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Q: Will low-cost carriers help planners reduce T&E costs or gain cheaper fares from traditional carriers?
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American International Travel Hong Kong strategic adviser, Jonathan Kao
I think the market will certainly be more healthy with more competition. It will provide more choices. Our clients are more likely to find more suitable routes and schedules.
However, I am not very sure that it will bring down T&E expenses too dramatically, as multinational companies have sophisticated travel policies and I think there are a few issues with low-cost airlines with a managed travel policy.
First of all, it is the issue of consolidation. Most of the low-carriers that I have seen are usually not available on the GDS, therefore MNCs that are using a TMC for their travel requirements will not be able to do any booking for the clients. This presents the problem of missing data in MIS reports. Our clients can no longer accurately review their travel arrangements/expenses through these reports.
Secondly, these airlines have very stringent restrictions on their tickets. Thirdly, depending on their schedules and routes, clients who need to do a multi-point trip may have a hard time connecting these flights due to time/date or airports (as a lot of low-cost carriers operate around regional/local airports).
I think the bigger established airlines in Asia are run very cost-consciously and there is nothing for them to worry about. But discount opposition will force existing carriers to become more competitive, especially in the economy class/leisure sector.
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Siam Express Thailand president, Charn Pirapokin
The prestige factor cannot be ignored. Not all businessmen want to be seen carrying their own luggage; some will not want it to be known that they are travelling on the cheap.
But I think established airlines will respond to the challenge coming from low-cost carriers and lay on cheaper services themselves. These might not be completely without frills, but the fares would be cheaper and this will appeal to the multinational corporations which are keen to cut T&E costs at the moment.
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Oriental Capital Assurance Malaysia chief operating officer, R Nesaretnam
The use of AirAsia for domestic travel has been raised a number of times, but has not been incorporated into our travel policy. A main issue is AirAsia, at present, is not promoted as an equal alternative to Malaysia Airlines (MAS), but a cheap option. So if we were to ask our staff to use AirAsia, it is a hard sell. They may feel we are asking them to travel on the equivalent of the back of the bus just to save some money at their inconvenience.
Other issues are the inflexibility with tickets and the need to book directly. While on business, we occasionally have to extend our trips. If we fly on AirAsia, this means forfeiting our return ticket or paying a RM50 (US$14) penalty to make a change.
Our staff are also comfortable with the current system of asking our appointed agents to make bookings according to their specifications. If AirAsia is the choice, they have to do it themselves and pay for it immediately. Our agents will not do this for them because no commission will be earned on the ticket.
Cost of domestic travel on Malaysia Airlines is not expensive. AirAsia will not be seriously considered unless this cost becomes so prohibitive there is a need to cut back. However, if AirAsia comes up with a product for the business traveller which has greater flexibility and is promoted in a different style, we will review its use more seriously.
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Rolls Royce Thailand managing director, Steve Miller
Most businessmen jealously guard their right to choose to fly with a company that boosted their air miles. Low-cost carriers do not offer air miles so I do not think they are going to attract people working for multinational corporations.
Business travellers on a two- or three-country trip are also concerned with seamless connections, and the lack of interline agreements may work against the low-cost carriers.
My view is that the budget carriers will have a greater impact on leisure travel.
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Air Services International Singapore, managing director, Mr Yap Soon Huat
The schedules of business travellers are erratic and many times bookings are made last minute, or there may be multiple changes. This makes it difficult for them to use budget carriers, which may not have the frequencies that traditional carriers do.
Another important factor for it to work for corporate travellers is the network. Does the low-cost carrier fly to business destinations? A good example of a successful low-cost model is Ryanair, which has quite an extensive European network.
Low-cost carriers may be popular with local businessmen who run their own small or medium-sized businesses and who are very concerned about costs. However, corporate travellers who work for global MNCs have been spoilt by the frills provided by the traditional models.
One example is loyalty programmes. For corporate travellers who do multiple trips a year, this has become a very attractive and essential feature.
Where there is competition, traditional airlines will also lower their fares – while still providing their full range of services – to stay competitive, so even if corporate T&E budgets are cut, companies may still be able to continue to enjoy flying on them.
Unless low-cost carriers have the fleet, network and frequencies of traditional models, I do not see them as a threat to traditional carriers as far as corporate traffic is concerned.
