S-E Asia's budget airlines grow fleets despite rising costs

They seek to gain market share amid fierce competition in the region, thin margins

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SEOUL - South-east Asia's biggest budget airlines are pursuing a bruising capacity expansion race despite rising cost pressures that are squeezing profitability and led Qantas Airways to shut down its Singapore-based offshoot Jetstar Asia.

Low-cost carriers have proliferated in Asia in the past two decades as disposable incomes rise, supported by robust travel demand from Chinese tourists.

Demand for air travel in Asia is expected to grow faster than other regions in the next few decades, and carriers like Vietnam's VietJet Aviation and Malaysia-headquartered AirAsia are to buy more planes to add to their already large order books as they seek to gain market share.

But margins are thinner than in other regions.

The International Air Transport Association (IATA), an airline industry body, expects Asia-Pacific airlines to make a net profit margin of 1.9 per cent in 2025, compared with a global average of 3.7 per cent.

Airlines across Asia have largely restored capacity since the Covid-19 pandemic, which has intensified competition, especially for price-sensitive budget travellers, and pulled airfares down from recent high levels.

International airfares in Asia dropped 12 per cent in 2024 from 2023, ForwardKeys data shows.