Thailand is A Growing Hub for Budget Carriers

1st Dec 2013

Thailand has become the favorite hub for budget carriers in the region with the entry of new players into the increasingly competitive market.

November 20, 2013 (from www.channelnewsasia.com): The latest additions to the crowded Thai budget travel market are the Indonesia-based Lion Air and VietJet Air from Vietnam.

Lion Air is Indonesia's largest privately-owned commercial airline, founded in 1999. VietJet Air, meanwhile, is the first privately-operated airline in Vietnam, established only in 2007.

Lion Air, through its joint venture with Thai partner, set up the local affiliate Thai Lion Air recently this year. It is scheduled to commence commercial operations before the year ends with the launching of its inaugural Bangkok-Jakarta flight. The maiden flight will usher in the formal entry of Lion Air into the lucrative Thai market which it hopes will boost its position in the region.

Along with the Bangkok-Jakarta flight, it will also launch simultaneously direct services to Kuala Lumpur and Chiang Mai.

The Bangkok-Jakarta and Bangkok-Chiang Mai service will be a twice-daily affair while its Bangkok-Kuala Lumpur route will be a once-daily service.

This early, analysts doubt if these routes will sustain in the long run saying they are becoming too crowded.

Other major low-cost carriers that have set up local affiliates in Thailand way ahead of the two latest entrants are Thai AirAsia, the pioneer in budget travel in Thailand being established in 2003 and Nok Air, the low-cost arm of Thai Airways, established in 2004.

According to Centre for Aviation's chief analyst, Brendan Sobie, the penetration rate of low-cost carriers in Thailand's international traffic is only 20%, quite low for the region. In comparison, Malaysia's LCC penetration rate is quite high at 50% and Singapore's is 31%.

The low penetration rate of international traffic in the country must be encouraging enough for foreign-based airlines to exploit the market.

Though Jetstar is currently based in Singapore, the airline was able to carry two million passengers in its Singapore-Bangkok route in 2012 alone.

Part of Jetstar's success to attract passengers on the said route is its 31 alliances and partnerships with other airlines which offer passengers a convenient connection from Bangkok to Singapore. These airlines bring passengers to Bangkok from various points in the region and essentially provide feeder routes for Jetstar for its Bangkok-Singapore route.

Thailand has a huge market for air travel from its current population of 65 million. Southeast Asia, where Thailand is part of, offers huge opportunity for budget carriers in the next few years as it has been in the past ten years.

With the advent of budget travel trend in the region over ten years ago, the penetration rate for low-cost carrier in Southeast Asia has gone from nil to over 50% this year. The expanding middle-class in the region will provide opportunity for many LCC's who take advantage of this growing trend.

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