAsia achieves these savings by asking pilots to train staff in everything from first aid to baggage handling (on the premise that pilots are smart and versatile). Cabin attendants do double duty, cleaning planes and selling drinks on commission. It's a "big fallacy" to think no-frills means just cutting out free drinks, says CEO Tony Fernandes, who has been known to work the check-in counter. You've got to "change the airline culture."
Even that may not be enough for no-frills entrepreneurs. The discount revolution has been slow to arrive in Asia, where governments still control most major airlines and have offered a grudging welcome to new competitors. Last year discount carriers accounted for less than 1 percent of passenger traffic in Asia (excluding Australia and Japan), compared with about 25 percent in the United States and 10 percent in Europe. While Southwest recently became the largest airline in the United States, AirAsia is a small success, with 7 planes and profits of $5.3 million last year. Now, in a frontal assault on AirAsia and other private upstarts like Cebu Pacific in the Philippines and Bangkok Airways, state-owned carriers like Singapore Airlines, Thai Airways and Qantas are considering their own no-frills spinoffs. "Most of the airlines in Asia are big monopolies; they have always had it their way and they don't like any whiff of competition," says Fernandes. "The unknown is causing this mass hysteria."
It may seem that major airlines can't lose this war, with the state on their side. Asian governments have yet to embrace the wave of deregulation that made it possible for entrepreneurs like Tony Ryan to become major players in the West. There is no Asian equivalent of Ryanair, which flies all over Europe, because Asian states have been much slower to open their airports to all comers. Asian discounters are for the ...
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Source: HighBeam Research, 'No Frills' Takes Flight.(AirAsia)