High-flying luxury: battle for Asia's jet-set is hotting up

Wed Jul 3, 2013 5:23pm EDT
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By Anshuman Daga

SINGAPORE (Reuters) - With limousine pick-ups and on-board chefs, Asia's premium airlines are investing hundreds of millions of dollars on luxury services in a bet on a rebound in business from the wealthy, even as low-cost carriers fly high with the booming middle class.

Although business and first-class traffic has fallen significantly in the last few years as companies cut costs, carriers such as Singapore Airlines Ltd (SIA), Cathay Pacific Airways Ltd and Qantas Airways Ltd are estimated to still earn about 35 to 40 percent of passenger revenue from the high-margin segment.

Yields per premium passenger are around four to five times higher than those for economy class, underscoring why airlines are keen to pour money on amenities that range from luxurious cabins to fine dining.

Asia-Pacific airlines are the most profitable in the global aviation sector, industry data shows.

"If you don't upgrade your products, you are always going to be under pressure to drop the price more significantly," Tan Pee Teck, SIA's head of product and services, told Reuters in an interview.

"So, when people see the investment, see something new, fresh, there'll always be people who are going to try it, just like the way the A380 was launched."

While low-cost carriers such as Malaysia's AirAsia Bhd and Indonesia's Lion Air have been grabbing headlines with record plane orders to feed rapid demand for travel, the battle for Asia's richer travelers has also been heating up.

Singapore's flagship carrier has hired BMW Group's design unit, DesignworksUSA, to roll out new first-class seats featuring more privacy and personal stowage space.   Continued...

An Indonesia AirAsia Airbus A320-200 passenger prepares to land at Sukarno-Hatta airport in Tangerang on the outskirts of Jakarta in this January 30, 2013 file photo. REUTERS/Enny Nuraheni/Files