Is there a need for more LCC in Asia? Yes and No... Here's the case in Indonesia...
1. Passengers claim that first and foremost they want cheap fares.
2. Passengers don't mind a no frills service at first... but they eventually get bored.
3. The formerly "elite" group of passengers will stay with the full fare airlines... but with reduced levels of service for airlines to stay competitive with the LCCs, they have to endure less service, and now share the cabins with the "plebs".
4. Eventually, the industry attracts the "annoying pax"... which is the ones who want to pay the least but refuse to accept the lower service... When they're in a minority that's OK
... but when you start having >5% of your pax like that, it brings a lot of bad publicity.
5. Pax don't mind walking to their aircraft... Well here, apart from a few airports, they will have to walk to the aircraft anyways. And NO ONE likes to walk to the aircraft in the rain... LCC or not.
Is there a need for (more) LCCTs in Indonesia? No...
What we need is more apron space and more terminal floorspace. The situation is such that the slot constraints here are lack of parking space.
anyways, back to the LCCs....
In Indonesia, despite almost everyone claiming to be an LCC, the only true LCC style operations are Indonesia Air Asia and Garuda's Citilink... Only Garuda is the proper Full Service Carrier... The rest is a confused bunch unable to make up their mind which end they want to go to.
Why does that happen?
Again, pax want the lowest fare but not the lowest service, and yes, they're pretty vocal about it. It quite frequent for a cabin crew to say to a pax "Sir, if you want a hot meal, you should fly Garuda next time," only to be replied with "But I want a hot meal now and on your flight." Again, when you get 1 or two of these people in your flight it's OK
, but when you start getting 5 of them out of 125 pax EVERYTIME, you know something's wrong... What's needed is passenger education.
Why is passenger education needed?
Many airlines here are NOT honest about their true service character. Whaddahell does that mean?
Let's take the example of Air Asia and Citilink, they are what I call the honest LCC... why? They say it up front:
1. Use it or loose it!
2. No meals! Mineral water only!
3. We're here to get you from A to B safely and reliably.
The rest of the LCC-wannabes go like this:
1. Buy the ticket, and once the seats have filled up, you can't get on... Oh we forgot to tell you we sold 10% more seats than the airplane... Check in 2 hrs before the flight next time! (yes, it happens)... Then, "we can always rebook you if you pay another 75% of the fare!"
2. "We serve meals" advertised, but the reality is only bread rolls, tea or mineral water.
3. "We fly from A to B 10x a day (but we regularly cancel 5 of them and try and make them leave on time, or even earlier if we've filled up thanks to the overbooking)."
It is a sad situation when in holiday season, you see a family stranded at the airport when they've done nothing wrong but end up the victims of overbooking... Sure they paid 50% of a Garuda ticket, but then, get told by the airline "you have to rebook (and pay 75% of your ticket price) or your ticket will not be refundable)."
The sad thing is many have fallen to this... and some airlines look at their station performance using "incidental revenue" as a performance criteria.
Schedules? WHAT SCHEDULE? In order to cut costs, some airlines have resorted to cold-blooded tactics of cancelling at will without notification, or even moving the schedule forward and then use the standard overbooking policy to get more money. And these carriers oppose to radical solutions of their competitors' more honest approach to the LCC and/or carrier reliability issues by playing the regulator's xenophobia/lack of understanding of the real issues.
So, more LCC's in Indonesia? Well, Garuda's planes are still "full", and they're returning jets to cut capacity and keep yields up. Even Lion Air, the so-called "champion of low costs" in Indonesia with the slogan of "We make people fly" have now turned around saying the LCC model is out of date (yes, they received a HELL OF
A LOT of complaints). Then we have airlines like Sriwijaya, who grew rapidly over the last year to double its fleet to 15 732s, by adopting the middle market and dumping their "LCC-wannabe" style... result... full loads.
Does Indonesia need more LCC?
1. Garuda's Citilink - Despite an honest approach to what they've provided, given their "flag carrier's baby" status, they made huge losses and now have decided to leave the Jakarta market and have realigned their routes, either because its finding the markets, or they're still trying.
2. Garuda Full Service - The Low Fare attack have hit its yields and overcapacity. Its major problem however is its debt... loads are still high on routes people want to go on, and the ticket prices are high.
3. Lion Air/Wings - The champion of low cost carrier is going full service (or trying). Try and book on a Lion ticket and don't be surprised if you find the fare is higher than the Garuda one... Their LCC operations in the name of Wings Air is a mess. However, this airline has publicly stated that they are going for the low fare full service road.
4. Adam Air - The airline that started as the low fare full service carrier have gone to shambles in terms of operations. It has now stripped its service to the lowest level... no more meals... and don't forget the overbookings, and the maintenance "cuts" to keep its margins (culminating in the spectacular incident where a 733 lost its way and landed 400NM from its destination due to an IRS problem). Lets not forget the lowest salaries around.
5. Batavia Air - Despite the new A319s, the pursuance of low fares have eaten this carrier alive. One by one their 732s are grounded, 6 at the moment which are grounded due to various maintenance issues... Spare cash for this airline has also run out according to one financial institution.
6. Express Air - After their previous operations (LCC) went bust, they are now making nice gains as a "normal carrier", with good loads on their niche routes.
7. Kartika Airlines - LCC attempt failed, now gone the complete opposite and still struggling.
8. Bouraq / Bali Air - The LCC attempt of Bali Air ended as a spectacular failure when their partners decided to set up Batavia Air and then Sriwijaya Air. Internal struggle to be an LCC or not eventually caused their collapse as they lost focus on the importance of debt service.
9. Indonesia Air Asia - The true and honest LCC, still hasn't rocketed to prominence despite airlines leaving the LCC sector. The previous plans of operating 12 aircraft by this year is not being met with only 5 in service.
10. Jatayu - Offering Low fares with minimal service... and now only their Medan - Malaysia operations are running, and that's probably going to have a shaky future as Adam decides to dump spare capacity out of Medan.
So, the above are just simplified versions of the stories. It looks like Indonesia is turning its back on LCC and prefer to settle for the more moderate "lower to middle" market. On the international markets, full service carrier still offer cheap fares with very low margins, thanks to the cargo carried underneath.
Where has it all gone wrong? Lack of gateways and infrastructure. Airports having limited apron and terminal floor spaces and the lack of suitable alternative airports for catchment areas is a problem.
Where it has gone right is where they can use an alternative airport. Air Asia hit the jackpot on Bandung and Solo. Bandung is estimated at 15 - 25% of the Jakarta's international market, its Bandung - KUL
flights tapped into this nicely, followed by Adam. Solo, has the catchment market of a few million people between itself and Surabaya, and has always been undermined by the proximity of Jogjakarta and Semarang which have better connectivity. Here, Air Asia again caught it right. Adam has decided to fly to Solo too (following Sriwijaya).
One recent gem is the city of Malang, south of Surabaya. Sriwijaya aggressively pursued this city during its initial LCC wannabe days, and Adam has recently entered the route. This airport is slot controlled by the military but has the catchment area of anywhere from it to the Bali strait.
Despite inflation fears, economic stagnation, the passengers are still not embracing LCCs the way the Americans and Europeans have. The situation in Indonesia is showing that a carrier must be a true LCC or don't bother claiming to be one. And even as an LCC, your lower cost structure, your low fares, might not be able to attract the yields, and infact, it could kill you! In the end, with the cases of Bandung, Solo and Malang, it goes to show that the key here is still to open new routes, or attack alternative markets... however, you don't need to be an LCC to do that... though it helps.
Sorry, just my 20 minutes worth of junk typing... so don't slap me if I'm writing rubbish...