A new airline alliance has just been launched in Asia. On Monday 16 May, the CEOs of eight low-cost airlines in Asia have signed an agreement to create Value Alliance, the first model of its kind for the low-cost air transport segment. Modelled in part on the major alliances of traditional airlines, Value is intended above all as a a tool for passengers rather than a pooling of marketing and strategic resources or joint purchasing policies.
Eight companies have joined the new entity, which is led by the CEO of Scoot, the subsidiary hybrid/low cost of Singapore Airlines. So it comes as no surprise that Scoot has joined the Value Alliance, along with its Thai subsidiary NokScoot, operated as a joint venture with local carrier Nok Air. Nok Air is also part of Value Alliance, as are Singapore Airlines' other low-cost subsidiaries, Tiger Air and Tiger Air Australia. Apart from this pool close to SIACebu Pacific (Philippines), Jeju Air (Korea) and Vanilla Air, a subsidiary of Japan's All Nippon Airways.
The eight carriers operate a fleet of 174 aircraft serving over 160 destinations from 17 hubs. It is worth noting, however, that some of the region's biggest low-cost airlines are absent. Starting, of course, with the AirAsia behemoth. But its size makes its integration into Value Alliance relatively derisory - or at least strategically pointless. The AirAsia group alone weighs almost 51 million passengers with a fleet of 170 aircraft spread across its half-dozen subsidiaries. AirAsia's network already includes almost 110 stopovers, a figure that is close to that of Value Alliance.
Another major absentee from the new alliance is Indonesia's Lion Air. Once again, this is not an essential strategic issue for the Indonesia's leading carrier in terms of passenger numbers. The airline carries some 37 million passengers a year and has a fleet of 190 aircraft in Indonesia alone. But it remains essentially a domestic operator with fewer than a dozen international routes.
The last major group to be absent from Value Alliance is Jetstar, a subsidiary of Australia's Qantas. The competition being intense between SIA and Qantas, it was therefore unlikely that the low-cost subsidiary would join the new alliance.
Among the potential airlines that could join Value Alliance in the short term are Tiger Air Taiwan and probably Vietjet in Vietnam. In the longer term, a and a representative of the Indian market could join the group.
What are the benefits for passengers?
What will Value Alliance bring its passengers, apart from the strength of its network of 160 destinations? It's all going to come down to the future alliance website. With just one click, passengers will be able to buy a ticket for all destinations, either on a direct flight or with a connecting flight. The transaction will be simplified because it will be a single process, and fares should be adjusted, notably downwards.
In addition to the flight, Value Alliance's booking engine will offer the possibility of adding options such as seat reservationa additional excess baggage or a meal. The site is still under construction, but should be operational in the next few months. The single booking portal for the eight companies should enable them toincrease their revenues by an average of 20% by attracting more passengers.
Finally, passengers will really benefit froman extensive range of alternatives in flights. Value Alliance, for example, has the largest capacity on departure from Manila - the main base of the Philippine low-cost giant Cebu Pacific. Manila is linked to 57 destinations with a monthly capacity of 768,000 seats. Next come Bangkok with 37 routes and almost 510,000 seats a month, and Singapore with 57 routes and some 469,000 seats a month. Next come Seoul Gimpo and Cebu, where Value Alliance is present with a capacity of 255,000 seats per month.
