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
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
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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
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