Low-Cost Carriers in Emerging Countries

John Bowen

• Publisher: Elsevier
• Year: 2019
• Print ISBN: 9780128113936
• eBook ISBN: 9780128113943
• Topic: Technology & Engineering
• Subtopic: Transportation & Navigation
• Index: Technology & Engineering

Low-Cost Airline Carriers in Emerging Countries traces the development of low-cost carriers (LCCs) in Asia, Latin America, the Middle East and Africa, examining airlines that have become significant players in their home markets but little known at a global scale. The book maps the geography of the LCC phenomenon, explaining the starkly varying success of budget airlines, and assessing their current social, economic and environmental impacts. The book concludes with insights into the future potential of the LCC phenomenon along with its global ramifications.Beginning with Southwest Airlines in the 1970s, low-cost carriers (LCCs) have democratized air travel around the world, fostering huge increases in airline traffic and transforming the airline industry. At the same time however, the ascent of these budget airlines has exacerbated aviation-related problems such as aircraft noise, airport congestion, greenhouse gas emissions and more. LCCs have been extensively studied in the US and Europe but not in emerging regions of the globe. Yet the impact of such airlines is greatest in low- and middle-income economies where only a small fraction of the population has ever flown, and where competition from alternative modes (road, rail) is weak.- Examines the evolution of low cost carriers around the world, how established airlines react to their entry and the wide-ranging societal implications for individual countries and the world- Places emerging countries' LCCs into a global context, comparing them to their US and European counterparts- Offers original quantitative analysis of LCC networks at several spatial scales (global, regional, national, airport vs. airport) using global schedule data from OAG- Includes professionally produced maps of representative airlines networks

Chapter 1

Introduction: “Now Everyone Can Fly”

Abstract

In 2018, more than 130 low-cost carriers (LCCs) accounted for nearly a third of airline seats around the world. This chapter defines LCC and sketches some measures of their importance. With a couple of notable exceptions, budget airlines in emerging markets (defined here as Latin America, sub-Saharan Africa, the Middle East and North Africa, Eastern and Central Europe, and Asia-Pacific outside of Japan, Australia, and New Zealand) have received relatively little scholarly attention, but their rapidly growing significance warrants careful scrutiny. LCCs have made it possible for hundreds of millions of people to fly for the first time and for others to fly more often. The resulting shift in travel away from buses and trains and other modes has enormous social, economic, and environmental implications, which are introduced in this chapter and explored more fully in later parts of the book.

Keywords

Aeromobility; Air Manas; AirAsia; Emerging markets; Low-cost carrier; T’way Airlines

At about 7:00 p.m. local time on Friday, April 6, 2012, the Singapore Airlines (SIA) flight SQ 748 from Hong Kong landed at Singapore's Changi Airport, completing the company's last passenger flight with the iconic Boeing 747. On board were airline executives, aircraft enthusiasts, media representatives, and others invited to commemorate the end of the airline's 40-year relationship with the jumbo jet (SIA, 2012). Many of the 350 people on board were ensconced in the luxurious business and first class cabins. But even those in economy class enjoyed SIA's legendary high level of service. When the flight reached cruising altitude, the crew served champagne to everyone on board to toast the “queen of the skies.” The acclamation was well warranted, for the 747 had been instrumental in the rise of SIA to its stature as one of the industry's elite carriers, and the airline had once operated as many as 51,747 s on a network encircling the globe. Yet by the early 21st century, the big jet's four fuel-thirsty engines made it inefficient in comparison with two-engine wide-body jets like the Boeing 777, so the SIA and other airlines gradually withdrew a once celebrated plane from service.

That same April evening at Changi, at about the same time that flight SQ 748 touched down, other flights were coming and going. Among them was the departure of AirAsia flight 716 to Kuala Lumpur. The AK 716 was operated by an Airbus A320, one of the more than 5000 operated by airlines around the world at that time with thousands more on order. The jet was packed with 180 economy class seats and there was no champagne or for that matter any alcohol on board. There was no fanfare at its departure and none at its arrival. Yet if AK 716 went unremarked, it was not exactly unremarkable. For the 1-hour flight was one small example of a global phenomenon that has transformed the airline industry and—to some degree—the communities it ties together.

AirAsia is a low-cost carrier (LCC), an airline whose operations are structured in almost every way to minimize cost, fostering lower fares in turn. The earliest LCCs were Pacific Southwest Airlines in California in the 1960s and Southwest Airlines in Texas in the early 1970s (Bowen, 2010, chap. 7), but in the decades since, budget airlines have spread to markets around the world. This book is about LCCs in emerging markets—defined broadly here to include Latin America, sub-Saharan Africa, North Africa, the Middle East, South and Central Asia, Southeast Asia, and East Asia (excluding Japan). In 2018, there were more than 130 operating LCCs globally, including those identified by the International Civil Aviation Organization in 2017 (ICAO, 2017), a handful of other airlines recognized elsewhere as LCCs but missing from the ICAO tabulation¹ plus a handful that launched by mid-2018. Of these, 85 were based in developing markets, including Malaysia-based AirAsia and its subsidiaries Thai AirAsia, Indonesia AirAsia, Philippines AirAsia, AirAsia Japan, AirAsia India, AirAsia X, and Thai AirAsia X.

The stories of Southwest Airlines (Muse, 2003), the world's largest LCC, and easyJet (Anderson, 2014) and Ryanair (Creaton, 2004), the two largest in Europe, have been told in numerous places, but budget airlines in developing countries comprise too new a phenomenon to have attracted much attention. A couple of books have been written about budget airlines globally, but these volumes are now increasingly dated in a so dynamic an industry and emerging markets comprise only a part of the focus. The Low Cost Carrier Worldwide (Gross & Lück, 2016) and the Handbook of Low Cost Airlines: Strategies, Business Processes, and Market Environments (Gross & Schöder, 2007) provide wonderful insights into the LCC business but give relatively little attention to the broader impacts of budget airlines. The same is true of a World Bank publication, Ready for Takeoff? The Potential for Low-Cost Carriers in Developing Countries (Schlumberger & Weisskopf, 2014). True to the priorities of the World Bank, the latter book focuses on the policy of environment for LCCs. This is an important concern and one that is addressed in the present book too, but it is only one piece in a bigger puzzle.

The new airlines of Africa, Asia, and Latin America are taking wing in a sky generally not yet crowded with well-established airlines. And on the ground, road and rail transportation systems are in many instances slow, congested, and dangerous. As incomes grow in emerging economies, LCCs are well positioned to capture much of the resulting demand for intercity transportation. The implications at the local, national, regional, and global scales are enormous. Most fundamentally, many more people will join the ranks of the world's flyers, with far-reaching positive and negative impacts.

Consider this: on December 23, 2003—exactly 100 years after the Wright Brothers’ first flight—an estimated 540,000 people were airborne on commercial flights somewhere in the world (Bowen, 2010, chap. 1), but approximately 54% of them were on flights that were both originated and terminated in a developed country (i.e., Western Europe, North America, Japan, Australia, and New Zealand) (Author's analysis of OAG, 2003). By April 6, 2012, when SIA's last 747 passenger flight touched down, the airborne population had jumped to 880,000 and the developed country share had tumbled to 37% (Estimate based on OAG, 2012 and methodology described in Bowen, 2010, chap. 1). The LCCs, including the LCCs in emerging markets, have propelled these trends, which are expected to continue toward the middle of the 21st century. Indeed by 2018, the airborne population at any one moment was approximately 1.4 million, but only about 34% were on flights that originated and t...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Acknowledgments
• Chapter 1: Introduction: “Now Everyone Can Fly”
• Chapter 2: Takeoff Paths: The Ascent of the LCC Phenomenon
• Chapter 3: Follow the Leaders: Pioneers in the Development of Budget Airlines
• Chapter 4: The Diffusion of LCCs in the Americas
• Chapter 5: Banking West: Budget Airlines in Eastern Europe and the Former Soviet Union
• Chapter 6: Mobile Money, Mobile People, Mobile Economies? LCCs in Sub-Saharan Africa
• Chapter 7: Shorter Superconnectors: LCCs in the Middle East and North Africa
• Chapter 8: Lions and Tigers: LCCs in Southeast Asia
• Chapter 9: Giants Flying in Different Directions: Budget Airlines in India and China
• Chapter 10: Now We Can All Fly? Aeromobility, Sustainability, Vulnerability
• Index