Budget airlines grows rapidly in the Southeast Asia region after the the liberalisation of the industry. Countries including Thailand, Malaysia, Cambodia, Philippines and Singapore underwent deregulation of the budget airline industry. Moreover, reciprocal access agreement were implement among Southeast Asia countries with the United States to embrace the liberalization of the industry. This implies the open skies services agreement encourage more air traffic to enter and exit the region domestically and internationally. Finally, governments in these countries allow more new private budget airlines were introduced to the industry to increase competition.
The large population base of the Southeast Asia region creates a large market for aviation travel. Among those, Indonesia that with 235 million potential passengers fuels the growth of budget airline industry. However, there is an perception of Asian passengers values quality more than price. Hence, despite the low price strategy, certain inflight quality standards will have to met the expectations of Asian passengers.
Infrastructures such as international and domestic airports, public transports to the terminal are quite sophisticated in the region. Malaysia for example, every states at least has a domestic airport, while bigger cities might have a combination of international and domestic terminals. Internet coverage are usually adequate for the purpose of purchasing online ticket, which lower the operating cost in budget airline.
Competition regulation implemented in several countries such as Malaysia, major merger or acquisitions were mostly prohibited by the local government to ensure the industry’s competition. Foreign direct investments were also limited to joint ventures or alliances by several countries in the region. Moreover, regulatory systems in some of these countries are quite weak, which might affect the business planning in this region.
Environment is really a big advantage for the airline industry, particularly to budget airlines. This is due the lack of high speed cross countries railways or highways, which make land travelling among countries difficult. Moreover, most the countries are separated by sea which pave ways to the budget airlines in the region as either travelling in business or pleasure have to take a flight to another country. Additionally, tourism industries are a major industry in the Southeast Asia countries. The spilled over of the growth tourism industry also increases the demand for budget airline, as more passengers demand for more low cost and fast travel options while travelling in the region. Finally, the countries were located near to each other, within 3 hours flight, few countries can be reached from Malaysia to Singapore, Indonesia, Philippines, Brunei and Thailand. Which budget airline can achieve a cost benefit from their fuel consumption.