Tuesday, October 30, 2007

Budget KL-Singapore Flights, Anyone?

Budget carriers AirAsia and Tiger Airways have been given green light to ply the lucrative Kuala LumpurSingapore route, plus a few other routes between Malaysia and the island republic. (Read the news here and here.)

What will be the impact to the incumbents, Malaysian Airlines (MAS) and Singapore Airlines (SIA)? I am no expert in aviation, but I think they still have certain advantages.

Business travelers may still prefer the incumbents. They often travel in short notice, and therefore unable to get the lowest possible fare from a budget airline by booking well in advance. If they do book weeks before the scheduled departure, they would be penalized for any changes in plan. Furthermore, many companies already save on airfare by getting discounts from their travel agencies. Finally, large corporations may be concerned that their image would be affected should their staff travel with low-cost airlines.

A study carried out by American Express in 2004 revealed that "business travelers who use no-frills carriers and don't book in advance may be paying comparable fares to traditional airline."

The same study, however, showed that economy class short-haul fares had fallen by 4.54% in the U.S. and as much as 17% in Europe. As such, I expect MAS and SIA to respond to the new challenges by cutting cost aggressively.

Leisure travelers who can book the flights weeks or even months prior to departure will find the offerings of budget carriers appealing. However, one must remember the 80/20 Rule – 80% of the sales come from 20% of customers. Here, the passengers who spend the most are the business travelers.

If I were the boss of KL International Airport, I would invite car rental companies to operate in the Low Cost Carrier Terminal (LCCT). That way, visitors from Singapore can leave their cars at home and pick up one upon arrival. That was exactly what I did when I worked in the U.S. a few years ago.

American Express Study Reveals Improved Prospects for Business Travel Industry in 2004

Related post:
AirAsia X, the Long-haul Budget Airline


  1. Actually, studies has shown that a lot of business travelers also don't care much about the frills. They just want to get from point A to point B.

    The reason why full service airlines like Mana Ada Sistem are making loses is because of poor management.
    SIA on the other hand, was reported to be the most profitable airline in Asia.

    Budget airlines use less noise insulation materials aboard their aircrafts, hence, lesser load and lesser fuel consumption.

    Their crew do not stay overnight on domestic routes. The same plane return to their base airport. Here, substantial savings are also gained when aircrew go home to sleep and no aircraft overnight parking charges incurred.

  2. cocka,
    Thanks for your insight. I learn something new.

    Agree that business travelers don't mind the frills. But they need to book well in advance to get the most from budget airlines.

    Mmm... I don't know they use less noise insulation materials. I do know that their aircrafts take off at smaller angle.

    I also know that AirAsia's crew on KL - Chiang Mai's flight return in less than an hour. Just not sure if AirAsia X can do the same thing. Gold Coast is 7 hours away.