Joint Ventures Spur Expansion For Asia-Pacific LCCs

By Adrian Schofield
Source: Aviation Week & Space Technology
August 26, 2013
Credit: Airbus/H. Gousse

The rapid growth of low-cost carriers (LCC) has already transformed Asia's aviation industry, and now they are driving the next phase of change as they expand into other countries in the region.

The major LCCs in Asia and Australia have established the model of setting up joint ventures outside their home countries to circumvent ownership and control restrictions. Most are devoting resources to building up these nascent carriers and replicating the same pattern in new Asian markets. The latest signals from the main players show that this process is gathering speed.

LCCs are booming in the Asia-Pacific region. The Sydney-based Center for Aviation says there are no less than 45 LCCs in this zone, with nine having been added since the beginning of 2012.

These airlines carry some of the largest orderbooks in the industry—three of the big Asian LCCs account for more than 1,000 orders—and much of that growth will be channeled to their offshore franchises.

Eventually, multilateral liberalization agreements, such as one proposed by the 10-member Association of Southeast Asian Nations, could make it easier to set up offshore affiliates. But until then, the carriers will rely on joint ventures with local partners as their conduits for establishing hubs in other countries.

A prime example is the Australia-based Jetstar group, which is moving closer to gaining approval for a Hong Kong-based affiliate to complement its joint ventures in Japan, Singapore and Vietnam.

The establishment of the Jetstar Hong Kong operation is “progressing well,” Jetstar Group CEO Jayne Hrdlicka said during the Center for Aviation's Australia Pacific Aviation Summit here recently. An application for an operator's license has been submitted to regulators, and it is expected to be published in the Hong Kong government gazette this month. This will start the public comment process.

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