KUCHING: Airline industry player AirAsia Bhd’s (AirAsia) penetration into Philippines market through joint venture (JV) forming with three Filipino businessmen was seen as a smart move by several research firms.
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| NEW ENTRANT: RHB Research notes that AirAsia will be entering the LCC sector in the Philippines as a new entrant, trying to garner a slice of action of the market that was currently dominated by market leader Cebu Pacific. |
According to OSK Research Sdn Bhd (OSK Research), the JV named AirAsia Incorporation (AAI) was expected to commence operations sometime in September 2011, with 40 per cent stake in the JV, would commence with the deployment of at least two aircraft leased from its parent company, AirAsia.
The research house stated that the Philippines would be an attractive market for low cost carriers (LCCs) such as AAI, given the archipelagic nature of its geography, which would provide conducive conditions for air travel.
Coupled with its high number of Filipinos working abroad to boost demand for international travel, the Philippines would also be offering a significant
growth potential on expectations of the high propensity for air travel on the back of rising per capita income, said the research firm.
Despite the intensity of competition in the Philippines’ aviation space,OSK Research noted a lot of room for market share gain, notably in the international segment as AAI would be able to leverage on AirAsia’s superior branding and comprehensive network.
OSK Research viewed that AAI’s earnings could start trickling in after two years of operations.
Another research house, RHB Research Institute Sdn Bhd (RHB Research) noted that AirAsia would be entering the LCC sector in the Philippines as a
new entrant, trying to garner a slice of action of the market that was currently dominated by market leader Cebu Pacific.
However, AirAsia would see significant competition from Malaysia Airline System Bhd’s (MAS) recent expansion of its 100 per cent-owned Firefly into a full-fledged LCC, backed by a fleet of 30 fuel-efficient 189-seater Next Generation 737-800 aircraft by 2015 that would lead Firefly to compete head-on with AirAsia’s A320 fleet.
It highlighted that Firefly, a new entrant to the jet segment would go all out to capture market share at the expense of profitability by heavy price discounting while
AirAsia might also want nip the competition in the bud by dropping fares. [source]
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