The low-cost carrier (LCC) business model has proved successful throughout the world but particularly so in Asia Pacific. Typical LCC strategies include operating at secondary airports, flying a single airplane type, increasing airplane utilization, relying on direct sales, offering a single-class product, avoiding frequent-flyer programs, and keeping labor costs low. Over the past 10 years, the region's LCCs have generated an average annual growth rate of 24.5 percent. By comparison, Europe's LCCs grew 13.4 percent annually during the same period, and North America's grew a modest 2.2 percent annually.
The countries in Southeast Asia were some of the first in the region to employ the LCC business model, and today, LCCs are flying nearly 20,000 weekly flights. Northeast Asia, on the other hand, has been slower to see the growth of LCCs, owing in part to the large high-speed rail network in Japan and to an aging population. China is the latest region to embrace the LCC model, with a large increase in the number of entrants in the past two years.
To expand outside their home country, many airlines have created joint-venture subsidiaries to avoid restrictions on foreign ownership. These subsidiaries, which employ the LCC business model, are often cobranded with the parent airline and share its name and livery. Although the vast majority of this activity has been in short-haul markets using single-aisle airplanes, the region is beginning to see joint ventures flying widebody airplanes on medium-haul operations in response to strong traffic growth.
At the other end of the spectrum, Asia's network carriers include some of the largest, oldest, and most well-regarded airlines in the world, such as Korean Air, Air China, and JAL. Network carriers tend to have major hub operations for domestic, regional, and international services and large, complex fleets; airline alliances; and a broad array of service offerings (such as airport lounges, onboard meals, and multiple cabin classes) to enhance passenger satisfaction.
Hub operations significantly increase network reach and allow carriers to offer convenient, one-stop connections around the globe. Additionally, traditional Asia Pacific network carriers are evolving their businesses to satisfy passenger needs. They are continually upgrading their fleets for efficiency. Some—such as Qantas, Singapore Airlines, and Thai Airways—have also created their own LCCs to offer products that are similar to what other LCCs offer but without diluting their premium product offerings.