The Asian ULCC Invasion of the US Begins

Air Asia

There have been many attempts at low cost carrier flying over the Atlantic over the decades, but the Pacific has never seen quite the same level of interest. Part of it is certainly because of the longer distance, but there’s also the fact that low cost carriers developed far later in Asia than elsewhere. Either way, it’s starting to change now, and the US is just beginning to receive the first of what will likely be many flights to come.

AirAsia X claims that it is now the first Asian low-cost carrier to receive approval to begin flying scheduled service to the US. While that’s really not true (Jin Air has been flying from Incheon to Honolulu for over a year), it is significant. See, Jin Air is trying to serve cheap South Korean travelers who want a beach vacation in Hawai’i and nothing more. AirAsia has much grander plans.

AirAsia X is the long-haul division of the wildly-successful AirAsia. Note that while AirAsia has been wildly successful, AirAsia X has not had the same luck. It originally started flying with fuel-guzzling A340s on long routes as far as Europe. That was a massive failure and the airline pulled out quickly. It has failed, in fact, on many longer-haul routes, instead finding its sweet spot on medium-haul flying primarily between Southeast Asia and both North Asia and Australia with a couple Middle Eastern routes thrown in for good measure.

The airline has since traded in those A340s for more efficient A330s, and it has packed them full of seats. Its 30 A330-300 aircraft have 12 angled flat beds in premium class and a whopping 365 coach seats. (Above image via AirAsia X.) For comparison, American has 28 flat beds in business and a mere 263 seats on the same airplane. It’s not even that AirAsia X has cut legroom much. The larger issue is that it crams in 9 seats across in coach whereas most wouldn’t do more than 8. (The seats are 16.5 inches wide.) Starting next year, AirAsia X will take 66 A330-900neos and 10 A350-900s to further build its empire. It’s ready to grow A LOT.

When I met AirAsia Group CEO Tony Fernandes a couple years ago, he was very clear that the US was on the roadmap. Hawai’i would be first but the airline had designs on much more. So it wasn’t a surprise when the airline said it was going to begin service. In fact, the press release saying that AirAsia X had been approved to fly to the US noted that “AirAsia X is currently considering flights to several US states including Hawaii as part of its route expansion plans.”

To start, AirAsia X is being cautious. Today it flies from Kuala Lumpur to Osaka/Kansai one or two times a day. The airplanes go to Osaka and then turn back around. Now, AirAsia X is going to send one of those airplanes on to Honolulu 4 days a week. The schedule looks like this (starting June 28)

AirAsia X 1 Lv Kuala Lumpur 2:00pm Arr Osaka/Kansai 9:25pm
AirAsia X 1 Lv Osaka/Kansai 11:25pm Arr Honolulu 12:30pm

AirAsia X 2 Lv Honolulu 4:00pm Arr Osaka/Kansai 8:25pm (next day)
AirAsia X 2 Lv Osaka/Kansai 10:00pm Arr Kuala Lumpur 4:00am (next day)

That’s some good aircraft utilization (though it’s an awful arrival time back in Kuala Lumpur). This arrangement allows AirAsia to enter a tried-and-true market with a ton of demand: Japan to Hawai’i. Osaka itself already sees 2 flights a day on Japan Airlines, 1 on Hawaiian, and 1 on Delta to Honolulu.

Of course, AirAsia’s plan is to be a price leader. Fares are starting at a little over $100 each way, and even those angled beds in the premium cabin are cheap at around $700 one way for now. This is already a leisure market, so fares can be low today, but not quite this low. I think what AirAsia is doing here is fairly smart. It’s sticking with its medium-haul strategy and it’s entering a market with a ton of demand. It’s doing it efficiently by jacking up aircraft utilization. Not a bad way to dip your toes in.

All that being said, there will be fierce competition in this market, and it’s unclear how the other carriers in the market today will react. With so many seats on those airplanes, AirAsiaX should have a tremendous cost advantage that will help it to make money with low fares. But it still has almost 400 seats per flight it needs to fill. That’s a lot of butts in seats.

While this is an interesting test case, this particular route isn’t what really interests me. (If it was, I would have been all over the Jin Air Honolulu launch.) It’s AirAsia X’s future aspirations that have me pondering what’s next. Those A330-900neos should have the legs to reach the West Coast of the US from Asia, even with a crushing number of seats onboard. When that inevitably happens, it’s going to bring fares down and spark a fare war similar to what we’re seeing over the Atlantic with Norwegian today.

It’s still not clear that AirAsia X can make any money on those truly long-haul routes. But with this new generation of airplanes coming in the door, it’s going to get interesting. Now that AirAsia X is beginning US service, it will be much easier to add cities on the mainland. It’s just a matter of time.

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38 comments on “The Asian ULCC Invasion of the US Begins

  1. 16.5 inch seats may work for Asian waistlines, but I suspect that Americans will be in for a nasty surprise trying seats that tight on long haul flights… Ouch!

    1. I’m not sure waistline is the worst problem (it can be squeezed more easily than shoulder width !)…

      1. Either way, I foresee a huge business opportunity for sketchy chiropractors to set up shop immediately outside of Air Asia X gates and customs/immigration.

    2. ITM-HNL is 4103mi, only fraction longer than KUL-OOL at 4043, where they have flown for years, and Australian and Americans are similar sizes. I’ve flown them on KUL-OOL a few times, and while it isn’t super comfortable, it’s not that much worse than economy in some of the more expensive carriers.

      Flying to west coast US is obviously further, and I think plenty of people would be happy to take it for the insanely cheap price.

  2. Cranky, since the range of their A330s restricts will restrict them to NE Asia for now, do you see these long-haul developments centering around Japan for the time being? I don’t know if the US-South Korea Open Skies treaty allows 5th freedom rights and I doubt China would be accommodating for something like this (not that cheap China-US tickets aren’t already there in good number).

    This could be a real godsend for KIX. With my namesake airport taking much of the short haul traffic in Kansai and more and more of the long haul traffic going via Tokyo via train, it’s only really LCCs that have wanted to grow in KIX. If Honolulu turns out to be successful, I could see AirAsia going after a kind of scissor hub in KIX with medium haul SE Asia flights feeding into Hawaii, LAX, SFO, and maybe something more out there like SEA or LAS.

    1. Itami – I see this as a trial balloon just to see what sticks. I’m not so sure we’ll see a ton routing through Japan here, but it’s entirely possible. I really don’t know though.

  3. What’s worse, 9 across in a 330 or 10 across in a 777? I’ll never know as I won’t ever fly an airline that does that.

    1. The one with the least personal space. You’re down to a point where every additional square and cubic cm counts !… :-) or maybe more true :-(

    2. 9 across 330 is 16.5″. 10 across 777 is still 17″. Both are torture, but the 9 across A330 is something that is inhumane.

      1. There is literally no way I would that A330 flight. And I have said the same about the 10-across 777s. I did a red eye on a UA 787 in coach and it wasn’t fun constantly getting bumped/shoulder-rubbed by a stranger.

        1. I agree, I really don’t like those narrow seats and I refuse to fly in them. I’ve seen a 10 across 777 flying TPE – SFO on CI last year, and I was thankful I was in J.

    3. I don’t know about the others since I’ve never flown on a 777 so far, but I flew PAL from Manila to Haneda last year, and their A330s (at least the ones that won’t be reconfigured soon) are 3-3-3-3. The seats were surprisingly comfortable and didn’t really feel that cramped, although the lack of IFE made the flight a little boring.

        1. I have flown in a PAL A340 from RUH-MNL (441 seats in all-economy I think) where they had to offload luggage indiscriminately from the hold (only 1 bag per pax was delivered), waited a few hours for outside temp to drop below 40C, and we still used every inch of the runway on the take-off.

  4. Sounds like the US airlines need another meeting with Pres Trump to complain about this unfair competition.

      1. I suspect they will gladly take your money and then sell your second seat a second time. And you can then file a complaint with the DOT in Malaysia :)

  5. AirAsiaX has already flown to Oakland with a A340 in a special Raiders paint job, and at the time it was hinted of scheduled Service one day to OAK. For a ULCC carrier OAK would be a lower cost location the SFO.

  6. What is considered a “good” (minimum reasonable) turnaround time for medium / long haul international flights like these? Is anything under 2 hours pushing it?

    1. I bet those planes are completely trashed after a flight with those many people on board. Cleaning one of those planes after a flight would probably take 90 mins.

    2. Kilroy – Hard to know what makes sense here, but it’ll be a mix of ground time and commercially-reasonable schedule. I wonder if that return is timed to not get to KL before 4a. I’m just not sure, but that should be more time than they’d need in Honolulu. Not by a ton, as Harrold mentioned. They’ll need some serious cleaning.

  7. Would UA be able to make a go of it using some of those retired 747s in a UA-Basic, maybe OAK-GUM-KUL Asia-Basic service?

    1. Probably not. The labor costs alone at UA wouldn’t allow them to be able to fare match. Not intended as a shot at organized labor in this case. Largely non-union DL probably couldn’t do it either.

  8. Since US-Asia is heavily Asia originating, this has to be targeted as much at Asian as US carriers. Hawaii is even more Asia focused.
    Hawaiian Airlines has grown its presence from Hawaii to East Asia while the US global 3 have reduced their presence to Paradise, largely because of the stronger yen and Delta’s reductions in Tokyo. If Hawaii becomes a major focus of low cost carrier activity across the Pacific – and Hawaii is almost entirely leisure driven and shorter haul than mainland US flights – the impact on Hawaiian will be significant. (and they just agreed to a new agreement with their pilots)
    It is ironic that the JAL and ANA complained about Delta’s presence in Japan using 5th freedom routes beyond Japan while the Japanese government recognized that it needed to open its aviation sector to more low cost competition, where Japan has been well behind other Asian countries.
    The combination of the two has led to Delta’s pulldown of its 5th freedom routes but a very likely increase in 5th freedom routes by Asian low cost carriers. Japan and S. Korea have higher standards of living than in SE Asia and also lower low cost carrier penetration. Japan and S. Korea’s geography means they will always be attractive markets for transpacific flights and the same holds true for low cost carriers. Open Skies treaties simply make it easier for SE Asian low cost carriers to expand. The impact to Japanese airlines will be far larger from a smaller number of low cost Asian routes than Delta’s Narita hub which was (and is) operated as a legacy carrier hub.
    Seat size is no more of an issue on AirAsiaXvthan the increasing use of the ~ 17 inch coach seats by many international airlines in 10 abreast 777 or 9 abreast 787 instead of ~18 inch seats that are the result of 9 abreast 777 or 8 abreast 787. When airlines have repeatedly said that “economy customers choose the lowest price” they automatically set themselves up as having an identity defined by the lowest common denominator (LCD). There are not only customers who know the difference between a 17 and 18 inch seat and there are also airlines that recognize that they can and do gain a revenue premium by offering a service that is not the same as, or at best fractions of an inch from, the LCD.
    Finally, the low cost carrier model means they will be attracted to the largest markets which means that Los Angeles, San Francisco and New York are most likely to be high on their lists, regardless if they use secondary airports in those cities. As such, UA’s SFO and EWR hubs could have the biggest bullseyes on them.

  9. The Chinese carriers have already had a pseudo-LCC effect on fares in a lot of US-Asia markets, due to their one-carrier-per-route system which incentivizes them to dump capacity to “land grab.”

    AirAsia will have a significant impact on fare levels in the Japan-US market, but I’m skeptical it will make too much of a difference on US-China and points south.

  10. Would also like to mention that Cebu Pacific has also received approval to fly to the US and plans to fly to Honolulu using its existing fleet of A330s (currently used for ME, Australia, and some regional trunk flights). The difference is that, unlike AAX’s planned flights (which are Kuala Lumpur-Osaka-Honolulu), 5J’s flights will be direct (Manila-Honolulu). Then again, Manila is closer to Honolulu than Kuala Lumpur is, and it’s a market already served by PAL.

    Also, as an aside, AAX is planning to launch Europe again, with flights to Gatwick starting this year using a pair of we-tleased 777s as a stopgap measure until the A330neos/A350s arrive. What do you think of this plan?

    1. MK03 – Ah yes, Cebu Pacific, one of the best run airlines out there right now making a questionable decision. Manila is a really low-yield market.
      Hawaiian tried it and it was bad. When Philippine came in, Hawaiian abandoned it. I don’t know that Cebu is going to have an easy time with this one. As for Europe, well, I’ll believe it when I see it. The step change in aircraft efficiency coming with these new models does potentially create opportunity. But then again, it all depends how the legacies react.

      1. I think PR was already in the MNL-HNL market by the time Hawaiian tried it. As an LCC, Cebu might be in a better position to try to compete with PR on the route than HA did. How has Cebu fared generally when going up against PR?

        1. From what I recall, 5J had a poor start to their ME routes (particularly Dubai; Dammam was suspended after just a few months), but they’ve been able to turn things around and now it’s PR which is planning to make cuts to ME.

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