Indonesia’s Lion Air Group is aiming to launch a new affiliate in Thailand by the end of 2013 with an initial fleet of two 737-900ERs based at Bangkok Don Mueang Airport. The new carrier, Thai Lion, will follow the low-cost model and, unlike Lion’s Malaysian subsidiary Malindo, provide an all-economy no-frill service.
Thai Lion will initially serve two international routes – Kuala Lumpur and Jakarta – and Thailand’s second largest domestic route, Bangkok-Chiang Mai. With Kuala Lumpur and Jakarta, Thai Lion will be able to leverage the hubs of its sister carriers.
The new carrier will compete primarily against Thailand’s two existing LCCs, Thai AirAsia and Thai Airways’ low-cost affiliate Nok Air. Both are based at Don Mueang and serve Chiang Mai while AirAsia is the market leader between Bangkok and Kuala Lumpur and also serves Bangkok-Jakarta.
Lion goes with LCC model in Thailand but hybrid model in Malaysia
Lion sees room in the Thai market for a third LCC. In Malaysia, the group decided against following the LCC model although the market only has one local LCC, AirAsia.
“Thailand is more tourism; a lot of tourism,” explains Lion Group CEO Rusdi Kirana. “There is some market in Malaysia that is full-service and Malaysia is dominated by low-cost so we needed to differentiate the product. If I put the same thing as AirAsia I think we have nothing to offer the passenger.”
In Thailand the market is more fragmented and the LCC penetration rate is currently much smaller, providing a potential opportunity for Lion to come in with a low-cost product. The system-wide LCC penetration rate in Thailand is currently 29%, the lowest among the five largest Southeast Asian markets.
Lion sells beverages and snacks but is not nearly as aggressive as AirAsia with pushing on-board sales. Unlike most LCCs, the Lion (and Thai Lion) product includes complimentary checked baggage.
Lion has not yet disclosed whether turboprops are part of the business plan for Thai Lion. But given the network model followed by all of the group’s carriers, ATR 72s will likely eventually be used by Thai Lion to operate thinner and shorter routes. Turboprops open up a wider range of potential destinations in Thailand and would give Thai Lion an opportunity to provide a key differentiator to Thai AirAsia.
Nok has been successful at using turboprops, including ATR 72s and smaller wet-leased Saab 340s, to open new routes and become Thailand’s largest domestic carrier. AirAsia follows a stricter model with a single aircraft type. While Thai AirAsia is by far the biggest international LCC in Thailand, Nok currently has about a 27% share of domestic capacity compared to 26% for Thai AirAsia.