Singapore - The future of Asia's fledgling budget airline industry looked bright with the entry of aviation's big players, but massive European-style price cuts were unlikely, analysts said yesterday.
Singapore Airlines and Tony Ryan, the founder of successful European budget airline Ryanair, became the latest to stake their claim with an announcement on Tuesday that they were setting up Tiger Airways to start flying from the city state next year.
Malaysia's AirAsia is the most established and successful no-frills carrier in the region. It expanded its intracountry routes into Thailand on Monday.
Other players include Indonesia's Lion Air, which flies a no-frills service from Jakarta to Singapore, Orient Thai Airlines, Malaysia's Athena Air Services and Singapore's ValueAir, which expects to start flights next year.
But it is the recent rush by the major airlines to establish no-frills services that analysts and industry players believe has confirmed the future of low-cost carriers in Asia and will lead to stronger competition.
Aside from the venture between Singapore Airlines and Ryan, Australia's Qantas Airways this week named its new budget airline, JetStar, to counter the success of low-cost upstart Virgin Blue, which has 28 percent of the domestic market.
British businessman Richard Branson, who launched Virgin Blue three years ago, also wants to enter the Asian market and is looking for partners.
"We are in discussions with one or two people about either working with them on a low-cost airline they have already set up or setting up a low-cost airline," Branson told Bloomberg News in Sydney. He predicted a decision in three to six months.
The Sydney-based managing director of the Centre for Asia-Pacific Aviation, Peter Harbison, was extremely bullish on the future of the region's low-cost airline industry, especially after the announcement of Tiger Airways.
"I think this significantly steps up the level of competition and the importance of this type of model in the region."
"The low-cost carrier model works best in ... the short-haul point-to-point market where ... the deciding factor is price."
Jimmy Lau, a spokesperson for ValueAir, said the decision by Singapore Airlines to set up a no-frills airline would ease concerns that there were too many obstacles for budget carriers to succeed in Asia.
"For us, what Singapore Airlines is doing has validated our business model. It means the model can work in Asia."
Some of the reasons previously cited for Asia being unable to replicate the European no-frills success include the relatively long distance of the routes and the lack of cheap alternative airports away from the main ones.
Europe is also regarded as having a far bigger surplus of pilots, which drives the cost of salaries down, and Asia does not have a common market.
Hong Kong-based ING Financial Markets aviation analyst Philip Wickham said these factors meant passengers in Asia were unlikely to enjoy the ultracheap flights available in Europe, where tickets can sometimes cost less than a pint of beer.
"I think you will see some cheaper flights but you might not see anything dramatic."
Wickham also pointed out that the lack of a common market meant it was highly unlikely a budget airline would be able to operate as a pan-Asian service.
Instead, he said, the low-cost airlines in Asia would generally only be able to fly routes that began or ended at their airport.
Nevertheless, passengers could expect to pay hundreds of dollars less for many popular destinations that were not serviced by no-frills airlines, analysts said.
For example, Wickham said, destinations offered by Tiger Airways would include Bali, Bangkok, Hong Kong, Jakarta, Manila and Phuket.