LCCs in Asia-Pacific LCC Asia-Pacific routes in December 2010
Graphics courtesy of InterVISTAS.
Northeast Asia The sub-region of northeast Asia is based around the economies of Japan and Korea and the GDP for this sub-region is expected to grow 1.3% a year during the next 20 years. This is much lower than the 4.4% projected growth for the entire Asia-Pacific region during the same period. Of the two countries, Japan has the more mature economy, with further traffic stimulation, most likely tied to airport expansion, easing of operating restrictions and further liberalisation. Air traffic between northeast Asia and other Asia-Pacific sub-regions is projected to grow at 5.8% per year between now and 2028 and to date, only a few LCCs based in northeast Asia have been established. Most northeast Asia-based network carriers are focused on growing their long-haul networks with large, widebody aircraft such as the A380, and ultra long-haul aircraft like the A350 or B787. Only 41% of the sub-region’s 1,180 new aircraft over the next 20 years are single-aisle narrowbody airplanes. To date, Japanese LCC carriers have failed to make a significant impact on domestic routes but Korean LCCs like Jeju Air, Air Busan and Jin Air have been more successful in establishing their brands and gaining market share. In the near- to
www.routesonline.com
medium-term, the greatest opportunity for LCC growth in this sub-region will come through LCCs based in other sub-regions – like JetStar or AirAsia – expanding their presence into northeast Asia. However, these carriers’ ability to expand is closely linked to the premise of liberalisation and easing of access to market entry.
China With over 20% of the world’s population and a projected GDP growth rate of 7.2% per year during the next 20 years, China is poised to overtake Japan to become the world’s second-largest economy. China currently accounts for 24% of the Asia-Pacific region’s economic output, but that figure is expected to rise to 42% by 2028. The country’s enviable economic output, growing middle-class and increasing disposable income will ensure continued demand for air travel. Illustrating this is the fact that domestic air passenger traffic within China is expected to grow 7.9% annually during the next 20 years. To support this expansion, China’s combined fleet is expected to more than triple in size during the next 20 years, with the country taking delivery of 3,770 new aircraft, 70% of which are single-aisle, narrowbody aircraft.
To date, LCCs have played a minimal role in aviation growth within China, due to the country’s strict aviation policy over decisions on which routes airlines are permitted to operate. This lack of free-market growth has stifled LCC development and means that traffic growth continues to be shared among China’s established legacy carriers. It is most likely that any initial foothold that LCCs may gain in China will come through expansion in provincial routes, rather than China allowing LCCs to form organically and compete against the established carriers on key trunk routes within the country. Consolidation of Chinese carriers, such as the recent acquisition of Shanghai Airlines by China Eastern, could open additional opportunities for LCC carriers to expand their market share in China. Aside from the astounding domestic growth in air travel within China, the country’s warming ties with Taiwan will lead to significant growth in trans-Taiwan Strait flight activity, facilitated by a liberalisation of air services between China and Taiwan. Taiwanese visitor traffic has grown 8.1% per year during the past 10 years and is projected to nearly triple within the coming 10 years. Historically, this traffic has been funneled through Hong Kong and Macau, but an increasing number of non-stop
111