Handouts win airline hearts

LUANG PRABANG, 14 June 2017: Airports and national tourist offices in the Greater Mekong Sub-region are playing a pivotal role to attract airlines to fly to secondary airports, according to ForwardKeys director of business development APAC, Jameson Wong.

Faced by bottlenecks at gateway airports, governments and airport authorities are canvassing airlines to fly to secondary destinations.

The strategy has accelerated in the Greater Mekong Sub-region following the ratification of ASEAN Open Skies Agreement.

ForwardKeys director business development, Jameson Wong talks trending at a MTF session last week.

Laos and Indonesia were the last to ratify the agreement in April 2016 and that has led to airlines extending their networks beyond capital cities across the ASEAN region.

By mid-2016, low-cost giants, AirAsia out of Kuala Lumpur and Bangkok-based Thai AirAsia, began services to Vientiane and Luang Prabang in Laos.

Vietjet and Thai Lion Air are viewed as the top candidates to expand flights to secondary destinations in ASEAN from gateway hubs such as Bangkok, Ho Chi Minh City and Hanoi. Vietjet is considering a flight to Luang Prabang possibly late this year or early 2018.

As visa restrictions ease and convenient eVisa services are introduced, governments will find it easier to convince airlines to fly to secondary destinations.

“More than ever airports and government tourist offices are the key players…They have the funding and can go to airlines and offer incentives to encourage airlines to establish new routes,” Wong told a session at last week’s Mekong Tourism Forum in Luang Prabang.

Traditionally, airlines started new routes after extensive research and only when the numbers made sense and the route was viewed as commercially viable, he said.

“But today, it more likely that national tourist offices and airports are driving route expansion by making offers to airlines.”

Commenting during the breakout session on aviation connectivity at the Mekong Tourism Forum, last week, Wong praised the AirAsia Group saying they were “particularly good at partnering with national tourist offices and airports to make it work.”

“Governments are selling airlines on a destination’s ability to draw tourists. They will underwrite costs, offer promotional support and reduce handling fees to launch a service.”

The GMS Tourism Sector Strategy 2016 to 2025 funded by Asian Development Bank and adopted by the six countries, clearly identifies the priority of reducing aviation bottlenecks and building capacity at secondary airports to accommodate more direct flights.

According to the Mekong Aviation Snapshot trending report, ASEAN’s open skies policy has already delivered new air routes since it was implemented.

Steven Schipani, director, ADB, signals confidence for the GMS Tourism Sector Strategy 2016-2025, claiming GMS tourism is opening to a prosperous new era.

Various airlines connected Ho Chi Minh City, Vietnam with Sihanoukville, Cambodia; Bangkok, Thailand with Haiphong and Danang, Vietnam and Phuket, Thailand with Siem Reap, Cambodia.

There are also plans to link Bangkok, Thailand to Phu Quoc, Vietnam; Bangkok to Bagan, Myanmar; Khon Kaen, Thailand to Chinese cities; and Phnom Penh, Cambodia to Yangon, Myanmar.

More airports are being connected to international destinations, the report states. Over the last three years, U-Tapao, Pattaya, Thailand; Nay Pyi Daw, Myanmar; Savannakhet, Laos; Sihanoukville, Cambodia; and Surat Thani, Thailand have all been linked to international destinations.

According to the report, second and third-tier destinations are benefiting from better air connectivity. The fastest growing airports in terms of airline seat capacity between July 2015 and July 2016 were U-Tapao, Pattaya, Thailand (up 214.2%); Phu Quoc, Vietnam (66.4%); Haiphong, Viet Nam (60.4%); Nha Trang, Vietnam (48.8%); and Luang Prabang, Lao PDR (38.9%).

In the summer of 2017, Dong Noi in central Vietnam will have its first international flight to Chiang Mai, Thailand, opening a new international entry point. Landlocked Laos has benefited most from open skies, with air seat capacity growing 28% between July 2015 and July 2016.

By early 2017, Thai Smile also returned to Luang Prabang and Mandalay after a three year absence.

The Mekong Aviation Snapshot reveals low-cost carriers are a major growth engine for air transport both in the GMS and ASEAN.

Last year, Thai AirAsia offered more than 670,000 seats per month from Bangkok to ASEAN destinations compared to Vietnam Airlines’ 457,321 seats/month from Ho Chi Minh City to ASEAN (Source: Flightmaps Analytics 04/16).

However, Vietnam Airlines’ seat capacity overtook Thai AirAsia by the end of 2016. Forecasts on airline and airport expansion suggest that Vietnam is the aviation player to watch. They estimates growth of 15 to 20% a year through to 2020.

Thai AirAsia and Vietjet Air remain the dominant LCCs in the GMS. There are other regional LCCs, which are based in Thailand (Nok Air, Thai Lion Air, Thai Vietjet); Myanmar (Golden Myanmar Airways); and Vietnam (Jetstar Pacific).

In China’s Yunnan and Guangxi provinces, LCCs with comprehensive networks include Lucky Air, which is based in Kunming, and Spring Airlines.

Last year, there were more than 70 air routes flown between China and Cambodia, Laos, Myanmar, Thailand and Vietnam. Kunming International Airport, China’s seventh largest airport (GMS’ second largest airport after Bangkok) remains the main hub between Southeast Asia and China, serving 60% of all international seats between China and ASEAN destinations.

The report notes there are gaps in route networks. There are no flights linking Lao PDR to Myanmar; Chiang Rai and Udon Thani in Thailand would likely support regional connections; and Myanmar’s Bagan and Mawlamyine would benefit from intra-regional flights.

In Vietnam, neither Hanoi nor Ho Chi Minh City have flights to secondary airports in Thailand (Chiang Mai, Phuket or U-Tapao) or Myanmar (Mandalay).

But the report points out that international connectivity is improving for Vietnam’s tourist island of Phu Quoc. It  will gain airline links from Bangkok and Shanghai later this year.

(Source: Mekong Trends Aviation Snapshot and MTF Aviation Breakout Session Track 7)