Tiger Airways, based out of Singapore, is expanding into Australia rapidly and there are talks of starting a Korean hub. Air Asia is doing better than ever on regional routes, and now starting long haul budget travel as well. Even though the growth of Indian budget carriers has slowed, they are still doing well, given the state of the industry in the rest of the world. The fact that ever more Asian airports are coming up with budget terminals is testimony to the fact that demand will increase in the near future. So what is it that other airlines can learn from the Asian budget carriers to be more successful?

1. Use newer planes. Average fleet age at AirAsia is 4.7 years, 2.5 years at Tiger Airways, 4.4 years at Air Deccan. This not only ensures that planes are more fuel efficient, but the customers feel better and safer in air too. The youngest fleet in the US for a major airline is 8 years, at Alaska Air, though Virgin and JetBlue are changing the game a little there. Already, there have been rave reviews of Virgin’s fleet.
2. Employ smart fuel cost-saving techniques. With fuel becoming a significant component of the cost, airlines should pro-actively think of ways to save costs in this regard. Techniques such as fuel hedging are very popular. Many airlines are now slowing down in the air, as well as making “gentle” landings to save fuel related costs.
3. Charge only for value added items. Customers can be very disgruntled when they are charged for items they weren’t expecting to pay for. Unfortunately, a number of budget airlines have become very good at extracting every single penny possible from the customer. Ryanair once charged $50 to allow the use of a wheelchair to an elderly person. On the other hand, customers don’t mind paying more for extra legroom in the exit row. Similarly, there can be services such as priority boarding, or even a budget business class in a plane which can be sold for an extra charge. A number of Asian budget carriers are doing this already.
4. Compete on experience and service. In most cases, good service at most customer touchpoints doesn’t cost a dime. Be it smiling check-in staff or compassionate stewards who care about the passengers like their own family. It is this that has got Southwest to where it is today. Airlines are leading the service industry, and should be setting exemplary standards too.
5. Be an LCC+ The days when airlines used to only be “cheap flying buses” are over. More and more budget airlines have a “mixed” model where they offer value added services and are deviating from a pure-budget model. AirAsia is starting long haul flights, and value added services are being offered on a number of airlines. Simply put, it’s a good way to make money.

Ponder that!

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Links:

1. Airlines moving from fixed costs to variable costs

• Is Southwest Airlines model the future for full-service airlines?
• Why Air Asia’s “budget alliance” with Qantas and Jetstar is a stroke of genius – Live on CNBC Asia with Martin Soong
• How business lessons from AirAsia can rescue the battered Air India brand
• Why the Southwest and WestJet alliance is good for both the brands
• Why LiveTV is a great idea from JetBlue Airways, to help them fly through a recession and keep the brand alive

Nevertheless, many airlines have used it to their advantage in the past – from Richard Branson of Virgin, to the upcoming Vijay Mallya of Kingfisher Airlines in India. These iconic figures have traditionally brought great leverage to the brand. But being so closely associated can be risky, since the smallest of the person’s actions will have consequences much larger in magnitude for the airline as well.

A better strategy is to create an icon – like the SIA Girl, of Singapore Airlines – which can be a controlled by the airline management as and when they wish, rather than be exposed to risks individuals face. Moreover, it can act as a reliable X-Factor, something that goes above and beyond what “yet another airline” would do to boost its brand image.

Ponder that!

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