Asia's Discount Airlines Eye U.S., Europe

Few countries have open-skies policies on routes to and from the US that would allow low-cost airlines to use popular routes such as New York-Tokyo. Instead, start-ups are often diverted to lesser hubs.


Long-haul budget travel, anyone?

Spurred by open-skies policies and booming tourism, low-cost airlines are mushrooming across Asia. Most have adopted the business model pioneered in the 1970s by Southwest Airlines - lean, mean, and affordable - to fly budget-conscious passengers around the region. Competition on popular routes such as Bangkok-Singapore - a 2-1/2-hour hop - has cut round-trip fares to just over $100, including taxes.

Now airline entrepreneurs are setting their sights on more distant destinations, betting that long-haul travel is equally ripe for discounting. If proven right, they could represent the first fluttering of a new era of low-cost air travel to and from Asia's dynamic economies.

Oasis, a start-up airline in Hong Kong, has begun daily flights to London for as low as $147 one way and plans this year to offer similar deals to Oakland, Calif. and Chicago. Jetstar Airways, a subsidiary of Australia's Qantas Airways, sells bargain tickets on routes between Australia and Southeast Asia. And Malaysia's AirAsia, the largest budget airline in Asia, recently founded a new operator, AirAsiaX, to ply long-haul routes to China and Britain starting in July.

For vacationers with open itineraries, such ventures offer a cheap way to reach Asia. "For leisure travelers, it's okay. They're flexible and don't mind a bit of inconvenience. There's definitely a market for it," says Don Ross, editor of a travel-industry newsletter in Bangkok.

Creating long-haul budget airlines that can take on the state-run carriers that dominate in Asia could prove more challenging, though. Such airlines are naturally reluctant to see competitors ply profitable intercontinental routes, having already lost market share on regional flights within Asia.

Connecting lesser-known hubs

Few countries have open-skies policies on routes to and from the US that would allow low-cost airlines to use popular routes such as New York-Tokyo. Instead, start-ups are often diverted to lesser hubs: Malaysia's AirAsiaX, for example, will launch low-cost flights to London - a global hub - and also to the cities of Birmingham and Manchester.

Analysts say this is one reason why frequent fliers are likely to stick with the existing carriers. "I think you may see a split between business travelers in Asia who want to get from point A to point B as quickly as possible, versus leisure travelers who have time and are prepared to put up with a lot more," says John Koldowski, research director at the Pacific Asia Travel Association, an industry group in Bangkok.

Airline executives say that low-cost travel doesn't necessarily mean bare-bones. Oasis offers free meals and in-flight entertainment, while Jetstar, which flies between Sydney and Honolulu, has blankets, food, and movies for sale. Nor should passengers expect to be squeezed in tighter: Oasis says its economy-seat size and comfort is comparable to other full-service carriers.

Competitive edge in business class?

So how can they keep fares so low? The secret, says Steve Miller, CEO of Oasis, lies in the efficient use of aircraft and crews, flexible pricing, and an attractive business class. Advertised one-way fares from Hong Kong to London start at $147, but most flyers pay more, and business-class seats start at $920. Fares between Hong Kong and Oakland, due to begin in June, will be slightly higher on this longer route, he says.

At the front of its Boeing 747-400 plane, where business-class passengers can stretch out on reclining beds, is where Oasis spies a competitive edge among self-employed travelers who pay their own way, unlike corporate fliers. Business people who would otherwise settle for coach can now afford an upgrade. "Every business man or woman should be able to fly business class and arrive in a state where he or she can get down to work immediately," says Miller.

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