Merger a sign Asia's budget airlines are struggling?

Monday's (May 16) announcement of an alliance between eight low-cost carriers across the Asian region may be a signal that some airlines are struggling.

"With so many competitors in the market, some are going to suffer," Mr David Miles, head of advisory services at Ambidji Group, a Melbourne-based aviation consultancy, said in a Bloomberg report on Tuesday (May 17).

"A merger usually comes when one or more parties are struggling and they realise they need help."

The grouping, called Value Alliance, comprises Scoot, Tigerair Singapore, Cebu Pacific (including subsidiary Cebgo), South Korea's Jeju Air, Thailand's Nok Air and NokScoot, Tigerair Australia and Japan's Vanilla Air.

The partnership partly reflects the challenge of making money as a low-cost carrier in one of the world's most competitive markets, Mr Miles said.

While Mr Campbell Wilson, Scoot's chief executive, told reporters on Monday that the alliance is open to any airline that wishes to join, the absence of Jetstar and AirAsia is conspicuous.

AirAsia chief executive Tony Fernandes did not immediately respond to e-mails seeking comment, said Bloomberg.

Responding to queries from AsiaOne, a Jetstar Group spokesperson said: "We also have long-standing partnerships and agreements with 45 other airlines including full service airlines Qantas, Emirates Japan Airlines and Vietnam Airlines."

"We will continue to have discussions with other carriers about providing our customers with even greater connectivity across Asia than we already provide," added the spokesperson.

"We're doing this for our reasons," Scoot's Mr Wilson was quoted as saying. "The fact that there are no other companies here is self-explanatory."

According to Value Alliance, its members offer flights to more than 160 destinations with a fleet of 176 aircraft. AirAsia and AirAsia X Berhad have a combined fleet of 199 aircraft. The Jetstar Group operates a fleet of 122 aircraft and over 180 routes.

In a joint press conference on Monday, Scoot's Mr Wilson said that Value Alliance is limited in scope by design. It also means that the alliance will not need any regulatory permits to proceed, reported Bloomberg.

The accord could be successful if travellers can hop from one member to the next as they fly around Asia, said Mr Miles. But that co-operation could rack up costs, eating into any benefit, he added.

xiuhuil@sph.com.sg