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Singapore. A frequent flyer to Indonesia, Jimmy Lim Chin Hwa abandoned Singapore Airlines’s economy class for budget carrier Jetstar Asia two years ago to save 65 percent on the cost of flying. He has noticed more people following suit.

“Normally, the flights are half full, but since the start of the year it’s packed,” said Lim, 50, who works as a furniture marketing manager. “The bigger airlines are just too expensive.”

Losing economy-class customers like Lim adds to pressure on carriers such as Singapore Air, forecast to post its worst-annual profit in two decades, as travel dwindles amid the global recession.

Jetstar, AirAsia and other regional discount carriers meanwhile are adding more planes after cut-rate fares helped double their market share since 2005.

“Low-cost carriers are making it so affordable now,” said Tan Teng Boo, of Kuala Lumpur-based iCapital Global Fund. “The full-fare carriers will have to sit down and think about reinventing themselves.”

The potential for cheap flights in Asia, where half the world’s population lives, has attracted investments from billionaire Wilbur Ross in an Indian discount airline, and Virgin Group’s Richard Branson in a Malaysian no-frills carrier.

Asia’s budget carriers control about 10 percent of the market by seat capacity currently, according to the International Air Transport Association. At least 20 low-fare airlines have started in the continent since 2000.

“During a recession, we prosper because people are coming down market,” said Tony Fernandes, chief executive of AirAsia, Southeast Asia’s biggest budget airline. “We are no different from McDonald’s or Wal-Mart. Our goal is to fill up our planes.”

AirAsia filled 80 percent of its available seats on average in June, the best ever for that month. Jetstar, partly owned by Australia’s Qantas, flew 15 percent more people in the first six months compared with the year earlier period.

In contrast, Singapore Air’s passenger numbers slumped 19 percent in June, the eighth consecutive drop. Thai Airways’s numbers declined 18 percent last month, the 12th straight decline.

Singapore Air, the world’s second-largest airline by market value, Malaysian Airline System and Thai, are altering networks and cutting capacity. Singapore Air is parking planes, lowering pay, and removing 11 percent of capacity in the year ending in March. The airline said last week it would reduce seats on some planes by 14 percent as part of a cabin upgrade.

AirAsia last month lowered ticket prices by scrapping administrative charges. Tiger Airways, a no-frills carrier partly owned by Singapore Air, is selling tickets at 9 Singapore cents, excluding taxes, to more than a dozen destinations.

Legacy carriers are not giving up. Malaysian Air started a “Global Low Fares” campaign in June to boost ticket sales after posting its first quarterly loss in more than two years. Singapore Air introduced promotional fares.



Bloomberg