Air Asia X and Cebu Pacific Race to the US Mainland

Hawaii is about to become the battle ground for what may end up being a race to the west coast of the United States. Two of Asia's long-haul low-cost carriers, Cebu Pacific and AirAsia X, are preparing for what will become the region's first low-cost long-haul services from Asia to Hawaii. The flights to Hawaii will serve as a test of each carrier's respective low-cost model before reaching further to the US mainland.

Copyright Photo: Angelo Agcamaran/PPSG
According to the Centre for Asia-Pacific Aviation, the trans-Pacific market is already one of the most competitive in the world. However, Asian low-cost carriers have a distinct advantage in having some of the lowest unit costs in the world. There are presently no long-haul low-cost carriers from the United States. However, that may change as foreign low-cost carriers from other parts of the world begin landing on US soil.

Honolulu is set to experience a massive drop in airfares as Cebu Pacific and AirAsia X enter the market. AirAsia X submitted an application to the United Stated Department of Transportation in April to operate four weekly flights from Kuala Lumpur to Honolulu via Osaka beginning in November 2015. 

Cebu Pacific secured certification in April of this year, but it is awaiting final approval from the US Transportation Security Administration, which needs to complete an assessment of Manila Airport's Terminal 3 before the Philippine budget carrier can serve the United States. In addition, Cebu Pacific will also need to secure the necessary slots at Honolulu International Airport. However, the carrier remains optimistic that it will be able to begin flights before the end of the year. 

AirAsia X intends to utilise fifth freedom rights between Japan and the United States. Given that Malaysia has a small portion of travellers bound for Hawaii, the majority of passengers on the AirAsia X flights will be sourced from Osaka, Japan.

The Osaka to Honolulu market is large and competitive with three other carriers competing on the route. Delta Airlines, Hawaiian Airlines, and Japan Airlines each offer one daily flight between the two cities. Delta Airlines is presently the market leader with a 39 percent share. 

Copyright Photo: Angelo Agcamaran/PPSG
AirAsia X is also banking on its soon to launch Japanese affiliate, AirAsia Japan, which is set to launch in late 2015. That would enable AirAsia X to offer one-stop connections to the Honolulu flights from a number of domestic cities throughout Japan. 

Cebu Pacific will have a distinct advantage over AirAsia X in that Hawaii to Southeast Asia is not a large sector with the exception of Hawaii to the Philippines. A large portion of overseas Filipinos reside in Hawaii. Filipinos are believed to be the second largest racial group in Hawaii with close to 175,000 Filipinos living in the US state. 

Cebu Pacific is hoping to stimulate the market with its low fares to not only draw more Filipinos to visit the mother country, but also to increase the frequency in which they visit. The Philippine budget carrier has less competition to face than AirAsia X, where Philippine Airlines is currently the only airline flying the Manila to Honolulu route. 

It remains unclear whether AirAsia X will attempt to compete against Cebu Pacific in the Hawaii-Philippines market. Although the route via Osaka would be rather circuitous for Filipino travellers, low-cost carrier operations often have the ability to stimulate unpredictable traffic when the right price is offered. 

AirAsia X currently competes against Cebu Pacific in the Philippines to Australia market, where Cebu Pacific offers non-stop service from Manila to Sydney, while AirAsia offers one-stop service via Kuala Lumpur. AirAsia Philippines does not presently fly to Japan. However, the carrier previously revealed intentions to serve the Japan-Philippines market in the future, making a one-stop service from Manila or Cebu to Honolulu possible via Osaka. 

AirAsia X will serve the route with a two-class 377-seat Airbus A330-300, while Cebu Pacific will operate a 436-seat mono-class A330-300. The Osaka to Honolulu flights are approximately seven hours long, compared to Manila to Honolulu, which is a more than ten hour flight in each direction.

Although Honolulu will be the first US destination for both carriers, which is a challenge in itself, the length of each respective flight is not unfamiliar to either budget airline. AirAsia X already operates s nine hour service from Kuala Lumpur to Jeddah, while Cebu Pacific operates a 10 hour service between Manila and Kuwait. 

While realizing success in the Hawaii market would be no doubt an achievement for either carrier, the real prize lies on the US mainland. If Los Angeles was the next target city for either carrier, flights from Japan would range between 10 to 12 hours, while flights between Manila and Los Angeles would be 13 to 14 hours. But Cebu Pacific will need to acquire long-range aircraft before it can enter that market. Even with a low-cost model and low fuel prices, making these long-haul routes viable would be a challenge for even the strongest low-cost carrier. 

Using Hawaii as a testing ground provides both Cebu Pacific and Air Asia X with an opportunity to test the US market before making the longer leap and accepting the bigger risk that is the US mainland. 

Honolulu may be a challenge for AirAsia X, which must rely on the Japanese market, where its brand is less established compared to Southeast Asia. On the other hand, Cebu Pacific already enjoys a strong reputation within the Filipino community at home and overseas, which will give it an advantage heading into the new service. 

Although the outcome remains uncertain for either carrier, there is no doubt that the legacy carriers in Asia and the United States will be monitoring the results of the low-cost models closely as the threat of eroding their market share looms ahead, especially for Philippine flag carrier, Philippine Airlines. 

AirAsia and Cebu Pacific will not be the first long-haul low-cost carriers to serve the Honolulu market. Jetstar Airways already offers non-stop service to Honolulu from Sydney, Melbourne, and Brisbane. 

Canada's WestJet also operates non-stop service from a number of Canadian cities including Vancouver, Calgary, and Victoria. Allegiant Air is the only US low-cost carrier to have tested low-cost carrier service to Honolulu but has since scaled back operations significantly. Virgin America will be testing its own low-cost model when it launches flights from San Francisco in November.

References: CAPA

18 comments:

  1. Dear AK and 5J, Prior entering the USA market please re-evaluate your economy class configurations. You will have a lot of interests from new clientele who want to save money and yet not to be cramped like a "sardine in cattle class". Mind yourselves that the Asian-American community is of larger and different body structure as to those of their ancestry from the old country plus many are of mixed culture such as Caucasian, African-American, Hispanic, etc. Your economy class seats should have some generous leg room and recline. Recall the health issue from a few years ago, "Deep Vein Thrombosis". These passengers understand what is a LCC but having to watch a movie from either renting an I-PAD which sometimes power down or to share overhead monitors while adjusting one's head or neck to view it due to the fact the other passenger in front is of a larger and/or taller size and may have his or her seat fully reclined. It IS NOT TOO LATE to install IFEs with USB outlets in every seat which will make the long distance travel time more enjoyable and faster. Your medium and and long-range flights should have these and other amenities since the journey will be more than 5 hours. Take examples of both JetStar Australia and Virgin America who are LCCs with IFE's and other features that still make flying pleasant and AFFORDABLE. Since Hawaii is only five hours from the West Coast USA, both Air Asia X and Cebu Pacific may attempt to fly either to San Diego, Las Vegas or Seattle from HNL. The only downfall is both airlines can't acquire additional passengers from Hawaii due to the Jones Act which is now being reviewed again. Yet AK and 5J passengers originating in Asia can enjoy a Hawaii stopover for a day or so then continue their journey as during the days of Pan Am, PAL and Northwest on their transpacific routes via Hawaii from the 1950's till the early 1990's when more modernized-fuel efficient jets were introduced. This would be a WIN-WIN for the airlines, traveling public and destinations involved. Best wishes to both airlines!

    ReplyDelete
  2. Good luck to AAX and CP, but it's going to be challenging. Remember how well AirAsia X's Europe flights went? Even if they didn't use A340s, ultra-long haul flights like that aren't possible with older generation aircraft, and even with newer ones it's still a challenging market (does anyone have any data on how well Norwegian's Europe-Bangkok flights are doing?) I somehow noticed that CAPA is somewhat biased towards LCCs: their analyses of LCCs are generally positive and optimistic, even when the LCC being analyzed is struggling (i.e. FastJet).

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  3. As for AirAsia Japan 2.0, well, let's see how it will go. The original one failed for various reasons, but one fatal flaw was their reluctance until almost the very end to adapt to the nuisances of the local Japanese market, such as a flexible check-in cut-off time (AA's 45 minutes versus the usual 15 minutes: even Peach's was relatively short), and not distributing tickets through convenience stores and the like (unlike even here in the Philippines). Even if they do learn their lessons for the next incarnation, it may already be too late: the LCC market in Japan is growing fast without AirAsia, and Peach and Jetstar Japan are doing very well so far (JJ is doing so well that they are now collaborating with parent JAL with codeshares, possibly to feed international flights at Narita); by contrast, newly-launched Spring Airlines Japan is struggling hard and I don't know if, given its numbers, it can survive in the long-term (indeed, there are rumors that Spring Airlines China is planning to expand more in Japan, which might leave little room for its Japanese affiliate). Even Vanilla Air (nee AirAsia Japan 1.0) isn't doing too well either. Also, AirAsia's possible saving grace is that they plan to be based at Nagoya's old airport, Komaki, which currently lacks much air service after most airlines moved to Chubu. If they can fill out a decent niche there, then they could be successful, but it's going to be an uphill battle given the overall competition environment in Japan.

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  4. Would the CEOs, execs and upper management of these LCCs fly their their own airline during long haul routes especially in the high dense economy class layout and the lack of basic amenities compared to full service carriers? They should have a premium economy/coach section.

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  5. LCC has a different business model compare to a legacy carrier.
    Do not insist on IFEs, amenity kits, premium ECY, etc on a low cost carrier. That will never happen because it is a low cost carrier.
    You can demand, insist, cry out loud for legacy carriers to offer those IFEs, BCL seats, PECY seats because it is a legacy carrier and that is part of their business model.
    A true-blue LCC like Cebu Pacific, Southwest, Ryanair, etc will never have those things which you keep on insisting since trans-pacific will definitely be a longer flight.
    It doesn't matter at all. Whether it is an hour flight like MNL-CEB or a long-haul flight like MNL-KWI, a true-honest to goodness LCC will have none of those things which you day dream of.
    LCC IS EFFING DIFFERENT FROM A LEGACY CARRIER.

    ReplyDelete
  6. Well said. All those who complain about the lack of IFE, amenity kits, complimentary food etc,will be the first to complain if LCC's provide these services and then increase airfares to cover their costs. Some travelers will never be satisified

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  7. People, if there is no IFE then bring your own. Movie, Music, Games, eBooks on a cell phone or tablet. I mean you are anyway carrying one, right? Same goes for the food and toothbrush. Who needs socks anyway?

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  8. Folks, continue dreaming until Cebu Pacific will start to take off from Manila to Honolulu for a Piso Fare. In the meantime, I am satisfied with fares of 4-star Eva Air and 5-star Asiana. I may try Cebu's Piso fare if it may work for me. Experience is the best teacher, so they say

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  9. You both have to make It fast to conquer north America because a real tiger called Vietnam Airlines would soon take off to the USA's major cities with LCC-type or lower fares! Remember, it is a government carrier with lots of capital, competitiveness and aggressive marketing! Start your engines! You may be upstaged..............................

    ReplyDelete
    Replies
    1. vietnam airlines has state-of-the-planes but their services is notoriously bad..staffs are more noisy,rude than pal.they likely to shout or embarras a passengers.i flew vietnam airlines twice.

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    2. Who cares? As long as they fly A350s, have loudmouth crews like PAL, etc., as long as the fare is right for my wallet, I am not worried at all! Crews will embarrass and hassle you if you go the bathroom one minute before landing, all airlines will do that to you, of course! Common sense.

      Delete
    3. 99% of passengers have no idea what A350 really is.what really matter is services like inflight entertainments,wifi and of course,foods! Im not plane genius....if all passengers happen like you,im sure pal goes bankrupt.

      Delete
  10. And you'll even land in jail (even in Manila). So there are rules in flying, therefore, if you fly any airline, the rule is the law so that it will not jeopardize your safety and the safety of every passenger and crew! Common sense, really!

    ReplyDelete
    Replies
    1. Have you ever fly with vietnam airlines?i think no. Did you know that their flight attendants are has the most bad reputation in asia?! Think about smuggling and allowing passengers taking selfie in cockpit airborne.these are few examples.all i can say is read,read,read news!

      Delete
    2. I cannot tolerate your English Grammar so I am not understanding you at all. Sorry!

      Delete
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