Will The Value Alliance Change Asia's Low-Cost Carrier Marketplace?
Photo courtesy of Singapore Airlines
With the formation of a new alliance, the low-cost carrier industry could be entering a new era. The Value Alliance consists of eight budget carriers from the Asia Pacific. The alliance's major partners are Cebu Pacific, Singapore Airlines affiliates Tigerair and Scoot, and ANA subsidiary Vanilla Air.
South Korea’s Jeju Air, Virgin Australia Holding’s Tigerair Australia, Thailand’s Nok Air and NokScoot are also part of the alliance.
Major budget airlines not included in the deal are VietJet, AirAsia, IndiGo, Jetstar brand airlines, and Indonesia’s rapidly-growing Lion Air.
It seems that the main point of the Value Alliance is to help the smaller carriers compete with these bigger players in the market.
Eight airlines, one place to book tickets
The biggest feature of the alliance is that passengers will be able to book flights on all carriers across their different platforms. They will be able to make all payments for tickets and fees in a single transaction instead of booking each trip or each leg of a trip on different web sites.
The new allies will not be as close as the members of the three main full-service-airline alliances. There will be no code sharing and no sharing of frequent flier perks by members of the Value Alliance.
However, giving passengers the chance to book in one place will make all eight airlines more competitive with the region’s larger budget players and it will make the ticketing process more convenient for fliers.
Tigerair Australia CEO Rob Sharp summed up the value of the Value Alliance by saying that it would allow his airline to expand "our existing network from 21 routes and 12 destinations to span one-third of the world to over 160 destinations throughout the Asia Pacific region.”
Win-win for airlines and fliers?
The alliance is good news for fliers no matter which airline they prefer. The eight Value members will be able to compete as one unit against AirAsia and Jetstar. This should mean lower base fares. Some commentators in Australia have suggested that the new alliance could lead to fares that are more than 30 percent cheaper than current prices.
Aside from the greater reach, airlines will be able to benefit from the ability to sell all their extras on one platform. Not only can fliers buy tickets, but they can also order and pay for meals, pay baggage fees and purchase other ancillary products as part of a single transaction.
There was probably a bit of urgency to get this alliance formed. Between now and 2020, 500 million visitors are expected to come to the region, so waiting too long could have caused these smaller players to miss out on the coming air travel boom.
Could other low-cost carriers in other parts of the world follow suit?
It is unlikely that major players like Ryanair or Southwest would make such a move in the West. However, struggling budget subsidiaries of major full service airlines (Eurowings, for example) could band together in Europe. Keep in mind that subsidiaries of Singapore Air, ANA and Virgin Australia are involved in the Value Alliance, so there is now a precedent for subsidiaries to form alliances with one another.
In the United States, low-cost carriers seem more likely to merge with one another rather than form an alliance.
In the Asia Pacific region, fliers should be able to look forward to lower fares over the next few years. If the number of LCCs continues to grow, prices should get lower or at least stay consistently low.
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