Interview with Paul Daff, head of commercial, Jetstar Asia Airways and Valuair

Europe has a significant advantage over Asia due to its common market, thus marking cross border holdings and mergers more easily facilitated, feels Paul Daff, head of commercial, Jetstar Asia Airways and Valuair.

When asked about consolidation in the European LCC market and his assessment of the situation currently in Asia, with merger of Valuair and JetStar Asia already taking place last year, Daff said, “Restrictions on foreign ownership and the bilateral regulatory regime in Asia will restrict consolidations significantly.  I believe the more likely scenario in the short term is brand franchising and alliances.”

In an interview with EyeforTravel.com’s Ritesh Gupta, Daff shared his opinion on the current status of the aviation market in Asia, expansion of LCCs in the region and much more. Excerpts:

How do you assess the current tussle between traditional and low cost carriers in the Asia Pacific region?

The entry of LCC’s into the Asian region has seen a dramatic increase in passenger numbers through the stimulation of pricing initiatives and the opening up of new routes.  This has had benefit for not only the traveling public but also to national economies.  The Traditional carriers have been forced to adapt to a changing environment, but it can benefit everyone.  Take Taiwan for example, this SIN-TPE market had been declining for a number of years, with airlines gradually reducing capacity.  Since Jetstar Asia’s entry on the route, we have seen the market grow for the first time in many years.  This growth has spurred the encumbents to also increase capacity. 

How do you assess markets like India and China? In fact, JetStar has already made inroads into India via its Singapore-Kolkata and Singapore-Bangalore flights?

Both these markets show significant potential for LCC’s.  Each market has a significant domestic market of greater than 1 billion people, spread over a geographically diverse area, making air travel a significant part of the transport infrastructure.  In addition, each of these markets economies are growing significantly creating a middle class who wish to travel internationally, and also attracting significant inbound tourism and business travel.

Jetstar Asia currently operates to both Kolkata and Bangalore in India, and the response has been extremely promising.

What do you think are the challenges for an organisation like yours to balance the equations between traditional and low cost carriers?

We see the opportunities to enhance our product offering to consumers whilst ensuring we maintain our low cost base. 

How is the traditional airline business model changing? What strategies the traditional carriers are implementing to protect their market share?

With the entry of LCC’s – I think a number of traditional airlines have been forced to look at distribution, revenue generation and focus on costs.   We’ve seen some airlines set up their own low cost airlines to focus on a different market segment to their core business, they have implemented new ways to generate revenue (including many adopting the standard LCC one way pricing model on some routes), and have had a renewed focus on costs and cost savings. 

What according to you have major developments in the online travel business in Asia in the last six months or so? How have these impacted or shaped up business opportunities for your organisation?

As more and more low cost carriers enter the market with a focus on online sales, this gradually changes peoples buying behavior and encourages the use of online purchasing.  There is to some extent a halo effect from this.

Is it possible to segregate diversified market in Asia on the basis of their online behaviour? What do you think is key in making e-commerce offerings relevant for a diverse Asian marketplace?

Asia is not a homogenous market – each country in the region is at different stages of their online development, and each faces different issues in relation to e-commerce.  The challenges and constraints vary across the region, some relate to technology and technical infrastructure, others are language and cultural whilst payment acceptance, credit card penetration and fraud continue to major influencers.  The key is recognizing this diversity and adapting your model to account for this.

How do you assess the emergence on online distribution channels including supplier websites, Online travel agencies and meta-search engines? How has this affected this your planning?

Jetstar Asia has a comprehensive online strategy that is constantly adapting to the emergence of these new channels.  We work closely with travel agencies and are beginning to expand further into the area of search engine marketing.

What do you think are going to be the major challenges (in 2006) for an organisation like yours?

Two of the main challenges for 2006 will continue to be access to limited traffic rights, thus dampening further growth, and expansion of technology and infrastructure in some markets limiting the growth in online transactions.