Budget carriers being hit by turbulence

Budget carriers being hit by turbulence
Asia's biggest budget carrier, AirAsia, has not been spared either. Last year, profits fell 55 per cent to RM364 million (S$142 million) compared with 2012.

Madam Agatha Wu, 78, went on six holiday trips last year, five of them on budget carriers.

The former senior nurse said: "Budget carriers have made travel highly affordable for retirees like me. The strong Singapore dollar is also a great help.

"I can now go on three trips for less than the price of one trip 15 to 20 years ago," she added.

Singapore's first low-cost carrier Valuair took flight in May 2004. This was followed by Tiger Airways and Jetstar Asia several months later.

Budget airlines have also proliferated in the region, fuelled by demand from a burgeoning middle class in huge markets like Indonesia, China and India.

Airlines have been aggressively launching new routes and adding flights, as well as starting joint-venture carriers in other markets to expand their footprint.

From zero just over a decade ago, budget carriers now account for about 60 per cent of all intra-South-east Asian travel, giving full-service carriers like Singapore Airlines a run for their money.

At Changi Airport, which handled more than 53 million passengers last year, low-cost carriers make up about a third of total traveller traffic and flights.

Three of Changi's top five passenger airlines last year were budget carriers - Tigerair (the rebranded Tiger Airways), Jetstar Asia and AirAsia. The other two were Singapore Airlines and its regional arm, SilkAir.

With more than 40 low-cost carriers in the Asia-Pacific battling for market share, fares have tumbled. This is great for travellers. But cut-throat competition has also slashed margins and yields for carriers.

From April last year to the end of March this year, Tigerair recorded its biggest annual loss of $223 million. In March, it cancelled an order for nine single-aisle planes due to arrive this year and the next. Three weeks ago, it said it would ground eight planes this year - about 15 per cent of its total fleet - and cut loss-making flights.

Over at Jetstar Asia, chief executive Barathan Pasupathi says the past 12 months from June last year to now have been among the most challenging in the past decade. The tough year came after it managed a modest $2.5 million after-tax profit in the previous financial year.

Asia's biggest budget carrier, AirAsia, has not been spared either. Last year, profits fell 55 per cent to RM364 million (S$142 million) compared with 2012.

AirAsia X - the group's long-haul arm - lost RM11.3 million between January and March. This contrasted with a profit of RM50.2 million a year ago.

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