A Change in Route for Low Cost Carriers

A Change in Route for Low Cost Carriers

The second part of our feature allowing Amadeus executives to give their views about key industry trends

The second part of our feature allowing Amadeus executives to give their views about key industry trends

Hazem Hussein, Amadeus’ executive vice president of Airline Commercial, talks about the rising number of LCCs targeting the travel trade…

Low-cost carriers (LCCs) have changed the landscape of travel. Today, LCCs account for 58% of air seats in Southeast Asia, thanks to the trailblazers like AirAsia who really opened up the low cost market in this region. However, there is still a lot of room to grow LCC uptake.

Hazem Hussein, Amadeus’ executive vice president of Airline Commercial
Hazem Hussein, Amadeus’ executive vice president of Airline Commercial

In North Asia, however, LCCs only account for 9.2% of air seats – a small margin now, but enormous opportunity for the future. One way to help them get there is to embrace the travel agency sales channel.

It’s easy to think that LCC seats are only filled by budget-conscious travellers, perhaps those that are new to travelling and rely on finding a cheap deal to fly. However, an LCC passenger is just as likely to be a savvy business executive, travelling low cost because the flight time better suited his schedule or travelling in line with his travel policy.

One could argue that there are two options a traveller has when booking a flight – to book an ‘all inclusive’ but often more expensive full service carrier (FSC), you speak to a travel agent. If you’re happy with the ‘no-frills’ experience on a LCC, you would more than likely jump online and manage the booking yourself.

But this isn’t necessarily true. As a business traveller, with a hectic schedule, finding time to do online flight comparisons isn’t always possible. I, like many corporate travellers, rely heavily on my ‘guardian angel’ (my corporate travel manager) to manage everything on my behalf, and ensure the best schedule for my trip, including the many changes my trips often have.

More options, less hassle

Tigerair recently started selling fares via the GDS
Tigerair recently started selling fares via the GDS

This means that travel agents and corporate travel managers need to be able to offer LCC flight options to their clients, and want to see them side-by-side with FSC seats to compare the options.

Traditionally LCCs pioneered the online-booking model, stripping back the extras to provide a basic seat at a basic price, and choosing to offer these deals exclusively via their own websites in order to reduce sales costs. However, a shift is occurring and we are seeing a lot of LCCs taking a new route, wanting to embrace the travel agency channel through companies like Amadeus, to ensure their seats can be offered to new audiences.

Amadeus is working with many of the leading LCCs in the market to ensure their content is available through the same travel agency shop window as their FSC counterparts. In fact, Amadeus has signed agreements with AirAsia, Jetstar, Scoot, Cebu Pacific and most recently, Tigerair to name just a few. We’re helping these airlines reach a new customer base and increase revenues.

Design-a- Flight

But it’s not just seats that need to be made available to travel agents. Passengers want a personalised travel experience, whether they’re travelling low cost or first class. While passengers might choose their flight primarily based on timing and price, they then want to add extra services at the travel agent to design their ideal travel experience.

Today’s array of ancillary add-ons include everything from extra baggage weight for the shopaholic travellers, Wi-Fi for the workaholic, premium meal options for the foodie traveller and entertainment for the film buff. Not to mention in-flight nanny services for the parents travelling with young children.

AirAsia X has pioneered many ancillary products innovations
AirAsia X has pioneered many ancillary product innovations

These ‘VIP’ extras are commonly linked to FSCs but even the cost conscious traveller wants to have options and LCCs are rapidly stepping up to the plate.

Malaysia Airlines, AirAsia X and Scoot have recently introduced the option to pay for a seat in a child-free zone, something that would definitely appeal to a passenger who values their peace and quiet.

These options offer a greater level of choice for passengers, but airlines need upgraded technology to facilitate these highly-customised reservations. Amadeus helps to make customisation easier for the travel agent and allows the traveller a more personalised journey.

Options for the traveller, technology for the airline

Industry experts predict that low cost seats are likely to account for 50% of all flights in Asia in the next five years.

The key to this growth will be flexibility –LCCs have realised that an unbending business model could mean missed opportunities in new customer segments. Travellers need flexibility, the ability to change itineraries at the last minute with without incurring sky high costs and through their guardian travel angels.

By taking a new route and a new strategy for distribution, LCCs look set to continue their growth and influence in the Asian travel industry.

Mark Elliott
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Mark Elliott
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