Jeju airplane at Seoul Incheon International Airport.
Benard | Andia | Universal Images Group | Getty Images
Low-cost carriers (LCCs) should have an advantage in a price-sensitive and regionally oriented air travel market, analysts told CNBC. However, one observer warned that the benefits can only be harnessed if demand recovers.
The coronavirus pandemic decimated the global tourism market when border restrictions were put in place and airlines were no exception. The International Air Transport Association (IATA) said there was pent-up demand for travel but consumer confidence was weak amid "job security concerns and rising unemployment" alongside fears about the virus.
More than ever, when individuals and businesses alike are looking for low-cost options, LCCs naturally have the upper hand.
Frost & Sullivan
According to analysts, LCCs have an advantage over full-service carriers (FSC) in such a market.
"I think that is the feeling right now … Next year it will be a price-sensitive market, low-cost airlines have a lower base," said Peter Harbison, Chairman Emeritus of CAPA Center for Aviation.
He told CNBC's Street Signs Asia last week that full-service airlines worked when airlines had higher revenue, so the profit margin was still "high enough".
"The problem we have now is that if an airline has high costs, we won't see the kind of business travel revenue we have expected in the past, so the return on sales will be a little lower," he said.
Frost & Sullivan's Shantanu Gangakhedkar said attractive prices have always been the "main reason" for low-cost airlines to be successful in Asia.
"More than ever, with individuals and businesses alike looking for cost-effective options, LCCs will of course have the upper hand," he said, adding that competition between these carriers would be "fierce".
Gangakhedkar, an aerospace and defense consultant in Asia Pacific, also noted that domestic air routes will open first, while many international travel restrictions remain in place.
"LCCs have already started flying domestic flights and are even offering discounts and specials to attract passengers, so they are expected to go green well before most FSCs," he said. Low-cost airlines are "better suited" for such short-haul routes because they mostly fly narrow-body aircraft, he added.
& # 39; hibernation & # 39;
Greg Waldron, editor-in-chief of FlightGlobal in Asia, agreed that leisure and even business travelers could opt for cheap flights, but said it depends on a recovery that begins first.
Southeast Asia in particular is in a "really difficult hibernation state," he told CNBC on a video call. "There is some activity, but it is very limited. It is certainly not the stuff recovery is built on."
The problem is that the market has just collapsed and … all the advantages that they have in their model can no longer really be realized.
The IATA predicted that global passenger traffic will not return to pre-coronavirus levels until 2024.
Short trips and weekend trips are "impossible" given the current travel restrictions, said Waldron. "It's a really challenging time and the low-cost airlines are really going to suffer because their advantage is their business model, but nobody's business model is working right now."
Rapid settlements, which are typical of LCCs, may not be possible when the aircraft needs to be sterilized, and reduced capacity due to social distancing would be difficult for profitability, he said.
LCCs in the region like VietJet and Jeju Air "work really well" when the market is good, he said. "The problem is that the market has just collapsed and … all the advantages that they have in their model can no longer really be used."