Based on the Asia Pacific Travel Cost Forecasts for 2015,  strong competition in the airline sector of the Asia market will depress many airfares. The dominance of low cost carriers (LCCs) in the region are pressuring the major carriers to match their low-cost airfares.   For travel buyers this is an opportune time to leverage this dynamic in order to negotiate better corporate deals with their preferred carriers. In addition, this current situation enables companies the chance to explore program opportunities that would gain cost advantage with a hybrid strategy of utilizing LCCs and legacy carriers.

In 2010 there were only seven (7) LCCs in the APAC  region; by 2015 this number has risen to 47 with another 10 new entrants planned by the end of 2015. With the LCC growth starting only five years ago, corporate program engagement is still in early stage development. Only 54% of LCCs can be booked through GDS systems and less than 30% have collaboration with T&E tracking tools. This poses risks in real-time data gathering when it comes to duty of care obligations and also creates challenges with accurate expense reporting.  The LCCs have built booking systems that have made it easy for travelers to book online and via mobile devices.  LCC’s low fares on high-traffic routes such as Kuala Lumpur to Hong Kong, Bangkok to Singapore, etc. have created tangible fare savings when compared to legacy carriers. Based on PhocusWright analysis, the savings on LCC fares on international trips between South East Asian countries can be as high as 75% when compared to legacy carriers’ airfares.  In India, the LCC fare savings can be as much as 75%.

The question that many corporate travel managers now grapple with – should the company allow and engage LCCs for their travel programs?  Key points to consider for this analysis:

·         What specific travel policy guidelines should be instituted when flying on LCCs?
·         How will LCC volume impact contractual obligations with current preferred carriers?
·         How can the LCC ticketed data be tracked for duty of care?
·         What is the LCC’s current safety record level?


Ultimately, the decision to include Asia Pacific LCCs in a corporate travel program will depend on the organization’s objectives, the acceptable tradeoffs between policy/control and cost savings, and the impact on the overall user experience.


Travizon Travel Management