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Monday, 29 September, 2008, 16 : 00 PM [IST]

Singapore-Kuala Lumpur route to benefit from liberalisation: CAPA

According to a Centre for Asia Pacific Aviation (CAPA) report, the Singapore-Kuala Lumpur (KL) route is expected to show the fastest growth in the world next year, as Low Cost Carriers (LCCs) from both sides rush to take advantage of market liberalisation. Rosalynn Tay, Managing Director- Singapore, Tiger Airways stated, “This is a huge milestone in Asian low-fare aviation. The customer is the big winner here.”

Tiger Airways and Jetstar Asia have announced plans to add just less than three quarters of a million new seats annually from December 1, 2008. AirAsia is expected to raise its frequency on the route from two per day to at least six, taking the tally well past one million. The route currently has around three million seats both ways per annum, so the added LCC capacity is expected to have a massive impact on pricing.

Tiger Airways is unleashing 50,000 free seats to launch its promotion (plus taxes/charges), as it raises the frequency of its service from once to five times daily, operating from the Budget Terminal. Jetstar Asia, which is reporting a load factor of 65 per cent on its existing single daily service, is adding 12 more frequencies from December 1, 2008, operating from Changi Terminal One and Kuala Lumpur International Airport’s (KLIA) main terminal.

Singapore Airlines (SIA) currently operates six times a day to KL with B777s, while Malaysia Airlines operates an average of eight flights a day (with a mix of smaller B737/A330 equipment) and they continue to codeshare on the route. SIA (with its larger capacity aircraft) has a 47 per cent capacity share at present, according to the Official Airline Guide (OAG).

Singapore to Kuala Lumpur Capacity share: Week commencing September 22, 2008

top_290908_1.jpg Source: Centre for Asia Pacific Aviation and OAG

Assuming AirAsia increases to six times weekly service (and the incumbents retain their current service levels), SIA’s capacity share will drop below 33 per cent and Malaysia Airlines to below 18 per cent. AirAsia and Tiger Airways would have 18 per cent and 15 per cent capacity shares respectively, followed by Jetstar on eight per cent.

Benefits seen for AirAsia X
AirAsia, which is yet to disclose its service plans (and expected massive promotional splurge), recently stated it is seeking to increase frequency to Singapore by at least another four daily services, with Tony Fernandes, CEO, Singapore Airlines adding that the carrier expects to eventually operate up to 20 times daily service to Singapore. Fernandes added the development will also be good for AirAsia X in the short term, providing additional passengers to its long-haul services to the Gold Coast, Hangzhou, Perth (six times weekly from November 2, 2008) and Melbourne (four times weekly from November this year).

Curtain raiser for ASEAN capital city liberalisation
Exciting as the Singapore-KL move is, it is merely a curtain raiser for the opening of the Association of Southeast Asian Nations (ASEAN) capital cities liberalisation initiative from January 2009 which promises to unleash the next round of route development and traffic growth in the region.

Carriers from the ten member countries will be free to operate unlimited services between capital cities within the grouping, as a preliminary step towards an ASEAN Single Aviation Market by 2015.

The opening of the market beyond the Singapore-KL route is now firmly in the sight of the LCCs. AirAsia plans to launch service to Singapore from Penang, Kuching and Kota Kinabalu as soon as possible, while Tay added that Tiger Airways is looking forward to the next stage of liberalisation to other cities in Malaysia as well as encouraging other countries in the region to follow Singapore and Malaysia’s lead.
 
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