SE Asia’s budget airlines seen posting strong growth rates Aggressive expansion cited as reason for growth

MANILA, Philippines - Think tank Centre for Aviation (CAPA) sees budget airlines in Southeast Asia including the Philippines posting strong growth rates amid the aggressive expansion programs of low cost carriers.

 In a latest aviation analysis titled “Southeast Asia airline market sees more rapid growth and high international low-cost penetration rates,” CAPA said budget airlines now account for over 50 percent of seat capacity in Indonesia, Malaysia, the Philippines, and Thailand.

 CAPA said low cost carrier also has a 50 percent share in the intra-Southeast Asia international market.

 Data showed that Southeast Asia’s international market grew by about 20 percent over the last 18 months from about 4.7 million weekly seats in April 2012 to 5.6 million weekly seats in October this year.

 CAPA said the Philippines has the highest low cost carrier penetration rate in Asia with 67 percent followed by Indonesia with 60 percent, Thailand with 56 percent, Malaysia with 53 percent, Vietnam with 37 percent, and Myanmar with three percent.

 However, the Philippines has a marginally smaller international low cost carrier penetration rate with 29 percent compared to Indonesia’s 56 percent, Malaysia’s 50 percent, Singapore’s 31 percent, and Thailand’s 30 percent.

The country’s international low cost carrier penetration rate is better than Vietnam’s 24 percent, Myanmar and Brunei’s 16 percent, Cambodia’s 12 percent, and Laos’ five percent.

However, CAPA believes that the international low cost carrier penetration rate of the country would improve significantly with the signing of the new air agreement between the Philippines and Japan allowing additional flights between the two trading partners.

“But this will increase significantly as the Philippines-Japan market has just opened up to expansion from Philippine carriers, ending five years of restrictions,” the report said.

During the 18-month period, the region’s population has grown by only six percent but the middle class has expanded at a much faster rate, leading to a much larger sector of the population that can afford to fly.

At the same time, CAPA said the intense low cost carrier competition has reduced fares in many markets, stimulating demand, particularly among the region’s new middle class.

The think tank said low cost carrier would soon account for one-third of the airline fleet in the entire Southeast Asia. Budget airlines Lion Air, AirAsia, Tigerair, Jetstar, and VietJet groups already account for nearly three-quarters of the low cost carrier capacity within the region.

 The five groups would operate an estimated 383 Southeast Asia-based aircraft by the end of 2013 accounting for 77 percent of the region’s low cost carrier fleet.

The five airlines are expected to expand their fleet by about 20 percent this year equivalent to about 500 aircraft by the end of the year.

Major players in the low cost carrier segment in the Philippines include Cebu Air Inc. (Cebu Pacific), AirAsia Philippines and affiliate Zest Airways Inc. and Tiger Airways Philippines.