WEEKEND READ: The low-cost revolution

Traditional airlines are under assault from a new breed of budget carriers intent on invading their airspace. The entire industry should brace for turbulence.

While most aviation analysts are focussing on the impact of fuel prices on the airline industry, there's a silent cataclysm underway which is reshaping the industry by stealth.

While everyone is looking the other way, a new generation low-cost model is changing the way the whole industry operates its business – a few years ago, cheeky upstart 'discount' or 'low-cost-carriers' started eating away at 'traditional' airlines'' customer base.

They began to expand the total market, using modern, efficient aircraft which are cheaper to run. They offered a no-frills service to entice people to fly who hitherto found it all too expensive.

They lease, rather than buy, their planes to save on capital and they charge for every passenger service under the guise of giving customers a choice of paying for the services they want rather than for a minimal standard for all in their class.

Now those alternative carriers are becoming mainstream in a way they never envisaged when the concept was first born.

There's a slightly tawdry analogy in the magazine publishing game: a decade ago when 'top-shelf' mens magazines were in rapid decline a publisher was overhead in discussion with the editor of a then new generation 'lads mag' (it might have been Ralph). Back then mens' mags still ensured its busty models preserve a general sense of modesty. "You'll take over our ground," he was heard to say. "And in the end, you'll become like us."

History has – generally speaking – proved that statement correct. And exactly the same comment could apply to today's traditional airline industry.

One of the most telling examples was September's decision by Indian low-cost-carrier Kingfisher Red – the re-branded Deccan airline which full-service carrier Kingfisher took over early this year – to begin offering hot food. Free.

And it won't be micro-wave heated pot noodles or ham sandwiches curling at the edges. "The food will be filling," Kingfisher GM marketing Vikram Malhotra told The Times of India. "We are Indians, we don't survive on cold sandwiches and biscuits for lunch."

That moot point aside, such a precedent could send loud vibrations through the corporate engine rooms of Qantas' Jetstar or the fast-growing Kuala Lumpur-based LCC group AirAsia.
Or would it?

Because this week, Jetstar in Australia announced it would commence in-flight broadcasts of radio stations Nova and Vega on its flights.

"Offering our customers the choice of more quality and popular entertainment options when flying Jetstar where some airlines are looking to reconsider some in-flight entertainment options due to costs, means we are keeping well in step with the modern travellers’ wants and needs," incoming Jetstar chief Bruce Buchanan said in a statement.

To listen to the radio stations while flying, customers must rent headsets from Jetstar for $3 for domestic flights and $5 for trans-Tasman and international services.

An optional $3 per passenger charge could be waived as a competitive edge in a market gradually being flooded with airline alternatives.

In the Asia-Pacific region there is a proliferation of low-cost carriers which is showing little sign of shaking out. You can fly between various Australian domestic points by Jetstar, Tiger and Virgin Blue (which is currently pushing the boundaries of the definition in service levels but not price) – and there is a remote possibility of Vivajet joining those ranks sometime next year, regulatory hurdles and capital arrangements willing.

The list is even longer in the Oceania-Asia region: there's Virgin Blue (and its various sub-brands), Jetstar, Jetstar Asia, Jetstar Pacific (Vietnam), Air Asia, Air Asia X, Tiger, Kingfisher Red, JetLite, GoAir (all in India), Cebu (Philippines), Viva Macau (albeit with only two ageing Boeing 767s in its 'fleet'), Lion and a raft of dodgier offerings from Indonesia, Thai Air Asia and the mercifully-suspended One-Two-Go in Bangkok, Korea's new Jeju...the list runs on.

Such a list illustrates how keen the competition is: all these carriers are trying to stake their share of the aviation market with varying degrees of success. All are currently exploiting a perceived competitive advantage against full service flag carriers flying the same routes.

And all of them are going to have to convince the travelling public they offer a more compelling offer – not just to their rivals but within the wider airline industry itself. It's game on.

And if fuel prices continue to ease back to realistic levels, the more efficient discount operators are going to find they have room to offer something over and above less efficient rivals without putting their fares up.

It will be a slow process, but one that Kingfisher Red and Jetstar have demonstrated is now underway.

The line between traditional and discount airlines are about to become as blurred as a five minute old jetstream a mile above earth.

Robert Stockdill is the co-founder and group editor of Aviation Record.com.

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