Tuesday, November 29, 2011

Discount airlines change air travel in Asia - USATODAY.com

HONG KONG – Budget airlines are leading a revolution in air travel in Asia.

  • Fliers wait Oct. 30 at Beijing airport during delays due to severe smoggy weather.

    AFP/Getty Images

    Fliers wait Oct. 30 at Beijing airport during delays due to severe smoggy weather.

AFP/Getty Images

Fliers wait Oct. 30 at Beijing airport during delays due to severe smoggy weather.

Carriers such as Jetstar, AirAsia and Tiger Airways are driving demand by rolling out flights to underserved Asian cities. They're forcing full-service Asian airlines to lower fares and, in some cases, launch their own discount airlines. U.S. carriers, in an effort not to be left behind, are beefing up their long-haul services to the region and striking alliances with their Asian counterparts.

The moves come as booming economies such as China and India lift hundreds of millions of people out of poverty. From 1990 to 2008, the middle class more than tripled to 1.89 billion people in developing Asia, which includes China and India. This population, defined by the Asian Development Bank as those spending $2 to $20 a day, is increasingly demanding middle-class trappings: televisions, refrigerators, cars and travel.

At the same time, once tightly regulated air markets in Japan, South Korea and China have begun opening to foreign carriers, which could lead to as many as 300 million more people traveling between these countries each year, estimates the CAPA Centre for Aviation in Sydney. That would be 20 times more than now.

"What is happening is a once-in-history change," says Peter Harbison, executive chairman of CAPA. "The numbers simply defy traditional forecasting."

Already, Asia's appetite for air travel has made the region the largest, most-profitable and among the fastest-growing markets in the world. And demand is only beginning.

Swelling demand

To understand the potential of this market, consider this: While China and India account for a third of the world's population, the average consumer in China takes only one flight every five years, and the average consumer in India takes one flight every 20 years, according to the International Air Transport Association, or IATA. In a developed country such as the U.S., the average is nearly two flights per person per year.

Last year, Beijing Capital International Airport overtook London Heathrow to become the second-busiest airport in the world, behind Atlanta. Nearly 74 million travelers passed through the Beijing airport last year.

As demand for air travel swells in Asia, it'll generate orders for thousands of passenger jets and create thousands of airline and airport jobs.

It'll also be a boon to other industries by increasing revenue for hotels, restaurants and retailers. And it'll boost real estate prices in some cities as airlines launch service to them.

Overall, air travel will grow 1.5 to two times faster in Asia than gross domestic product, predicts Rigan Wong, a transportation analyst at Citigroup in Hong Kong. GDP in developing Asia will expand 8.5% next year, much faster than advanced economies' 2.6% growth and the global economy's 4.5% growth, the International Monetary Fund estimates.

When per-capita GDP rises above $3,000 a year, it usually means "the population is well-off enough to travel by air, and that's when we see acceleration in air travel," Wong says.

China, Malaysia and Thailand have surpassed that threshold, while Indonesia is at the cusp and the Philippines is approaching it, Citigroup's anal- ysis shows.

Rowena "Neneth" de Vera, a rice farmer in the northern Philippines, began flying five years ago when competition between airlines lowered the cost of a ticket from the north to the south to $44 one way.

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