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Asia300

Asian low-cost carriers spread wings beyond the region

SINGAPORE -- Low-cost airlines in Asia are increasingly looking to fly beyond their familiar home regions. Scoot, the budget carrier under Singapore Airlines group, announced it would start a Singapore-Athens service in June 2017, while Malaysia's AirAsia X is planning to re-start flights to London, while expanding its route network in Middle East. While the price competition on Asia's short-haul routes continues, the low price of oil has made the business model of "long-haul low-cost carriers" viable, at least for now.

Scoot's new Singapore to Athens direct link is its first to Europe and the longest route that has been flown by a low-cost carrier, the company said. Parent Singapore Airlines ditched its route to the Greek capital in 2012 with the country going through an economic downturn. However, the group believes leisure demand is strong enough for the route to work for its low-cost wing.

The price for the more than 11-hour one-way flight will be set from as low as S$288 ($213), including taxes.

Scoot, one of two budget carriers under Singapore Airlines-owned Budget Aviation Holdings (the other being Tigerair), has a fleet of 11 Boeing 787 aircraft and nine more on order. The carrier has been focused on medium-haul routes within the Asian region since it was started in 2012, with destinations including China, Australia and India. But it is now getting serious about European routes and considering opening up a second destination.

Asia's top budget airlines group AirAsia is singing a similar tune. "As soon as we get the aircraft, we will start London Gatwick," group chief executive Tony Fernandes told Malaysian media at Farnborough Airshow in the U.K. in July. The group's long-haul arm, AirAsia X, expects that the Kuala Lumpur-London route, which Fernandes made a hard decision to pull in 2012, to restart by the end of 2017, or early in 2018.

AirAsia X has already expanded its destinations beyond Asia, with a focus on the Middle East. In June, the group launched routes from Kuala Lumpur and Bangkok to Teheran in Iran. Hawaii is another destination that the Malaysian carrier has been looking at for some time.

Cebu Pacific, the largest passenger carrier in the Philippines, is also aiming to establish a Manila-Honolulu route. With demand from overseas Filipino workers being the major motivation for Cebu's international development, the low-cost arm of Cebu Air already has multiple operations to the Middle East and plans to expand. It started flying to Guam in Micronesia in March.

The arrival of new generation aircraft, which can fly longer and are much more fuel efficient than older ones, as well as the low fuel price, is making low-cost long-haul operations feasible, said Greg Waldron, Asia Managing Editor of Flight Global. He warned, however, that price competition from Middle Eastern carriers is a concern. "They have so much capacity that they can put pricing pressure on anybody [from full service to low-cost carriers]," he said.

Filling up large aircraft suitable for long-haul routes is another challenge for the budget airlines. Scoot is preparing various marketing activities in neighboring countries like Malaysia and Indonesia to sell its 329-seat Athens flights. The plan is to pick up passengers from regional countries by sister company Tigerair and transfer them onto Scoot's long-haul flights.

"Scoot will need to rely heavily on connections beyond Singapore," the CAPA Center for Aviation said in a report dated Aug. 17. The Sydney-based think-tank views Australia, with its large Greek diaspora, as particularly viable for connecting flights.

C.K. Tan in Kuala Lumpur contributed to this story.

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