What is the macro and industry environment in the Southeast Asian region for the entrance of new budget airlines? What opportunities and challenges are associated with this environment?
Answer: Competition for the Southeast Asian budget traveler has increased significantly in recent years as more carriers have entered the market. These new entrants are attracted by the large number of potential travelers, and the fact that government regulations in the region have decreased making it easier for companies to operate. However, fuel prices are a concern as are other costs involved in running airlines such as providing ground operations and passenger services. Some airlines including AirAsia are forming alliances to share these additional costs.
2. How might demand for low-fare service differ in the Asia-Pacific region from North America and Europe?
Answer: Substantial opportunities have been created for low-fare airlines in Asia by the relatively low income levels in most Asian countries, the availability of alternative modes of transportation, and the low percentage of the population that utilizes more expensive airlines, as well as the increased awareness of the U.S. and European trends favoring lowfare providers. .
It is important to note that the Asian markets are substantially more sensitive to fare differentials than the North American market due to the competition from high speed rail. Moreover, although currently changing, Asian markets are still relatively limited in their utilization of the full potential of Internet resources, and still depend on travel agents and other middlemen. In addition, Asian low-fare airlines have a smaller market share, compared to their dominance in Western markets. Finally, in Asia, low-fare airlines are less likely to compete with more expensive providers for the same customers, and are more likely to target individuals who would otherwise not travel by air. This is also in line with the socially stratified nature of these...
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