Asian Carriers Innovate in Tough Times

 - November 26, 2012, 6:00 PM
Singapore Airlines’s recent acquisition of a 10-percent stake in Virgin Australia is a prime example of the wave of strategic realignments now happening in the Asia Pacific air transport sector. (Photo: Airbus)

Tough economic times are resulting in innovations by carriers in the Asia Pacific region looking beyond traditional business models through strategic realignments and new product offerings. Recent ground-breaking deals include Virgin Australia selling a 10-percent stake to Singapore Airlines (SIA) and buying 60 percent of Tiger Airways; the new partnership between Emirates Airline and Qantas; and Etihad Airways purchasing a 10-percent stake in Virgin Australia.

“It is hard to say who is next. Qatar Airways said it would never enter into an alliance, and within a week it was in bed with British Airways,” commented Martin Eran-Tasker, technical director of the Association of Asia Pacific Airlines (AAPA) at the group’s recent Assembly of Presidents in the Malaysian capital of Kuala Lumpur. But in his view, the region is now at the epicenter of global airline realignment.

According to AAPA director general Andrew Herdman, the shifts in airline strategic ties are bound to have an effect on Asian hubs. “For instance, Emirates services to Australia will get more penetration and feed,” he said. “It’s a win-win strategy…the market drives what an airline needs to do.”

Nonetheless, acknowledged SIA chief executive Goh Choon Phong, challenges remain and particularly for some of the so-called legacy carriers. “It is no secret the low-cost segment is growing at a far greater rate and we would like to participate in it. That is why [SIA subsidiary] Scoot and Tiger Airways are partnering.” Moving away from the point-to-point model, medium-haul Scoot and short-haul Tiger Airways have an interline arrangement for seamless transfer within the transit area at Singapore Changi Airport–a first for budget carriers.

With consumers expecting low fares, legacy carriers in particular are having to rethink value proposition, explained Hugh Dunleavy, commercial director of Malaysia Airlines (MAS). With the flag carrier set to join the OneWorld alliance on Feb. 1, 2013, MAS is placing renewed emphasis on its frequent-flyer program in a bid to build its network. On November 24, MAS introduced 494-seat Airbus A380s on its twice-daily service from Kuala Lumpur to London, replacing 359-seater Boeing 747-400s and increasing weekly seat capacity by 37 percent in the process. Having taken delivery of four of six A380s ordered to date, MAS is preparing to introduce the new widebody on an intra-Asian route during 2013. Meanwhile, Indonesia-based budget carrier Lion Air has signed a joint-venture agreement with Malaysia’s National Aerospace & Defense Industries to set up Malindo Airways in Malaysia. It has ordered 15 Boeing 787s, which it will operate medium to long-haul routes.