Post by : Jyoti Gupta

Photo:Reuters

In Southeast Asia, budget airlines like AirAsia and VietJet are trying to grow as fast as they can. They’re buying more planes and adding new routes because more people in Asia can now afford to travel, and lots of tourists from China want to visit. Experts think that air travel in Asia will keep growing faster than in other parts of the world for many years.

But there’s a big problem: these airlines are making less money on each ticket than airlines in other places. Their profit margins are very thin—only about 1.9% in Asia-Pacific, compared to 3.7% worldwide. After the pandemic, most airlines brought back their flights, which means there are now more seats for travelers, but this also means airlines have to lower their prices to compete. In 2024, international airfares in Asia dropped by 12% compared to the year before, and AirAsia’s average ticket price fell by 9% in the first part of the year.

At the same time, airlines are facing higher costs for things like airport fees, staff, and plane maintenance. There’s even a shortage of new planes, which makes it more expensive to lease or fix the ones they have.

Because of these challenges, some airlines are struggling. For example, Jetstar Asia, a budget airline based in Singapore, is shutting down after 20 years because it couldn’t keep up with rising costs like fuel and airport charges. Other airlines, like AirAsia and VietJet, are still betting big on the future and ordering lots of new planes, hoping that growing demand will help them make more money later on.

Right now, about two-thirds of all international flights within Southeast Asia are on budget airlines, which is much higher than the global average. The competition is fierce, and airlines have to be very careful with their spending. If costs go up even a little, it can be hard for them to stay in business.