Word: low-cost
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...Fernandes wouldn't have it any other way. "I love it when I struggle to find a seat," he beams. With ticket prices as low as 50?, seats have often been hard to find. Fernandes expects to fly 4 million passengers this year, twice as many as in 2003. His success heralds a revolution in the airline industry in Asia. Although Americans and Europeans have benefited from low-cost air travel for years, tight regulation, powerful national-flag carriers and a dearth of airports have kept budget airlines at bay in Asia. But finally the region's long-suffering travelers...
...premier airlines, deny that they are cutting prices in response to this new threat. But they have been offering what they call routine special promotions. In May, Cathay Pacific sold round-trips between Hong Kong and Singapore for $128, even less than the $160 fare offered by Singapore-based low-cost carrier Valuair, which started flying that same month. Major airlines "have been advertising prices even lower than ours," says Lim Chin Beng, Valuair's chairman. If they "want to lose money by undercutting us, good luck to them...
...Still, even Fernandes doesn't expect budget airlines to create the same upheaval for big carriers in Asia as they have in the U.S. and Europe. A tighter web of regulation provides established airlines more protection by preventing low-cost carriers hopping from city to city around Asia in the way Ryanair does in Europe. And, with only 2% of airline capacity in the region, the budget carriers have a long way to go to challenge the big boys. Most of all, major Asian airlines have much lower costs than their American and European counterparts, allowing them to compete more...
...With so many budget carriers starting up, they might be a bigger threat to each other than to the major carriers. Thailand has no fewer than seven low-cost operators. Tiny Singapore will be home to three: Valuair, Tiger Airways and an entry in which Australia's Qantas Airways is a major investor. Backed by powerhouse Singapore Airlines, Tiger plans to launch late this year on at least six routes. "We'll grow as quickly as we can and fly wherever we can," vows Stephen Johnson of Phoenix-based Indigo Partners, an investment company that owns 24% of Tiger...
...would be wrong, though, to underestimate Kim, who has become near legend in Seoul for the turnaround he engineered at LG's appliance business. When he took over in 1996, LG was making washing machines and refrigerators that seemed little more than cannon fodder for low-cost Chinese companies like Haier. Kim sliced costs by moving production of low-end products to China. He proved there is room for innovation in basic white goods, introducing, for example, appliances like air conditioners that can be controlled from the Internet. The result: sales reached $4.7 billion last year, more than twice...