Upstarts eager to stake claims to Asean’s open skies

U Airlines, a startup from Thailand that has splashed the colour orange on all its aircraft for greater visibility among established players in the region, is capitalising on the imminent opening of Asean skies by 2015 to grow into a larger player.

The airline is barely three months old and has big ambitions to muscle up enough market share and fill enough seats to eventually warrant having an Airbus A380 superjumbo. Will it?

All this ambition is fuelled by the growing air traffic in Asean and Asia, led by the rising affluence in the region.

Last year alone 35 million people in Indonesia entered the middle class and that means they now have money to travel within Asean, and when their earning capacity grows they will seek new frontiers in Asia and beyond.

U Airlines is not alone. Malaysia will soon have a second low-cost airline, Malindo Air, plying Asean and Asian routes beginning in March next year. It aims to have 12 aircraft in 12 months and 100 in 10 years.

Those carriers already established in the region are also playing their cards very carefully so that they do not give the upstarts a chance to eat into their market share, though the overall market will grow and there should be enough for all of them. Still, they are not wasting time sharpening their knives to guard their turf.

On Nov 21 AirAsia, one of the largest LCCs in the region, announced plans to place a new order for an additional 100 aircraft to prepare itself for the onslaught of Asean Open Skies. It sees a lot more potential in traffic volume and needs the additional planes.

In July, Indonesia’s Garuda said it would double its fleet size before 2015 from 92 to 194, and many other carriers in the region are grooming themselves to capitalise on the growth. Jetstar, Tiger Airways, SilkAir, Malaysia Airlines, Thai Airways, Singapore Airlines and even smallish Zest Air are all in preparation mode.

Open skies in Asean means freedom to travel across the 10 countries of the Association of Southeast Asian Nations. That dramatically expands the freedom of the 600 million citizens to travel freely within each others’ borders, particularly skilled workers as there will be greater connectivity between the nations. It also means airlines can go to any city and pick up passengers.

The first country to pave the way for liberalisation of air travel was Malaysia when it opened its most protected route, Kuala Lumpur-Singapore, to competition. Before the opening, return air fares were a hefty 840 ringgit. Today they are as low as RM200.
Malaysia took another bold step last month when it announced that it would open 37 routes to competition in line with the opening of Asean skies. Its main hub for these 37 routes will not be Kuala Lumpur but Kota Kinabalu, the home to millions of people who live in the eastern states of Sabah and Sarawak.

These 37 routes will connect Kota Kinabalu to nine secondary points in Asean and 28 in China, which will spur more trade and tourism to East Malaysia, which for years has lacked the connectivity Peninsular Malaysia enjoys.

Last year Kota Kinabalu airport handled 4.2 million passengers and the number will grow with greater connectivity.

The nine points in Asean are Bandar Seri Begawan (Brunei), Sihanoukville (Cambodia), Mataram (Indonesia), Luang Prabang (Laos), a destination except Yangon in Myanmar, a destination in the Philippines except Manila, Singapore, Chiang Mai (Thailand) and a destination in Vietnam other than Hanoi and Ho Chi Minh City.

China’s 28 secondary points are Changchun, Chongqing, Xi’an, Xiamen, Urumqi, Chengdu, Shenyang, Fuzhou, Kashgar, Kunming, Dalian, Guiyang, Hohhot, Xishuangbanna, Haikou, Lanzhou, Harbin, Nanning, Sanya, Xining, Wuhan, Changsha, Yinchuan, Ningbo, Guilin, Zhengzhou, Lhasa and Yanji.

About the author

Writer: Jen Rita