20 years of budget airlines: Once the underdogs of commercial aviation, now a force to reckon with

CNA11-11

SINGAPORE: Mr Norazman Sapiie's family was worried when he started working as cabin crew on budget carrier Jetstar Asia 20 years ago. After all, budget airlines had just burst onto the scene then, ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2482909412?lang=en_US&edition=fundamental","thumbnail":"https://onecms-res.cloudinary.com/image/upload/s--B0MxOB6C--/c_fill,g_auto,h_468,w_830/f_auto,q_auto/v1/mediacorp/cna/image/2024/11/08/whatsapp_image_2024-11-07_at_4.11.34_pm.jpeg?itok=n1e9ooij","is_english":true,"pubTime":"2024-11-11 06:00","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2482909412","market":"us","top_or_hot":-1,"title":"20 years of budget airlines: Once the underdogs of commercial aviation, now a force to reckon with","media":"CNA","content":"<div>\n<p>SINGAPORE: Mr Norazman Sapiie's family was worried when he started working as cabin crew on budget carrier Jetstar Asia 20 years ago. \nAfter all, budget airlines had just burst onto the scene then, ...</p>\n\n<a href=\"https://www.channelnewsasia.com/singapore/budget-airlines-20-years-scoot-jetstar-asia-changi-4733956\">Source Link</a>\n\n</div>\n","source":"can_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>20 years of budget airlines: Once the underdogs of commercial aviation, now a force to reckon with</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n20 years of budget airlines: Once the underdogs of commercial aviation, now a force to reckon with\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-11 06:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.channelnewsasia.com/singapore/budget-airlines-20-years-scoot-jetstar-asia-changi-4733956><strong>CNA</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SINGAPORE: Mr Norazman Sapiie's family was worried when he started working as cabin crew on budget carrier Jetstar Asia 20 years ago. \nAfter all, budget airlines had just burst onto the scene then, ...</p>\n\n<a href=\"https://www.channelnewsasia.com/singapore/budget-airlines-20-years-scoot-jetstar-asia-changi-4733956\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"CAAS","symbol_name":"中汽系统","start_time":0,"source_url":"https://www.channelnewsasia.com/singapore/budget-airlines-20-years-scoot-jetstar-asia-changi-4733956","article_id":"2482909412","we_media_id":null,"thumbnails":["https://onecms-res.cloudinary.com/image/upload/s--B0MxOB6C--/c_fill,g_auto,h_468,w_830/f_auto,q_auto/v1/mediacorp/cna/image/2024/11/08/whatsapp_image_2024-11-07_at_4.11.34_pm.jpeg?itok=n1e9ooij"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2482909412","pubTimestamp":1731276000,"sourceInfo":{"source_id":"can_highlight","name":"CNA"},"weMediaInfo":null,"summary":"Singapore's first low-cost carrier took off from Changi Airport in 2004, and the industry hasn't looked back since. But will the growth of budget air travel continue unchallenged?","collect":0,"end_time":0,"defaultTopTitle":"channelnewsasia.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"CAAS":"中汽系统","C6L.SI":"新加坡航空公司","BK6523":"ESG概念","BK4124":"机动车零配件与设备","BK6003":"航空公司","LU1981816686.USD":"EASTSPRING INV ASIAN MULTI FACTOR EQUITY \"A\" (USD) ACC","SG9999013460.SGD":"LionGlobal Singapore Dividend Equity Fund SGD","5GC.SI":"斯恩威","SGXZ58947870.SGD":"LIONGLOBAL SINGAPORE DIVIDEND EQUITY (SGDHDG) INC","ACI":"艾伯森","SG9999001127.SGD":"United Singapore Growth Fund SGD","SG9999013478.USD":"利安新加坡股息基金","BK4113":"食品零售","BK6519":"运输股","SG9999013486.USD":"LIONGLOBAL SINGAPORE DIVIDEND EQUITY (USD) INC A","SG9999006266.SGD":"MANULIFE SINGAPORE EQUITY \"A\" (SGD) ACC"},"translate_title":"廉价航空公司20年：曾经是商业航空的失败者，现在是一股不可忽视的力量","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ACI":1,"CAAS":1,"C6L.SI":0.9,"5GC.SI":0.78},"content_text":"SINGAPORE: Mr Norazman Sapiie's family was worried when he started working as cabin crew on budget carrier Jetstar Asia 20 years ago. \nAfter all, budget airlines had just burst onto the scene then, and floating around was a general misconception that they didn't have the same safety standards as a full-service carrier. \nMr Norazman, now 56, in fact went through training that included firefighting, emergency procedures and first aid – the same skills a crew member with a full-service carrier would be expected to have.\nIndeed, it was a common misperception that low cost equalled poor safety, said Scoot associate management pilot Keagan Pang. \nThe 42-year-old began flying with Tiger Airways in 2013, before its rebranding as Tigerair and subsequent merger with Scoot. \nToday, fewer questions are being asked of safety standards as more people have become accustomed to budget travel, both Mr Norazman and Mr Pang said.\n“Think of it as a plate of Michelin-starred chicken rice,” said Mr Pang. “One is served in a restaurant versus one in a food court.\n“You get the same ... but the price point is different, simply because the setting is slightly different.” \nSince Singapore's first locally-operated budget flight took off from Changi Airport in 2004, the low-cost carrier industry has seen several ups and downs on its way to becoming a household name. \nIn the early years were mergers, acquisitions and the opening and closing of a budget terminal. \nThen there was the pandemic in 2020 which shut down almost all commercial air travel.\nWhile much has changed in the two decades, some things have stayed the same: Budget airlines continue to market lower prices in return for a no-frills experience – which usually means no complimentary in-flight meals, in-flight entertainment, pillows, blankets and such.\nSuch a trade-off may appear a Faustian bargain to full-service carriers. But it has paid off handsomely for budget airlines. \nSingapore's low-cost carrier market grew by 21 per cent between 2004 and 2024; in contrast, full-service carriers grew by 1.4 per cent over the same period, Alton Aviation Consultancy director Alan Lim noted.\n“Competition among low-cost carriers has been strong with an average of two new entrants per year over the last 20 years … the low-cost carrier (market) share has grown significantly to just over 30 per cent of the Singapore market measured by seat capacity.\"\nWith domestic and international passenger traffic in Asia Pacific also projected to more than double the levels in 2019, will the low-cost airline industry here continue growing unchallenged – and take an even more generous share of the pie?\n\n\n\n\n\n      The Scoot logo on tailfins of Airbus A320s parked at Changi Airport Terminal 1. (Photo: CNA/Wallace Woon) \n    \n\n\n\n\nA BRIEF HISTORY\nThe early 2000s were a time of growing appetite and need for air connectivity in Asia, especially within Southeast Asia.\nThe regional geography was fragmented and lacking an integrated network of road, rail and sea links.\nIt was in this setting that several local low-cost carriers entered the fray, looking to also meet rising demand for cheap travel.\nFirst to take off was Valuair in May 2004. It sought to revolutionise low-cost travel by offering a light meal on board to all passengers, and assigning seats as opposed to free-seating arrangements preferred by budget airlines in those days. \nA simple flight from Singapore to Bangkok was not expected to turn heads – but this one did. \nIn the weeks leading up to this landmark budget trip, full-service carriers Singapore Airlines (SIA) and Cathay Pacific began to slash prices, with SIA selling tickets to Bangkok at only marginally higher prices than Valuair.\n“I’m very surprised at the reaction of the big boys,” then-Valuair chairman Lim Chin Beng said at the launch of the first flight.\nYet it was only a matter of time before Valuair would be overwhelmed by rising fuel costs, continued price wars with full-service carriers and the entrance of two rivals that same year: Tiger Airways and Jetstar Asia.  \n“When we planned this airline, there did not appear to be any other budget carriers,” Mr Lim said in 2005. “If there were only one or two, the full-service carriers would have been more tolerant.” \nWith the writing on the wall, Valuair was acquired by Jetstar Asia in July 2005, just over one year from its maiden flight.\nJetstar Asia’s Mr Norazman, who joined the airline in October 2004 - even before its first flight - recalled having to wear two different uniforms due to being rostered for Valuair flights as well.\nTogether with older Asian budget airlines such as Malaysia’s AirAsia and Philippines’ Cebu Pacific, the business took off over the next few years.\nBy 2009, low-cost carriers were accounting for 23 per cent of Changi Airport’s total passenger traffic, according to data from the Civil Aviation Authority of Singapore (CAAS). \nIt didn't take long for Changi to spring into action.\n“Being Asia’s regional hub for air travel, Changi Airport saw an opportunity to expand its city links to serve this need by introducing low-cost carrier operations in Singapore,” said Mr Lim Ching Kiat, Changi Airport Group’s executive vice-president for air hub and cargo development.\nIn 2006, it built a no-frills, budget terminal with no aerobridges and transfer facilities, to support the growth of low-cost carriers. \nWhile the terminal grew to accommodate more passengers over the years, it was closed in 2012 to make way for the construction of a larger, full-service Terminal 4.\nCalling it a \"hard\" decision, Mr Lim said the move was made based on feedback from passengers that they wanted the same level of service from Changi Airport even while travelling on budget carriers. \nGrowth over the ensuing decade was briefly checked by COVID-19 ravaging air travel in the early 2020s, but the industry has bounced back in force. Budget carriers currently contribute to about one-third of Changi Airport's passenger traffic.\n\n\n\n\nWHAT IT TAKES TO RUN A BUDGET CARRIER\nSingapore's two budget carriers - Jetstar Asia and Scoot - told CNA they have had to adapt to the times while continuing to balance providing low costs with maintaining service standards. \nOver time, offerings such as meals, amenities, more legroom and “business” options – though all at a cost – have also been added to the mix to capture a larger market. \nTo offer a no-frills product with options at the side has always been Jetstar Asia’s modus operandi, said its chief executive officer John Simeone. \n“(Allowing) the customer to choose what they want to pay for, I think, is still a strong proposition,” he said. \nScoot’s chief executive officer Leslie Thng meanwhile pointed to the use of technology, such as how low-cost carriers offer mobile applications and self check-in kiosks to improve the passenger experience.\n“While low-cost carriers still prioritise cost efficiency, operations and customer experience have improved significantly through the modernisation of aircraft, digitalisation and customisation of comfort upgrades,” he said. \nMergers and acquisitions, meanwhile, have helped airlines remain sustainable. \nMr Thng said the Scoot-Tigerair merger in 2017 strengthened its position in the low-cost carrier market, created better economies of scale and provided more connectivity for customers. \nOperating as a subsidiary or in partnership with a larger airline group has been another boon.\nScoot's parent company is the Singapore Airlines Group while Jetstar Asia comes under the Qantas Group umbrella.\nJetstar Asia's chief Simeone said this has similarly led to economies of scale and helped the carrier ride out the “headwinds” of past years.\n“We've been able to use the Qantas partnership with connecting traffic into Jetstar to ensure that we don't just have a point-to-point network selling out of Singapore.\"\n\n\n\n\n\n \n\n\n\n\n\n\n\n\nSINGAPORE: A CHALLENGING MARKET? \nOne question that has arisen is whether the budget business model has a place in Singapore with its relatively higher costs of operation in the region.\n“Singapore is becoming a very expensive place to operate out of, whether it is ground services charges or operating charges or airport charges,” said Jetstar Asia’s Simeone. \n“We’ve seen increases in our costs which we are obviously working (on) and it just means we are looking at our business as well as around what the opportunities are to make sure we continue to provide low fares.” \nManaging director of AirAsia Malaysia Fareh Mazputra pointed to Changi Airport's higher landing, parking and handling fees.\n“Additionally, intense competition from numerous international carriers compels airlines to continuously improve their offerings to attract and retain passengers,” said Mr Fareh. “Slot availability is another challenge, as high traffic at Changi limits schedule flexibility.” \nAviation expert Hsieh Cheng-Hsien from the Singapore University of Social Sciences (SUSS) said many large full-service carriers adopt a hub-and-spoke model, where a major airport like Changi is the hub and other destinations form spokes.\nUnder this model, passengers fly to a hub before flying on smaller flights to their final destination. This tends to increase the percentage of seats filled, helps to reduce fares and expands the number of possible destinations as well.\n“However, low-cost carriers prefer the point-to-point system, which connects each origin and destination via direct flights,” said Associate Professor Hsieh. “This approach offers significant cost savings by eliminating the hub stop and its associated development costs.”\nIt also shortens the total travel time and enables better aircraft ulitisation, he added. \n“As a result, the business strategies of the low-cost carriers may not directly align with Changi Airport’s goal of becoming an aviation hub.” \n\n\n\n\nWHAT'S KEEPING BUDGET AIRLINES IN SINGAPORE?\nDespite this ostensibly fundamental misalignment in business direction between budget carriers and Changi Airport, it hasn't stopped their growth here. \nOne reason noted by several budget carrier chiefs was the world-class facilities and services on offer.\nScoot CEO Thng pointed to Changi's ground operations infrastructure, including self check-in facilities for baggage drop-offs, which help customers skip queues while alleviating congestion at physical counters.\nPhilippine low-cost carrier Cebu Pacific’s president and chief commercial officer Alexander Lao said Changi's reputation for efficiency ensured both a smooth travel experience for passengers while helping airlines maintain streamlined operations.\n“Striking this balance allows us to continue offering affordable options while benefiting from Changi’s top-tier services,” he said. \nJetstar Asia’s chief operating officer Geoffrey Lui said operating costs must be viewed relative to the premium product on offer. \n“In some of the less advanced hubs, for example, you can end up having to spend many hours at the airport checking in, transiting or even connecting on various flights,” he told CNA. \n“The intent here at Changi hub is to ensure that customer experience is very high on the list compared to other global hubs, and hence there is a price to it.”\nThen there is Singapore's status as a major travel hub.\n“Singapore’s strategic location between the Pacific and Indian Oceans makes it an ideal transit point, providing travellers from nearby Southeast Asian destinations with easy access to major markets such as Australia, India and Mainland China, as well as a wide range of direct route options within the region,” said Mr Thng. \nAgreeing, AirAsia’s Mr Fareh said Singapore allows the airline to extensively connect with key markets in the region, in turn providing access to a broader passenger base and increasing revenue potential.\nMr Lim from Alton Aviation noted that other than premium facilities and connections to a wide network, Singapore can also boast of a strong working relationship between the government and private agencies. \n“Efficiency is at the heart of low-cost carrier operations and the strong support ecosystem in Singapore continues to be attractive.” \n\n\n\n\n\n      Jetstar Asia COO Geoffrey Lui and Jetstar Asia CEO John Simeone, at the Jetstar office in Changi Airport on Nov 7, 2024. (Photo: CNA/Jeremy Long)\n    \n\n\n\n\nWHAT LIES AHEAD \nIn a world of post-pandemic booming demand for travel, low-cost carriers will be increasingly crucial in managing capacity and capturing market share, said Mr Stefano Baronci, director-general of Airports Council International (ACI) Asia-Pacific and Middle East. \n“Most of the fast-growing markets are markets where the price elasticity is quite high,” he told reporters at a media roundtable in September. “The more you differentiate the price, the more you have a reaction by the passenger to decide ‘yes’ or ‘no’.” \nChangi Airport Group's Mr Lim agreed, saying budget carriers will continue to command a place in Singapore and the regional market.\nIn the last few years, the airport welcomed five new low-cost carriers. In 2024, three out of five new airlines starting operations at Changi are budget ones.\nBut entering and staying in the market are different matters, with many low-cost carriers also exiting in recent times – which speaks to the general fragility of the industry, said Alton Aviation consultant Mr Lim.\n“As the market in developed countries becomes more saturated with larger players, they are finding it more difficult to grow market share organically.” \nBudget airlines face a slew of other challenges. For one, fluctuations in fuel prices are a major threat to cost control, said Assoc Prof Hsieh from SUSS. \n“Although many low-cost carriers have mitigated the impact by hedging oil prices, the sharp rise in global oil prices early this year has still put considerable pressure on many airlines,” he said. \nThe sustainability push is another. \n“New environmental regulations and carbon emission standards require airlines to invest more resources in eco-friendly technologies, inevitably increasing operating costs,’ Assoc Prof Hsieh added. \nOn top of everything, there are also changing consumer preferences, with expectations of flight experience and comfort levels increasing post-pandemic, he said. \nAirline leaders, however, struck an optimistic tone in interviews with CNA.\n“Headwinds arising from increased competition, supply chain disruptions and geopolitical tensions have an impact,” said Scoot's Thng. “That said, many of these challenges are not new to us and we are in the right position to tackle them by remaining nimble in our operations.\" \nJetstar Asia continues to believe that a growing number of travellers means growth opportunities for the taking. \n“We are here as low-cost carriers to fill a segment of demand in the travel population, and to offer them those options that are available to satisfy their travel needs,\" said Mr Lui. “The pie is big enough for everyone.\"","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2482909412"}