Full Service and Low Cost Carriers Become Indistinguishable

13th Aug 2013

A senior industry professional observed that airlines across the Asia-Pacific region, whether full-service or budget carriers, start to diversify their business models and will soon eventually obliterate their differences.

According to Ho Hoong Mau, division head of Abacus International, low-cost carriers are beginning to adopt the modern booking system through GDS channels, growing by almost 80% of the total numbers based on their data.

He cited the strong performance of Jeju Air and Air Busan both from South Korea; PAL Express of the Philippines, and StarFlyer of Japan. These airlines are considered the top four users of the Abacus GDS system. Another airline, Mihin Lanka, will soon use the Abacus GDS system.

He noted that a growing number of budget carriers are shifting towards hybrid models, making them more suitable to use the GDS system.

Some LCCs in the region are now using the business models commonly used by full-service airlines, going beyond short-haul routes. Cebu Pacific, for instance, is going to launch a medium-haul service with its Manila-Dubai route in October this year. The airline has no choice but employ a system that would easily handle the sales for its international routes.

He further noticed that most Asian budget carriers form multiple brands and even form partnerships with other airlines to strengthen their foothold and market share. AirAsia, Lion Air and Tigerair are two examples of LCCs that set up local subsidiaries in multiple countries across the region.

Full-service airlines in the region such as Singapore Airlines and Thai Airways International have long diversified their business with the establishment of budget carriers, Tiger, Scoot and Nok Air, to better serve budget travelers. Singapore Airlines' SilkAir and THAI's Thai Smile were specifically tailored for premium budget market.

Though a few of the budget carriers already serve medium-haul routes, most of them are still hesitant to venture into long-haul routes. Long-haul flights burn more fuel which would burn their coffers as well.

Ho noted that there have been a few LCCs who call themselves 'long-haul low-cost carriers' but not one of them will ever venture to routes beyond 10 hours of flight. He predicted that Scoot, AirAsia X and Cebu Pacific will be able to fly long-haul routes ahead of the pack as they are now building up their respective regional network.

As the difference between the business models used by LCCs and full-service airlines become indistinguishable, the GDS system will become more relevant to most airlines.

While full-service airlines continue to dominate the Abacus GDS system, the number of budget airlines adopting the system is also growing rapidly.

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