Airlines in Asia Resist the No-Frills Trend
By BETTINA WASSENER
HONG KONG — What do you do when your passengers do not fly as much as they used to?
In the United States, many airlines have responded to the drop-off in travelers by tacking on charges for meals, headphones and other things that were once part of a ticket — even as they have drawn fire for letting service levels slide.
But extra niceness is the approach adopted by many carriers in the Asia-Pacific region, who have decided that the way to persuade people to fly, preferably in business or first class, is to pamper them.
Korean Airlines, for example, is spending $200 million to equip its aircraft with high-end seats and upgrade its entertainment in all cabins. On the meal front, the menu includes organic food. And this year, the carrier even introduced beef and chicken raised organically at its own ranch on Jeju Island.
The Hong Kong carrier Cathay Pacific's latest initiatives include new cabins on long-haul flights; a new first- and business-class lounge in Kuala Lumpur; and a home wine delivery service. Starting next year, passengers will be able to choose from at least 21 movies, up from 18.
The world's airline industry will lose a combined $11 billion this year and $5.6 billion next year, according to the International Air Transport Association, and carriers across Asia have not been immune from the downturn. Like their counterparts in Europe and the United States, Asian airlines have had to drop routes, shed employees and scrap aircraft orders. Some are shrinking the number of seats in first and business class, where demand has fallen sharply. Japan Airlines is even seeking a government bailout to keep going.
But the tradition of perks has remained sacrosanct in the region and is likely remain so, analysts say.
Outside of mainland China, Asian airline passengers expect top service because it is part of the region's cultural makeup and because no-frills, budget carriers are not as established here yet. For many carriers, the top end of the market makes up a huge part of revenue, and none can afford to be the first to cut corners when it comes to service levels.
"Asian airlines have been very reluctant to start going down the track that the Americans have gone," said Peter Harbison, chairman of the Center for Asia Pacific Aviation, a consulting firm based in Sydney.
Alex McGowan, product manager at Cathay, said: "When the financial crisis overwhelmed the industry a year ago, we took a decision that maintaining that premium service was vital to our future. So whatever cutbacks we made, we did not make any to the areas our customers value."
Singapore Airlines is installing new seats in the premium cabins on some aircraft and has improved in-flight entertainment systems. Like Cathay, it is based in one of Asia's financial hubs and was hit hard by the turmoil in the banking industry. But about 40 percent of its revenue comes from its premium classes. That may explain why it has not only maintained its annual wine budget for first class — 10 million Singapore dollars, or $7 million — but also has introduced new meals for first-class passengers on Chinese routes, specially created by a leading Chinese chef, Zhu Jun.
Qantas, the Australian carrier, canceled orders for several aircraft in June. But it has pressed ahead with a program devised to cut check-in times in half on domestic flights by allowing members of its frequent-flier program to check in with a membership card fitted with a special chip.
Asian airlines' obsession with service shows through in the quality rankings of Skytrax, a consulting firm based in London. Five of the six airlines in Skytrax's five-star category are based in the Asia-Pacific region, as are nearly half of the 27 carriers that hold four stars.
By contrast, only a few four-star carriers are North American and fewer than 10 are European. Carriers in Europe have started to move down the road of charging for extras and easing back on some services. But the practice is not nearly as entrenched in Europe as it is in the United States, where a recent survey by J.D. Power & Associates showed that customer satisfaction with North American airlines has declined for the third consecutive year as airlines added fees for items like drinks, baggage and even pillows.
Such "ancillary income" — revenue from sources other than the ticket price — has become increasingly important for airlines, which have had to resort to heavy discounting to fill seats. Passenger numbers have begun to recover recently, but intense competition means ticket prices remain well below where they used to be: the International Air Transport Association's most recent statistics show that economy fares in August were 13 percent below a year earlier, and premium fares were 17 percent lower.
For no-frills carriers like Easyjet or Ryanair in Europe, fees for drinks and headphones make sense: The airlines are charging only for what the passenger wants, said Mr. Harbison of the Center for Asia Pacific Aviation.
"But when you are posing as a full-service airline and are trying to show that you're not just a commodity carrier, you risk undermining your image and passenger loyalty if you start charging for add-ons, or cutting back on established services," he said.
The airlines will not say how much they are spending to keep the perks coming. And there has been at least one recent exception: Cathay Pacific announced last month that it would give all passengers, not just loyalty program members, the chance to secure extra-legroom seats — for a fee of $100 on long-haul flights. But such developments are not expected to become standard among Asian carriers any time soon.
At the same time, budget airlines are a relatively recent phenomenon in Asia and have not shaken up the market with rock-bottom pricing as much as in Europe and the United States. Carriers like AirAsia, Tiger Airways and Jetstar are growing, but "this is not going to change the established carriers' attitude" in the way it has elsewhere, Edward Plaisted, chief executive of Skytrax, said in a phone interview from London.
Asia's low-cost carriers have mostly expanded the pie, rather than intensifying the squabble over an existing market. Their fares draw in many passengers who could not afford to fly with traditional carriers.
And Asian low-fare airlines, like their full-service brethren here, often have a higher service mentality than their counterparts elsewhere. AirAsia charges for meals and drinks, for example, but its new aircraft have leather seats, conveying an aura of luxury.
Jetstar, another low-cost carrier, is testing a technology that will transmit boarding passes by text message to any mobile phone — whether it is Internet-enabled or not.
All that means that flying in Asia is likely to remain more pleasant than in Europe or the United States for the foreseeable future — and not necessarily at outrageously higher prices. For although the higher service levels come at a premium, that premium pool has shrunk, as carriers rush to entice travelers with lower ticket prices.
"Whether they want to or not, airlines in the region cannot compromise on quality," Mr. Plaisted said. "Fares have become very much more level than they were two years ago."
