Why can’t Taiwan’s budget airlines take off? Boeing troubleshoots

TAIPEI (The China Post/ANN) - U.S. aircraft maker Boeing on Thursday expressed optimism on the expansion of low-cost carriers (LCC) in Taiwan, but stressed that the key obstacle to its development was that local consumers were still more accustomed to traveling on traditional airlines.

The issue of whether the Taiwan market is fit to introduce budget airlines has drawn much attention, in light of TransAsia Airways’ (6702-TW) recent shutdown of its low-fare subsidiary V Air and recent signs indicating the China Airlines-invested (2610-TW) Tigerair Taiwan would cease operations as the airlines continues to lose money.

Randy J. Tinseth, vice president of marketing for Boeing Commercial Airplanes, said Taiwan has market potential for LCCs because the economy was showing steady growth. 

Also, average growth rates can be expected to surpass those of LCCs in the Northeast Asian region -- which averages at 2.6 percent -- because the current LCC penetration rates and market shares remain at low levels, while most younger travelers wish to save money on overall travel costs. 

According to Boeing, there is a low percentage of Taiwanese that opts for budget airlines when traveling — this is an important factor behind management challenges for local carriers. 

However, Tinseth emphasized that Taiwan-bound passengers in comparison more often choose to travel by LCCs, so inbound LCCs generally perform better than Taiwan carriers. 

Tinseth said it was critical that Taiwan LCCs consider the needs of Taiwanese passengers, gather deeper insight into the overall market and customer structure, as well as “completely execute” the LCC business model. 

Tinseth pointed to Malaysian low-cost airline group AirAsia and South Korea’s Jeju Air as successful examples of LCC firms with strong performance.

According to statistics released by Boeing, LLCs account for 47 percent of the Northeast Asia air transportation market, a huge 16-percent leap from 31 percent in 2011. 

Among the 47 percent, Jeju Air takes up around 12 percent, Hong Kong Express Airways also accounts for 12 percent, South Korea’s Jin Air holds nearly 10 percent and mainland China’s largest low-cost carrier Spring Airlines has 12 percent.

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