August 2, 2010
Hoping to reverse a drop in market share, flag carrier Thai Airways is jetting into regional markets with a budget airline operated with Singapore's Tiger Airways.
"The low cost market is growing very fast," Thai Air President Piyasavasti Amranand told a news conference on Monday, confirming the alliance. "This is a chance to help fill the hole before we lose more opportunities to rivals."
But increasing numbers of Asian carriers have the same idea, making for a potentially crowded market.
Japan's All Nippon Airways plans to seek investment from overseas airlines and investment funds to help set up a low-cost carrier which it aims to launch as early as next year, the Nikkei business daily reported on Monday.
The new ANA discount carrier will offer flights at less than half the price of major carriers for international routes within six hours of Japan, the Nikkei said. That puts it in direct competition with some Southeast Asian budget carriers.
The Thai-Singapore joint venture, to be called Thai Tiger Airways, will be 51 percent owned by Thai Airways and another Thai entity and 49 percent by Tiger, the two airlines said in an announcement to the Singapore exchange.
The new carrier will be based in Bangkok and is expected to start operations in the first quarter of 2011. It will offer domestic services plus international flights within a five-hour radius from the Thai capital.
That puts it in range of travel hot spots such as Bali in Indonesia and the southern Thai beach destinations, along with busy regional centres in Vietnam, Cambodia, Singapore, Malaysia and Hong Kong.
MORE ROOM TO GROW
Low-cost Asian travel has much more room to grow over the next five years, Tiger chief executive Tony Davis told reporters.
"The competition in Asia is still very small compared to Europe and the US. The market will be six times bigger than Europe, but with very few local airlines. It's far from saturated," Davis said.
Tiger, 49 percent-owned by Singapore Airlines and part-owned by Singapore state investor Temasek, is the second-largest budget carrier after Malaysia's AirAsia.
Davis said Tiger planned to adopt a business model based on its founding shareholder Ryanair, Europe's biggest low-cost carrier.
Thai Tiger Airways, which has registered capital of THB200 million baht (USD$6.2 million), plans to acquire 10 new Airbus A320s in 2011 and 2012.
Asian low-cost carriers have expanded rapidly over the past decade and account for about 14 percent of travel within Asia, according to estimates by Airbus.
Over the next five years, budget carriers from Malaysia's AirAsia to Singapore's Tiger will take delivery of over 500 planes, a capacity increase of 15 percent a year.
That has helped to turn Asia into the largest market for the two big planemakers, Airbus and Boeing, accounting for a third of outstanding orders.
Thai Air, 51 percent-owned by the Thai government, has seen its market share in the region drop to 33 percent from 42 percent in the regional market over seven years because of fierce competition from regional rivals.
Thai Air, which planned to raise its holding in budget affiliate Nok Air to 49 percent from 39 percent, said their combined share in domestic budget market was at 48 percent now, down from 82 percent seven years ago.