ANALYSIS: LCC battle heats up in Asia Pacific

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Growth in the low-cost sector continues to be strong in Asia Pacific, with at least 10 new players planning to launch operations in the region this year. Their entrance will mainly affect markets in the Greater China region, Thailand, Japan and India.

Flightglobal Pro takes a closer look:

China

The highly-regulated China airline market may only have one home grown low-cost carrier (Spring Airlines) at present, but things look set to change. The Civil Aviation Administration of China has signalled its intentions to promote the development of Chinese low-cost carriers in response to a growing number of foreign LCCs flying into the country.

Shanghai-based Juneyao Airlines has applied to set up low-cost unit Jiuyuan Airlines. The carrier, which means “nine yuan” in Chinese, plans to start with domestic services from its base in Guangzhou before launching regional services.

Full-service carriers Hainan Airlines and China Eastern Airlines are meanwhile working to convert their respective subsidiaries West Air and China United Airlines into low-cost operations. West Air is based in Chongqing while China United operates out of Beijing.

Hong Kong

Over in Hong Kong, Qantas Airways, China Eastern Airlines and Hong Kong conglomerate Shun Tak Holdings are awaiting approval from the local government to launch Jetstar Hong Kong. The airline’s launch has been delayed from last year because its air operator’s certificate application has met with opposition from Cathay Pacific, Dragonair, Hong Kong Express and Hong Kong Airlines. The carrier has taken delivery of five Airbus A320s, some of which are in storage in Toulouse.

Taiwan

After years of mulling over whether to enter the low-cost market, two Taiwanese carriers have decided to take the plunge. With domestic travel well covered by Taiwan's high speed rail network, the low-cost carriers will focus on regional routes. Though there is strong demand for cross-straits flights, there is also a cap on the number of such weekly flights which could prove challenging for LCCs to secure slots.

TransAsia Airways has announced plans to start a yet unnamed low-cost unit with a fleet of A320s on routes within a five hours range from Taipei. Flag carrier China Airlines is meanwhile partnering with Tigerair to launch Tigerair Taiwan, with plans to grow to a fleet of 13 aircraft within three years.

Japan

Spring Airlines Japan received its air operator’s certificate from the Japanese authorities last December. The carrier, a joint venture between Chinese low-cost carrier Spring Airlines and unnamed Japanese partners, will launch services on 31 May. It will start with a fleet of three Boeing 737-800s on services from Tokyo Narita to Hiroshima, Saga and Takamatsu.

The approval, which has been delayed because of political tension between China and Japan over the disputed ownership of islands in the East China Sea, has not come at the most ideal time as political tension between the two countries remain high. Operating from Japan could prove costly, and AirAsia Japan has demonstrated the challenges of a joint venture with differences in management styles. AirAsia Japan has been rebranded Vanilla Air after ANA and AirAsia dissolved their joint venture last October. Besides AirAsia Japan, Japan also saw the entrance of Jetstar Japan and Peach Aviation in 2012.

Thailand

The Thai market will get even more crowded in 2014. Vietnamese low-cost carrier VietJet Air is partnering with Thai regional carrier Kan Air to set up a new joint venture airline, targeting to launch in early 2014. The carrier will be based at Bangkok’s Suvarnabhumi airport. VietJet’s entrance follows that of Lion Air, which launched Thai Lion Air last December.

On the long-haul front, Thai AirAsia X has secured an air operator’s licence and is planning to launch in the first quarter of 2014 with two A330s. AirAsia X chief executive Azran Osman-rani says the Thai unit will target North Asia and Australia as its first markets, especially cities where AirAsia X already operates, so that the airline could hit the ground running.

Hot on the heels of Thai AirAsia X, Nok Air and Scoot are partnering to launch a Bangkok-based longhaul carrier. Details have not been released, but NokScoot will be based at Don Mueang International airport and operate widebody aircraft on medium and long-haul services.

India

Over in India, India AirAsia is inching closer to a launch as the country’s civil aviation department processes its air operator’s permit application. The low-cost operation, which had originally planned to start services in the fourth quarter of 2013, will launch with a fleet of three A320s from its base in Chennai and expand its network across the country. The carrier is a partnership between AirAsia, Tata Sons and Telestra Tradeplace.

In the same year, Singapore Airlines and its Indian partner Tata Sons are also expected to launch. The full-service carrier, to be based in New Delhi, is working towards a mid year launch. SIA has long held ambitions of playing a greater role in India, and is now poised to challenge flag carrier Air India in the full-service market.

Venturing into India could however be risky as airlines have to contend with the high levels of taxation on jet fuel, spare parts and maintenance. Other challenges include dealing with New Delhi's bureaucracy and archaic regulations.