CAPA outlines best airlines in Asia Pacific
Airline awards, honour and prestige aside, provide a valuable insight on recent airline developments. Here are the best of 2018 in Asia Pacific and the Middle East, according to CAPA.
Japan Airlines - Airline of the Year
After government bailout in 2010, Japan Airlines (JAL) were put under restrictions, lifted only in 2017. Since then, the airline managed to implement several new strategic initiatives.
JAL has since resumed expansion with several new long-haul routes including Melbourne and Kona. This year, it made new joint ventures with China Eastern and Hawaiian Airlines, in addition to the pre-existing ones with American Airlines, British Airways, Iberia and Finnair. JAL also has increased cooperation with American and Alaska and has implemented new partnerships with Aeromexico, Garuda Indonesia and VietJet – the latter a pioneering tie-up with Asia’s fastest growing LCC.
Earlier in 2018, JAL established a low cost long haul subsidiary, which plans to launch in 2020 with 787s focusing on opportunities in Southeast Asia. JAL already has a stake in Japan’s largest short haul LCC (by fleet size), Jetstar Japan, and the new long haul project will improve its position in the strategically important and fast growing budget end of the market ahead of the 2020 Summer Olympics in Tokyo.
JAL, which contracted significantly in 2010 and 2011 as it restructured, has resumed expansion with RPK growth of around 5% the last three years. The airline group has been consistently profitable the last seven years, generating operating profits of at least $1 billion every year since FY2011/2012.
Thai Lion Air - Low Cost Airline of the Year
Thai Lion Air has “adopted the LCC model to suit its market while maintaining a very low cost base through leveraging synergies from its parent the Lion Group,” according to Peter Harbison, executive chairman CAPA.
Image: Alec Wilson
Thai Lion focused initially on the domestic market, where it now has around 20% market share and is the second largest airline. Over the last year it has pursued rapid and successful expansion in the international market, with a focus on China. Thai Lion began serving China in 2016 and has already become the largest airline from Thailand – and all of Southeast Asia – in the strategically important Chinese market. Earlier this year it overtook Thai AirAsia in the Thailand-China market, an impressive achievement given that Thai AirAsia has served China since 2005.
Thai Lion has been able to expand its China network rapidly by working closely with Chinese travel agents, including OTAs. Relationships with OTAs, which now account for approximately one third of all its bookings, also have been crucial to Thai Lion’s success in other markets. Thai Lion is now connected to more than 10 OTAs directly through API.
Offline agents account for another one third of Thai Lion bookings while GDSs account for 6%. Thai Lion’s distribution strategy follows more a hybrid rather than pure LCC model but has enabled it to expand rapidly. Thai Lion provides complimentary check-in bags but is a typical LCC with its sale of seat assignments, meals and drinks.
Alliance Airlines - Regional Airline of the Year
Alliance Airlines stand out for its flexible approach, as it offers wet lease, contract and charter flights as well as scheduled passenger services which are sold under a Virgin Australia codeshare. While fly-in/fly-out (FIFO) operations for the resources/mining industry is still an important and growing revenue source, Alliance’s strategy to diversify revenue has been highly successful, leading to improved profitability and increased flying across multiple sectors. It also has an expanding aviation services business.
Image: Bidgee, CC BY-SA 3.0
Alliance has been consistently profitable the last three years and turned an AUD26 million profit before tax in the fiscal year ending Jun-2018. Revenue increased 23% to AUD248 million while total flight hours increased by 34% to 34,612.
Alliance has quietly become the world’s largest Fokker operator, with 35 aircraft currently in service (a mix of Fokker 50s, Fokker 70s and Fokker 100s). It expanded its fleet from 29 to 33 aircraft in FY2018 and plans to another six aircraft in the current fiscal year.
“Alliance is not well known, particularly outside Australia, but has been a strategic standout in a challenging segment of the industry,” Mr Harbison said. “Alliance’s success proves there is still room for small regional airlines that are flexible and innovative.”
Saudia - Turnaround Airline of the Year
Saudia (also known as Saudi Arabian Airlines) undertook successful transformation, including efficiency improvements, in-flight product upgrades, fleet renewal and an accelerated growth rate.
Saudia started its transformation programme three years ago. Since then, it has taken delivery of more than 70 aircraft, resulting in a young new fleet with new in-flight products and higher service standards. Saudia now has one of the youngest fleets in the world, with an average age of less than five years.
The transformation also included a new dual brand strategy, resulting in the launch of LCC flyadeal in 2017. flyadeal and Saudia’s strong domestic position is being effectively used to fend off increased local competition as the market liberalises.
In 2018 Saudia has moved into a new terminal at its Jeddah hub, resulting in massive customer service improvements particularly for transit passengers. Saudia’s new strategy includes pursuing more sixth freedom traffic and inbound tourism as the airline expands its international operation. More than a dozen international destinations have been launched in the last two years while capacity has been added to several existing destinations.
Image: WikiMedia, CC BY-SA 2.0
“Saudia has been totally transformed and has emerged as a strong network airline with a well-executed dual brand strategy,” Mr Harbison said. “Saudia is well positioned to benefit from a booming local market as Saudi Arabia’s youthful population travel more frequently and as the kingdom diversifies, becoming a major tourist and business destination.”
flyadeal - Start-up of the Year
flyadeal commenced operations in Sep-2017 and had already carried over 2 million passengers. The LCC currently operates eight A320s to eight domestic destinations and is close to finalising an order for up to 50 aircraft, positioning it for rapid growth over the next several years.
flyadeal is already the third largest domestic competitor in Saudi Arabia and is preparing to launch regional international operations in 2019. Long haul services are also under consideration for the medium term.
flyadeal decided to pursue a pure low cost model – becoming Saudi Arabia’s only pure LCC – aptly recognising the market was ready for a true LCC following the introduction of a more liberal regulatory environment. The model has worked, stimulating demand and capturing high load factors from the first day with a strong following particularly among young Saudis. flyadeal’s marketing campaigns successfully educated customers of its low fares no frills approach and resulted in very strong brand recognition.
About CAPA Aviation Awards for Excellence
The CAPA Aviation Awards for Excellence have recognised strategic leadership in the aviation industry since 2002. CAPA Awards for Excellence for Asia Pacific (including the Middle East) were announced during CAPA Asia Aviation & Corporate Travel Summit on November 8, 2018, in Singapore. The awards are not driven by customer surveys or sponsorship.
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