Last week, we saw how the Low Cost Carriers started at different times and in different places of the world. World Airport Report by Arthur D. Little, published in Air Transport World this September 2007, reported that the Low Cost Carriers have had 25.7 percent, 23.8 percent and 7.8 percent market share of seats covered in air traffic, respectively, in domestic US, within Europe and within Asia Pacific from 2001 to 2006. If the trend continues, with the Asia Pacific as the consistent leader in traffic growth, Asian LCCs will increase and will induce the greatest number of new air travelers in the world.
Because of the distinct geographical situation of the three basic continents, LCCs experienced different growth patterns in their birth and operation. Because of low fares, those who usually traveled by car in the US, shifted to flying by air. And travel was domestic and within the confines of the country. In Europe, new air travelers included also those that used the trains; and LCCs operated between and among countries in a European “Open Skies” environment.
LCCs in Asia started flying as domestic carriers. In India, Air Deccan started in 2003, using the LCC model, attracting a small percentage of the several million “middle class” train travelers across its vast landscape. Such was the case too, for Air Asia in Malaysia and Jet Star in Australia. Here in the Philippines, it was entirely different. One of the CEOs of a big shipping company here confided that the shipping association has accepted losing the C market to the Low Cost Carriers. Being archipelagic in geographical shape, the biggest chunk of air travelers came from those who traveled by ship and those who did not travel at all were it not for an integrated national promotion of domestic tourism. While air carriers in China are still considered traditional in their business concepts, LCCs across the region have influenced a lowering of fares among them. The National Tourism Bureau declared that the number of Chinese traveling abroad will reach 47 million by 2010 and 100 million by 2020.
Today, Asian LCCs have broken the sea and country barriers. Air Asia Berhad and Tiger Airways were much ahead on this. With the coming of its Airbus 319/320s, Cebu Pacific is now flying to Jakarta, Kuala Lumpur, Singapore, Bangkok, Taipei, Hong Kong, Inchon, Pusan and many of China’s southern hub cities. Air Philippines continues to connect to more local destinations as it gains more Boeing 737-200 aircraft. It will be exciting to experience these two LCCs, using the ATR and the Bombardier efficient turbo prop aircraft in the Low Cost model, in local destinations, including those not accessible to jet aircraft, in a few month’s time.
Benefits of Low Cost Carriers
Having actually experienced the growth of the Diosdado Macapagal International Airport at Clark as a result of the operations of Air Asia and Tiger Airways, and after attending several Low Cost Carrier fora in the region, we have seen several benefits of this business model.
First is Benefits To Consumers.
As a result of these carriers, the consumers have more choices. In Europe, 50 to 60 more airlines came in to serve the fliers. In Asia, more and more of these type of carriers are emerging in India, Australia and in the five original ASEAN countries, in addition to an increasing number of traditional airlines and various hybrid business models.
Another benefit to the consumers is lower fares. Because of landmark fares offered by LCCs, more and more new travelers are emerging.
Second is Benefits To Airports.
Because of the LLCs, there are now Low Cost Airports. LCCs choose airports that are not congested and those that are not primary gateway airports like Manila, Hong Kong, etc. The reason for this is that airports that are not congested can provide the LCCs the ability to be able to land, turnaround within 30 minutes and take off again. Clark is sometimes known as Manila’s Low Cost Airport. The second reason is aeronautical and related fees are lower in secondary airports.
Because Low Cost Airports have lower aeronautical fees charged to the LLCs, they now concentrate on non-aeronautical or commercial aspect of revenue from these carriers. These non-aeronautical fees are sourced from four main areas: rental and concession fees from businesses inside the terminal; car parking fees; shuttle transport service concessions and revenue from advertisements along the terminal and airport operating areas.
The second benefit to airports is traffic growth. In order to derive benefits from the LCCs, the larger airport hubs, like Kuala Lumpur and Changi, Singapore, constructed Low Cost Terminals focused on operations of the LCCs. These terminals do not have air bridges, VIP rooms, highly computerized check-in counters and branded duty free shops, but concentrate on basic retail and amenities.
Third is Benefits To The Region.
As a result of the coming of the Low Cost Carriers, there is a greater exchange of tourists among the citizens of Southeast Asia. As more and more new travelers emerge, peoples of these countries get more opportunities to learn about the different cultures of the countries of destination.
Second benefit to the region is employment. LCCs have generated more jobs within their own airlines, as well as in the airports where they operate.
Fourth is Benefits To The Environment.
The following factors contribute to lower environment impacts of LCCs: more efficient seat configuration and lower fuel consumption; decreased noise emissions as a result of smaller and more efficient aircraft; direct services leading to less connecting flights and reduced waste as result of no onboard food and newspapers.
Here in Mactan Cebu International Airport, we expect more flights from our own LCCs this year and the next years to come. Within the first quarter, Cebu Pacific flew 2.5 million passengers. It would be a dream to see a mixture of Airbus 319s, Airbus 320s, Boeing 737s, Bombardier and ATR Turbo props and Embraers all departing to and arriving from all our exciting sites and the landmarks of our neighbors across the seas.
The Asian LCCs will soon discover a longer range derivative so all of us...
...can travel more!
