New low-cost carriers in Southeast Asia may find it more difficult to survive as dominant players could engage in a dumping strategy to protect their market share, while seat resumption for airlines could take 10 years for a full recovery.
Patee Sarasin, chief executive of Really Cool Airlines and former chief executive of Nok Air, said after the airline obtained an air operation licence in the third quarter of this year, it is now applying for an air operating certificate (AOC), which it expects to receive in January 2024.
After receiving the AOC, the company should be ready to start operating full-service charter flights from March to May 2024, with destinations including Tokyo, Nagoya, Hong Kong, Singapore and Shanghai, before moving to scheduled flights from the third quarter.
Mr Patee said two Airbus A330-300 planes will be used in the first quarter, targeting a utilisation rate of 13 hours per day for each aircraft.
The company wants to expand the fleet to four jets by the end of 2024.
He said Really Cool's products and services stand apart from low-cost carriers as competition in this segment is not feasible for a new airline.
Existing players could pursue a price dumping strategy to cripple newcomers, relying on their more extensive networks, said Mr Patee.
As proof of the risk, he pointed out that last week the Malaysian budget carrier MYAirline suddenly suspended operations because of financial issues.
Mr Patee said while post-pandemic airfares have increased as seat capacity remains limited amid soaring demand, the low-cost segment still remains sensitive to price.
Large airlines that can regularly slash prices to protect their market share could gain an advantage, he said.
Mr Patee says the new airline plans to fly two Airbus A330-300 aircrafts in the first quarter.
Such a strategy affects smaller players that cannot afford to lower airfares, especially when high operations costs push up prices beyond levels in 2019, said Mr Patee.
He said the opportunities Really Cool Airlines is targeting are with long-haul services.
These routes consume more fuel and incur high costs, but with an appropriate hedging strategy, the airline should be able to manage operational costs, said Mr Patee.
"While we obtain an AOC, the airline has completed other tasks and are 80-90% ready to fly," he said.
"We already recruited pilots and will select 180 cabin crew by the end of this month after receiving 1,000 applications."
Mr Patee said the airline should recognise an operating profit within 18 months, which is faster than would normally be expected, attributed to ticket prices rising significantly since the pandemic.
By 2026, the airline plans to fly long-haul flights to Europe, which would make it the second carrier after Thai Airways to serve those routes.
He said the model set by two new Japanese airlines should be monitored: Air Japan, under the ownership of ANA, and Zipair, owned by Japan Airlines.
Utilising a unique strategy compared with other low-cost carriers and with high travel demand for Japan, those two airlines could offer low fares in the beginning, then raise them at a later stage, said Mr Patee.
"New airlines have to differentiate themselves to survive," he said.
Though some industry analysts predict a full aviation recovery can occur in a few years, Mr Patee said seat capacity would take 10 years to match pre-pandemic levels because of insufficient maintenance facilities and delayed delivery of new aircraft, a lack of manpower, and airlines' large debts.
Moreover, unanticipated external incidents could disrupt growth, such as conflicts in Israel and Ukraine that are ongoing, he said.
"Based on my experience with Nok Air, it took five consecutive years to develop a steady profit until we could list the company on the stock exchange in 2013," said Mr Patee.
"It won't be easy for airlines during this time to recover from the pandemic as the impact was greater than any crisis in the past."