Asia’s budget airlines’ challenges – wider than just costs

Following JetStar Asia’s decision to close its Singapore base after 20 years , the Financial Times recently published an article suggesting that the region’s low-cost airlines are struggling, particularly due to cost pressures and increased competition “Asia’s budget airlines struggle for profitability as costs rise” 29 Sept 2025. Whilst cost pressures are clearly a challenge to most airlines, there are more structural problems impacting the successful development of low- cost airlines in Asia. Unlike the United States and European Union, there is still a fragmented market in Asia, restrictions on traffic rights, national regulatory oversight and local commercial control. In addition, many countries still maintain their own national flag carrier with majority or significant government ownership.

Many of the region’s low-cost airlines, locally known as “budget” airlines so as not to draw too much attention to their high cost, high service compatriots, are operating as subsidiaries or under management control of national airlines, rather than the independence of Ryanair, EasyJet or Wizz. More often than not, decisions in such airlines are based on network and fleet optimisation for the parent airline, rather than a laser focus on cost and profitability.

Despite large populations and increasing propensity to travel, the operating environment in Asia also presents its own challenges. Distances between cities are often significant, domestic markets are often limited or non-existent, the absence of effective secondary airports and reliance on serving congested mega hubs designed for full service and often extensively long-haul, “hub and spoke” operations with many connecting passengers, are not ideal environments for airlines seeking low costs. But even here, creative solutions can be found. A dedicated, specifically designed low cost and basic facility, known as the Budget Terminal at Singapore’s Changi Airport was such a creative solution. While it was embraced by airlines such as Tiger Airways and Cebu Pacific, its ultimate demise may have been a result of the faculties being a bit too low cost for some the region’s “budget” airlines.

Ultimately, consumers in Asia will be best served through the implementation of the regulatory and competitive liberalisation that has facilitated the growth of the largest airlines in Europe. But in the meantime, creative solutions to ensure the highest levels of operational efficiencies and economies of scale are required to ensure sustained profitability with low fares.