Salt of the earth
Surveillance

Flying low

According to Time magazine, the budget airline business in Asia is fairly cut-throat:

Udom Tantiprasongchai, chief executive of Orient Thai Airlines routinely employs a team in his office to go on the Internet and buy up as many of the cheapest tickets on AirAsia flights as they can get, often spending more than $3,500 a day. It's a small price to pay, he argues, to keep the low-price tickets out of the hands of potential AirAsia customers and to foster ill will toward his competitor.

I'm not so sure this is a good strategy. His logic is obviously that if he buys the cheapest tickets real customers will have to pay higher prices, and may not bother if no bargains are available. However, if the demand is there, AirAsia will fill up the plane and make more money. If they were clever they could re-sell the tickets bought by their competitor and make even more money! Also, from a PR point of view it could rebound on Orient Thai if customers know what they are doing to force up prices. Probably not a good idea to tell a journalist, then...

For some reason, The Economist also had a longish piece on budget airlines a couple of weeks ago, focusing more on the European market. The problem is that the UK and Ireland market is saturated, and there are doubts about the size of the opportunities in other countries.

There was also >this strange story, about a travel company that acquired a small airport in the UK, renamed it as West Midlands International Airport and started operating cheap flights. For some reason they seem to be able to do this without needing any planning permission. Local residents are not amused (they never are).

I remain rather unconvinced by Asian budget airlines. Time magazine reckons that the big airlines have lower overheads and so are not so vulnerable to price competition (certainly Cathay and SQ were quick to offer special prices on selected flights), and anyway these prices are not so amazingly low. Who wants to take a ferry to Macau and have all that messing about just to save a few dollars?

Comments

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Eric

Well, the obvious response strategy for AirAsia is to start heavily overbooking their flights, thus making up to 2x revenue on each seat. But then, of course, Orient Thai Airways seem like they might respond by hiring a bunch of gangsters to show up at the airport with tickets and demand to be seated.

Helen

I just booked 3 different trips on BMI, one of those low-cost airlines. The trips, in Nov., Dec., and Jan., cost £4 per person each way (plus some small airport taxes).

For that cost, it has to be done. Why stay home?

That said, I am beginning to wonder how they can stay in business.

Chris

I'm not sure that anyone is making money right now, but I suppose the key to it is that there are a limited number of very cheap tickets available, and they are probably on flights that would otherwise be virtually empty. If you book at short notice you will pay much more, certainly at busy times. Also, if you book and then cannot travel you can't get a refund.

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