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Starry-eyed budget carriers in South-east Asia staring at overcapacity

Published on Feb 9, 2014 7:43 PM
AirAsia aircraft model 9M-AQB is seen on track at Low Cost Carrier Terminal (LCCT) airport at Sepang outside Kuala Lumpur on November 19, 2013. -- FILE PHOTO: REUTERS

SINGAPORE (Reuters) - Low-cost carriers are flying high in South-east Asia on the back of sharp growth in air travel, but as hundreds of new jets swarm into the region concerns are rising about its ability to absorb the record numbers of planes on order.

South-east Asian carriers have been devouring as many new airplanes as planemakers can sell, gambling that low fares and rising disposable incomes will drive the region's 600 million-strong population to keep flying to new destinations.

An aircraft buying binge fuelled by cheap interest rates and backed by Western export credits shows few signs of halting, with Vietnam's VietJetAir and Thailand's Nok Air both expected to place orders at the Singapore Airshow this week.

But after years of explosive growth, the region's budget carriers are now facing fears of overcapacity as deliveries accelerate, airlines expand into each other's markets and currency weakness threatens to puncture economic growth.

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