Budget airlines fly higher in economic ‘perfect storm’
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Is the current situation a crisis or an opportunity? It all depends which sector of the airline business you occupy.
Tony Tyler, the chief executive of Cathay Pacific, explaining the reasons for cutting costs at the Hong Kong carrier last month, said the conditions facing airlines were “worse than SARS,” the respiratory disease that rocked Hong Kong and other parts of Asia and caused many people to avoid flying in 2003.
Over at AirAsia, however business is just fine. For Tony Fernandes, who heads the low-cost Asian carrier, the current turmoil is “not bigger than SARS.” On the contrary, he said during a recent interview, AirAsia is “a beneficiary” of the recession that has grounded many travellers and caused air cargo to plummet.
“We are a Wal-Mart; we are a McDonald’s,” Fernandes said, referring to the kinds of lower-cost businesses that traditionally flourish in recessions as consumers tend to trade down. Fewer meals in five-star restaurants, fewer seats in first class; more Big Macs and more economy or budget tickets.
Backing up his claim was a 26% rise in first-quarter net profit and a 21% increase in the number of passengers from a year earlier.
The trend away from the front end of the cabin toward more affordable seats - and budget carriers - is global and is devastating for many “full service” carriers.
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