Asia's LCC battle reaches a new market as Taiwanese carriers plan startups
The rapid spread of low-cost carriers (LCC) in Asia is forcing traditional airlines to try fighting fire with fire. Taiwan's full-service carriers are the latest to adopt this strategy, with two of them revealing plans to launch their own LCCs to meet the interlopers head on.
Several overseas LCCs have already begun flying to Taiwan from other Asian nations, and more are planning to start service there soon. Their encroachment on key international routes has prompted bothand TransAsia Airways to set up Taiwan's first locally based LCCs.
A similar pattern has occurred elsewhere in the region. Japan is a good example, with the country's two largest airlines deciding last year to establish LCC joint ventures—the first true LCCs in Japan. They did this partly for defensive reasons, as it became clear that if they did not do so, others would. Ironically, one of these new LCCs—Vanilla Air—is among the foreign airlines that are now launching flights to Taiwan.
, Peach, Scoot, Jetstar, and Spring Airlines are all flying into Taiwan, and Vanilla Air will do so later this month. All of these LCCs except AirAsia and Spring are joint ventures set up by the region's major airlines.
TransAsia appears to be the Taiwanese carrier closest to launching its LCC, as it has recently received initial approval from Taiwan's Civil Aeronautics Administration. China Airlines has confirmed its LCC intentions, and has promised to announce more about its plan soon. The other major Taiwanese airline, EVA Airways, says it is not considering an LCC yet.
In releasing the first details of its LCC on Nov. 20, TransAsia says it will be 100% owned by the parent carrier. TransAsia had previously discussed the possibility of forming a joint-venture LCC with other airlines, but it now appears to have rejected that approach.
The new LCC will flyand A321s to destinations within 5 hr. of Taiwan. TransAsia is running a competition to name the carrier.
Scheduled operations are “expected to be launched within a year [after] undergoing the review and auditing procedures from the competent authorities as well as rigorous flight safety preparation,” TransAsia says. The LCC will initially have 2-3 aircraft in its fleet, a spokesman tells Aviation Week.
According to the Aviation Week Intelligence Network's fleet database, TransAsia has four A320s, five A321s, two-300s, and nine -500s in its fleet. It has orders for six A321s, 12 , and nine 72-600s.
China Airlines is set to reveal more details about its own LCC this month. It is not yet known whether it will wholly own the carrier like TransAsia, or have an established LCC as a partner. Some media reports suggest Singapore-based LCC Tigerair is a candidate to partner with China Airlines.
The airline is also yet to confirm the type of narrowbodies the LCC will use. Although it is the largest Taiwanese carrier, China Airlines has only 13 narrowbodies—-800s—in its fleet of 72 aircraft, according to the AWIN database. The carrier is considering an order for at least 20 more narrowbodies, from either the 737 MAX or A320neo families.
The Taiwanese carriers are no doubt hoping their LCCs will fare better than the Japanese startups, which are taking longer than expected to achieve breakeven.
Vanilla Air—the latest to join the LCC fray in Japan—is being established byas a wholly owned subsidiary, replacing its failed LCC joint venture AirAsia Japan. Vanilla has already received its first A320 and is scheduled to launch on Dec. 20, with flights from Tokyo Narita airport to Okinawa and Taipei.
Vanilla's second aircraft is due to arrive in mid-December, and a third in mid-January, a company spokeswoman tells Aviation Week. The airline expects to boost its fleet to a total of five by the end of March, and to add another aircraft by the end of 2014. All of its A320s will be leased.
Vanilla Air plans to launch a domestic flight from Tokyoto Sapporo on Jan. 29, and a new international route to Seoul on March 1, according to the spokeswoman. She says sales for the first two routes have been strong, particularly for the Narita-Taipei flights.
ANA's earlier joint venture with Malaysia-based AirAsia was dissolved in October, after disagreement over how AirAsia Japan should be run. A major factor was that the carrier's financial performance had not met expectations. When the end of this agreement was announced, ANA stressed that it would set up another Narita-based LCC to take its place.
AirAsia Japan was one of two LCC joint ventures established by ANA in 2012. The other, Osaka-based Peach Aviation, is still in operation and currently has a fleet of 10 A320s.
ANA rivalset up its own LCC joint venture —Jetstar Japan—in partnership with the group. It has 18 A320s, and plans to boost its fleet to 24 with the help of new investment by the partners.
While legacy carriers have been busy setting up LCCs, Asia's major low-cost groups have been continuing their rapid growth. With their massive narrowbody orders, expansion is imperative for the likes of AirAsia and Indonesia's Lion Air.
Lion Air is preparing to launch a new affiliate in Thailand this week, after that country's Department of Civil Aviation recently issued its air operator certificate.
The LCC plans to begin operations Dec. 4 with a twice-daily flight between Bangkok and the northern Thai city of Chiang Mai. It has also applied for international traffic rights, which it needs to start overseas service, and wants to launch flights to Kuala Lumpur and Jakarta in late December.
So farhas two Boeing 737-900ERs, both new deliveries from Lion Air's orderbook. It is due to receive a third in March, and plans to add up to nine more 737s in 2014. It has earmarked Singapore and southern Chinese cities as potential new international destinations.
AirAsia already has a well-established short-haul LCC affiliate in Thailand, and the group's long-haul affiliate——intends to establish its own Thai joint-venture operation early in 2014.
Growing its overseas franchises is a key plank in the AirAsia strategy, so it is allocating more of its new aircraft deliveries to these carriers.
Of the 12 new Airbus A320s the AirAsia group is due to receive in the fourth quarter, four will go to its Thai short-haul operation and eight to the Malaysian parent carrier. Also in that period, five of the A320s already in the Malaysian fleet will be redeployed to AirAsia's Philippine operation. Of the four aircraft from AirAsia's defunct Japanese joint venture, three will go to its Indonesian affiliate and one to the Philippines.