Let’s travel together.

LLCs collaborating more as regional competition heats up

Read Article

ETW StaffMumbai

Low cost carriers (LCC) across Asia Pacific are deploying a more collaborative strategy as competition intensifies, according to a new Abacus LCC/Hybrid Study. Abacus has shared analysis from in-depth surveys with over 20 major budget brands, explaining in part their success in averaging almost three times the growth trajectories of their full service counterparts – and their plans for the future.

While they all intend to leverage the advantages they enjoy with lower cost bases, better aircraft utilisation and what they consider superior technology to gain share, many have become concerned about cannibalisation of the sector at the budget end.

Ho Hoong Mau, VP, Airline Distribution for GDS leader, Abacus, said, “These airlines are meeting frustrated demand from corporate travel agents for LCC content so it’s a win-win. We’ve seen related bookings jump 40 per cent just in the first two months of this year. The carriers’ reward is the higher yielding business travellers, governed by policies that can now include low cost options.”

From the survey, 37 per cent intend to partner with other airlines to feed their network over the next three to five years. Almost a third (32 per cent) are considering joining or forming an alliance, with 26 per cent admitting they might merge or acquire a smaller LCC at some point in the future.

With 60 budget airlines operating in Asia Pacific by the end of this year, there are plenty of partners to choose from at home and even more outside the region. “Collaboration is key to step change in this industry. Whether LCCs are looking at major markets like China for potential allies or for links with carriers bringing passengers into Asia’s hubs, they will gain strength from an extended network,” Ho added.

Closer ties are also expected to afford these airlines dividends. Eight in ten respondents forecast their growth to be between 6-20 per cent short-term, with another 11 per cent predicting over 20 per cent. The future appears to be bright for those planning to take many more routes to market.

Of those surveyed, four in ten (42 per cent) cite competition from other LCCs as a ‘significant challenge,’ just behind the serious concern of fuel costs. That compares to only four per cent who see full service brands as a direct threat.

A common response has been to differentiate and diversify, with the result that only 27 per cent still identify themselves as low cost ‘pure-play’. The majority prefer a ‘new age’ or hybrid definition, given moves to broaden their service offering.

As the battleground shifts, LCCs are looking to extend their ancillary products and services portfolio even further, moving up the market to capture more of the untapped premium sector.

Previously focused on web-only fares, the majority of respondents have moved to embrace the travel agent channel, with over half (54 per cent) already integrated with a Global Distribution System (GDS) to access the trade directly, and a further six intending to soon.

The benefits, however, extend beyond just the incremental trade business. Travel agents are also adept with complex cost-saving interline and codeshare reservations, which is another area where the LCCs are looking for longer term growth.

Leave A Reply

Your email address will not be published.