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TourismFirst_February_issue

8 aVIaTION: CaPa rEPO rT lcc to grow in Southeast asia as airasia, and VietJet to induct more: capa after a one-off sign of sluggishness in growth in the LCC segment in 2016, this year is expected to be a stellar year for the segment as many regional carriers induct aircrafts to ramp up market share. CaPa reports that airasia, Lion and VietJet will lead in adding capacity. Excerpts of the latest CaPa report. same group of 21 LCCs added 67 aircraft in 2015 and 61 aircraft in 2014, equating to 13% growth in both years. When Tigerair Mandala (which shut down in 2014) is included the Southeast Asian LCC sector grew by 11% in 2014. These figures exclude all wet leased aircraft; Vietnamese LCCs VietJet and Jetstar Pacific both currently have several wet leased aircraft in their fleets. Golden Myanmar and Malaysia’s Malindo were included in previous CAPA reports on the Southeast Asian LCC fleet published in early 2014, early 2015 and early 2016. Malindo and CAPA. Golden Myanmar are no longer categorised as LCCs, and for comparison purposes they have been also been removed from the historical data in the above table. Golden Myanmar launched in 2012 and initially followed an LCC model, operating single class A320s and charging extra for most services. However, it stopped operating A320s in 2015 and now only operates turboprops following a regional airline model. Lion Group has focused expansion on its Full-Service subsidiaries Malindo Group, which operates a fleet of A320s on flights of up to four hours, currently includes four LCCs in Southeast Asia as well as an affiliate in India. Sister group AirAsia X includes three LCCs in Southeast Asia. As CAPA highlighted in a recent analysis report on the short haul AirAsia Group, its active fleet was flat in 2016 at 176 aircraft and shrank by two aircraft in 2015. When India is excluded, the group’s fleet in Southeast Asia declined by two aircraft in 2016 and by five aircraft in 2015. Indonesia AirAsia and Philippines AirAsia have reduced their fleets over the past two years as part of restructurings. Thai AirAsia has continued to grow its fleet rapidly, while Malaysia AirAsia cut its fleet slightly in 2016 but still grew capacity by improving utilisation. AirAsia Group’s Southeast Asian fleet experienced much faster growth in prior years, with 11 aircraft added in 2014 and a record 24 aircraft in 2013. Widebody LCC expansion rate also slowed in 2016 AirAsia X has also slowed its fleet growth significantly over the past couple of years southeast asia LCC widebody fleet size ranked by operator: January 2017 vs January 2016 and January 2015 launched in 2013 and has never followed an LCC model, operating two class 737s with full frills in both cabins, including meals, drinks, seatback IFE and checked bags. However, it initially referred to itself as an LCC or hybrid airline before adopting an FSC position in early 2016 (although its product did not change). Malindo, along with Indonesia’s Batik Air, are the two full service airlines under the Lion Group. Lion also has three LCCs – Lion Air and Wings Air in Indonesia and Thai Lion Air. However, as CAPA highlighted in a recent analysis report on the Lion Group, the focus in 2016 was primarily on growing the two FSCs. Lion Group’s three LCCs added 13 aircraft in 2016 while its two FSCs added 23 aircraft. In 2015 Lion Group’s FSCs also added 23 aircraft, but the group expanded its LCC fleet by 34 aircraft. airasia has taken a hiatus from fleet expansion Southeast Asia’s other big LCC group, AirAsia, initially slowed fleet expansion in 2015 and continued the hiatus in its fleet growth in 2016. One third, seven, of the 21 LCCs based in Southeast Asia operate under the AirAsia brand. The AirAsia as part of a restructuring. AirAsia X Group’s all widebody fleet grew by only two aircraft in 2015 and by three aircraft in 2016, compared to seven additional aircraft in both 2013 and 2014. (All figures are net, with aircraft returns – in AirAsia X’s case A340s – offsetting some of the deliveries.) The entire Southeast Asian LCC widebody fleet grew by a modest five aircraft in 2016 compared to 14 in 2015. The five additional aircraft in 2016 include two additional aircraft at Malaysia AirAsia X and only one additional aircraft for Cebu Pacific, Scoot and Thai AirAsia X. The slowdown in medium/long haul growth is somewhat surprising, given that this sector is significantly less penetrated than Southeast Asia’s short haul market. Widebody growth will pick up slightly in 2017, but will not come close to the record growth achieved in 2015. short haul LCC penetration rate declines for a second year The LCC penetration rate within Southeast Asia was approximately 53% in 2016, while LCCs accounted for 21% of total capacity to and from the region. For the second consecutive year the LCC penetration rate within Southeast Asia declined slightly – as the region’s FSCs added short haul capacity at a faster rate than the LCCs. The slowdown in LCC fleet growth partly explains the recent reduction in the short haul LCC penetration rate, after 15 years of steady gains. Faster expansion by some of the region’s FSCs is another driver. The reclassification of Malindo also contributed to the drop in the LCC penetration rate in 2016. (CAPA has removed Malindo from the historical LCC fleet data outlined earlier in this report, but Malindo continues to be included under LCC in the historical capacity data from 2013 through 2015, while in 2016 it was included under FSC.) The LCC penetration rate within Southeast Asia should start to inch back up in 2017 as the rate of fleet expansion accelerates. The narrowbody growth rate in 2017 will be significantly higher compared to 2016, and similar to the growth rate achieved in 2015. AirAsia, Lion and VietJet plan faster fleet growth in 2017 The AirAsia Group will drive some of the accelerated growth rate in 2017 as its recently revised fleet plan for 2017 includes 20 additional aircraft to its Southeast Asian fleet. Lion Group will again focus a lot of its growth in 2017 on its FSCs, but its LCC fleet will grow at a faster rate than in 2016. The Lion Group’s fleet plan is constantly in flux, but its three LCCs will likely add 15 to 20 aircraft in 2017, or slightly less than its arch rival AirAsia. The VietJet Group plans to expand its fleet by 12 aircraft in 2017. VietJet’s fleet expanded by 10 aircraft in 2016, excluding wet leased aircraft. Southeast Asia LCC fleet to grow by 80 aircraft in 2017 Overall CAPA expects Southeast Asia’s LCC fleet to grow by approximately 70 aircraft in 2017, which would represent growth of 11%. This includes several additional aircraft for Citilink and Jetstar Pacific and approximately five aircraft for Scoot (including Tigerair, which will fold into Scoot by the end of 2017). Jetstar Asia does not plan to grow its fleet in 2017, while Nok and NokScoot are planning very modest fleet expansion. The Cebu Pacific Group is also planning very modest expansion for 2017. Its fleet plan envisages only two additional aircraft in 2017, including one aircraft at the regional subsidiary Cebgo. Market conditions in the Philippines could support faster growth, but Cebu Pacific is waiting for the A321neo before accelerating its rate of growth. The group’s fleet plan includes eight additional aircraft in 2018, driven by the A321neo. The Cebu Pacific, AirAsia/ AirAsia X, Lion and VietJet groups account for over 75% of Southeast Asia’s current LCC fleet and approximately 90% of the current order book. Cebu Pacific has a relatively modest order book of 47 aircraft, while VietJet has approximately 200 aircraft on order, AirAsia/AirAsia X nearly 500, and Lion Group more than 400. Not all these aircraft will end up in Southeast Asia’s LCC sector; some will end up at affiliates outside the region, some at FSC subsidiaries within the region, and some could be leased outside their groups. southeast asia LCC fleet to grow by 80 aircraft in 2017 Overall CAPA expects Southeast Asia’s LCC fleet to grow by approximately 70 aircraft in 2017, which would represent growth of 11%. This includes several additional aircraft for Citilink and Jetstar Pacific and approximately five aircraft for Scoot (including Tigerair, which will fold into Scoot by the end of 2017). Jetstar Asia does not plan to grow its fleet in 2017, while Nok and NokScoot are planning very modest fleet expansion. The Cebu Pacific Group is also planning very modest expansion for 2017. Its fleet plan envisages only two additional aircraft in 2017, including one aircraft at the regional subsidiary Cebgo. Market conditions in the Philippines could support faster growth, but Cebu Pacific is waiting for the A321neo before accelerating its rate of growth. The group’s fleet plan includes eight additional aircraft in 2018, driven by the A321neo. The Cebu Pacific, AirAsia/AirAsia X, Lion and VietJet groups account for over 75% of Southeast Asia’s current LCC fleet and approximately 90% of the current order book. Cebu Pacific has a relatively modest order book of 47 aircraft, while VietJet has approximately 200 aircraft on order, AirAsia/AirAsia X nearly 500, and Lion Group more than 400. Not all these aircraft will end up in Southeast Asia’s LCC sector; some will end up at affiliates outside the region, some at FSC subsidiaries within the region, and some could be leased outside their groups. Southeast Asia’s low cost airline fleet grew by only 7% in 2016, representing the slowest growth in several years. The region’s two main groups, AirAsia and Lion, both slowed their growth significantly, with AirAsia slightly reducing its Southeast Asian fleet in 2016. Southeast Asian LCCs ended 2016 with a fleet of 623 aircraft – up a modest 41 aircraft compared to the beginning of the year. The same group of 21 airlines added 67 aircraft in 2015 and 61 aircraft in 2014. Several airlines responded to overcapacity, which peaked in 2014 following a period of overzealous capacity expansion, by deferring aircraft deliveries. Overcapacity continues to persist in several Southeast Asian markets, but some LCCs are reaccelerating expansion in 2017. Given the sector’s huge order book it is likely 2016 will represent the low point in Southeast Asian LCC fleet growth. southeast asia’s 21 LCCs collectively grew their fleets by only 7% in 2016 Southeast Asia currently has 21 LCCs spread across the six main Southeast Asian markets of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. There are currently no local LCCs in the smaller countries of Brunei, Cambodia, Laos and Myanmar, although foreign LCCs generally provide sufficient service in these markets. This group of 21 LCCs ended 2016 with a fleet of 623 aircraft, according to the CAPA Fleet Database. This represents relatively modest growth of 7% compared to the 582 aircraft operated by these 21 airlines at the end of 2015. The

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