Window of opportunity for Royal Brunei
Royal Brunei Airlines has always been quite a small player in Asia’s airline industry, but things seem to change now. With the advent of the first Boeing Dreamliner for Brunei’s national airline, the carrier has made it into the news, and adding to this, it has weighed into the debate over airline deregulation which would give it a better advantage over larger airlines in the region.
Furthermore, the ASEAN Economic Community plans to open skies above the 10-member bloc by 2015, which could be a real game changer for Royal Brunei, making it easier to set its mark on global air routes throughout Asia.
Royal Brunei has been in consolidation mode in the past years, having restructured its networks and business as such. It withdrew from destinations in Australia and New Zealand and cut staff by 25 per cent. But now, it seems that there is new momentum.
Not only will the Dreamliner open new, more cost-efficient opportunities on strategically important long-haul routes, there are also plans by Royal Brunei to intensify its regional network by using a proposed new feeder airline to be registered in Brunei to complement services. This would be the first time a second commercial airline operates in Brunei and an interesting new business model for Brunei’s aviation industry through better risk-sharing.
While long-haul has become a very tough business for carriers – Singapore Airlines just cancelled its flights 21 and 22, the longest commercial services in the world at around 19 hours flight time between Singapore and Newark, US, because they haven’t been profitable, the regional airline business in Southeast Asia is thriving as a sizeable part of the 600 million population is on the move.
The new feeder airline for Royal Brunei could follow a no-frills concept similar to booming new carriers such as Lion Air or Vietjet. Southeast Asia continues to post some of the highest growth rates in the global aviation industry, driven primarily by expansion in the region’s booming low-cost sector. This sector now accounts for over 50 per cent of capacity in Southeast Asia’s four largest domestic markets – Indonesia, Malaysia, the Philippines and Thailand. Even more impressively, low-cost carriers have been able to rapidly claim about a 50 per cent share in the intra-Southeast Asia international market.
But there has also been growth in 2013 at nearly all of the region’s flag carriers. A large portion of this growth has been on regional routes as full-service operators have been able to join the discount airlines in taking advantage of the generally favourable economic conditions in Southeast Asia. Adding to this, relaxation of market regulations among ASEAN countries has removed many traditional barriers to growth. Flights among ASEAN capital cities have also increased, marking an intermediate step in the path to a unified regional aviation market.
These are the best preconditions for a successful expansion of Brunei’s commercial aviation industry.
This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.
[caption id="attachment_7466" align="alignleft" width="146"] By Arno Maierbrugger[/caption] Royal Brunei Airlines has always been quite a small player in Asia’s airline industry, but things seem to change now. With the advent of the first Boeing Dreamliner for Brunei’s national airline, the carrier has made it into the news, and adding to this, it has weighed into the debate over airline deregulation which would give it a better advantage over larger airlines in the region. Furthermore, the ASEAN Economic Community plans to open skies above the 10-member bloc by 2015, which could be a real game changer for Royal Brunei, making it...
Royal Brunei Airlines has always been quite a small player in Asia’s airline industry, but things seem to change now. With the advent of the first Boeing Dreamliner for Brunei’s national airline, the carrier has made it into the news, and adding to this, it has weighed into the debate over airline deregulation which would give it a better advantage over larger airlines in the region.
Furthermore, the ASEAN Economic Community plans to open skies above the 10-member bloc by 2015, which could be a real game changer for Royal Brunei, making it easier to set its mark on global air routes throughout Asia.
Royal Brunei has been in consolidation mode in the past years, having restructured its networks and business as such. It withdrew from destinations in Australia and New Zealand and cut staff by 25 per cent. But now, it seems that there is new momentum.
Not only will the Dreamliner open new, more cost-efficient opportunities on strategically important long-haul routes, there are also plans by Royal Brunei to intensify its regional network by using a proposed new feeder airline to be registered in Brunei to complement services. This would be the first time a second commercial airline operates in Brunei and an interesting new business model for Brunei’s aviation industry through better risk-sharing.
While long-haul has become a very tough business for carriers – Singapore Airlines just cancelled its flights 21 and 22, the longest commercial services in the world at around 19 hours flight time between Singapore and Newark, US, because they haven’t been profitable, the regional airline business in Southeast Asia is thriving as a sizeable part of the 600 million population is on the move.
The new feeder airline for Royal Brunei could follow a no-frills concept similar to booming new carriers such as Lion Air or Vietjet. Southeast Asia continues to post some of the highest growth rates in the global aviation industry, driven primarily by expansion in the region’s booming low-cost sector. This sector now accounts for over 50 per cent of capacity in Southeast Asia’s four largest domestic markets – Indonesia, Malaysia, the Philippines and Thailand. Even more impressively, low-cost carriers have been able to rapidly claim about a 50 per cent share in the intra-Southeast Asia international market.
But there has also been growth in 2013 at nearly all of the region’s flag carriers. A large portion of this growth has been on regional routes as full-service operators have been able to join the discount airlines in taking advantage of the generally favourable economic conditions in Southeast Asia. Adding to this, relaxation of market regulations among ASEAN countries has removed many traditional barriers to growth. Flights among ASEAN capital cities have also increased, marking an intermediate step in the path to a unified regional aviation market.
These are the best preconditions for a successful expansion of Brunei’s commercial aviation industry.
This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.
