Crew members of a budget carrier make their way out of international arrival at the Low-Cost carrier Terminal (LCCT) in Kuala Lumpur

Low-cost carriers’ earnings will soar in the year ahead, as customers migrate from full-service airlines which face steep revenue declines and forced mergers, industry experts said.

“Stormy conditions in 2008 have already helped the low-cost segment gain a larger slice of global aviation,” the Sydney-based aviation think tank said in an outlook report.

“Now predicted tougher economic conditions and lower fuel prices will give the sector a major advantage in 2009,” it said.

Tony Fernandes, chief executive of AirAsia and the pioneer of low-cost aviation in Asia, said as the recession hits, many passengers will not cancel trips but instead hunt for the cheapest ticket.

“They will fly with a low-cost carrier instead of a legacy airline to save money,” he told AFP.

Fernandes said the fortunes of British low-cost airline easyJet and Ryanair, Europe’s biggest budget airline, would soar as the downturn depresses European economies.

“Full-service carriers will try to compete with us, but we have the upper hand,” he said.

Airbus chief Thomas Enders last week warned of a “very challenging year for the aeronautics industry,” saying he expected a sharp drop-off in orders for Airbus.

Aviation industry group IATA has said it expects the industry to lose US$2.5 billion in 2009 due to the economic crisis after losses of $5 billion in 2008.

US-based consultancy Frost and Sullivan said Asian budget carriers are in a good position and most of the damage to the aviation industry would occur in the US.

The Asia-Pacific is forecast to see passenger traffic rise 5-7 percent this year.

“The market will see reasonable growth in low-cost carrier (LCC) passenger traffic within Asia-Pacific and even in the long-haul segment,” Amartya De, an analyst at the consultancy, said in a report.

Airlines worldwide have cut back growth plans and axed loss-making routes to weather spiraling fuel prices which last year sent at least 27 carriers out of business.

CAPA said low-cost carriers had a relatively good year in 2008, as they have done in previous downturns, while “plummeting premium demand quickly put the full-service carriers under the blowtorch.”

“The European region, which accounts for nearly 41 percent of international traffic, grew by 5.2 percent in 2008, thanks mainly to the performance of its fast-growing LCC segment,” it said.

Falling demand for premium aviation services together with pressure on revenues will drive further merger and acquisition activity among traditional airlines in the year ahead, it said.

“The low-cost sector, meanwhile, will focus on organic growth via fleet and network expansion. The result - a shift in the balance of world aviation.”

CAPA said that new-generation long-haul LCCs, such as AirAsia X and Jetstar, will be emboldened by the current lower fuel prices.

“As we enter 2009, many of the world’s leading LCCs are still growing their capacity at double-digit rates,” it said.

Source: AFP