Low-cost, no-frills:
How budget airlines changed air travel in Singapore over 20 years

Is it safe? That was the first question Captain Keagan Pang’s mother asked when she found out he was going to be a pilot at a low-cost carrier.

The year was 2011, and budget airlines here were expanding and looking to hire.

Having developed an interest in aviation after working in the air force and as a cabin crew member at national carrier Singapore Airlines (SIA), Captain Pang did not hesitate to sign up as a cadet at Jetstar Asia, before joining Tiger Airways.

Now an associate management pilot with SIA’s low-cost arm Scoot, the 42-year-old has flown all over Asia, from Ipoh in Malaysia to Osaka in Japan.

Despite her initial reticence, Captain Pang’s mother has become a regular on budget airlines, too. Fittingly, her most recent trip in 2024 was to Osaka on Scoot.

When it took off 20 years ago, the low-cost carrier industry in Singapore was met with fervour by some and doubt by others. But budget airlines have since become an accepted – even essential – part of the aviation landscape, opening up air travel to millions and creating a new breed of travellers.

While budget carriers make up about a fifth of the airlines at Changi Airport today, they fly to more than half of the 165 cities that the airport is connected with.

The shortest non-stop budget flight from Singapore is 55 minutes to Melaka. The longest is 12 hours to Athens.

More than 40 destinations are exclusively served by budget carriers, including Vientiane in Laos and Jeju in South Korea.

In the first nine months of 2024, a third of the 49.8 million passengers who passed through Changi Airport flew on low-cost airlines.

Mr Ellis Taylor, Asia editor of aviation analytics firm Cirium, said the conventional wisdom in the late 1990s and early 2000s was that Asian travellers would not fly on budget carriers.

This has been proven wrong.

By cutting costs and offering low fares, they have been able to launch new routes that other airlines wouldn’t have tried, and have played a key role in enabling tourism across Asia and beyond.

With thinner margins, low-cost airlines have been among the first to adopt new technology and business models to reduce costs, pushing full-service carriers to rethink their processes and product offerings.

AirAsia Malaysia chief executive Fareh Mazputra said the low-cost carrier model has democratised air travel.

With a growing middle class expected to fuel greater demand for affordable flights, he and the heads of Singapore-based Scoot and Jetstar Asia believe the sky’s the limit for budget carriers in South-east Asia, even with the challenges that lie ahead.

The low-cost carrier wave in Singapore began on May 5, 2004, when a Valuair flight left Changi Airport for Bangkok with 162 passengers on board.

It was the first budget flight to be operated by a Singapore carrier, with fares that were 40 per cent to 50 per cent cheaper than full-service ones.

Later that year, Tiger Airways – which was set up by SIA Group, Singapore’s investment company Temasek and the founders of Irish no-frills carrier Ryanair – entered the fray.

Qantas subsidiary Jetstar Asia joined in too, with its maiden flight on Dec 13, 2004.

The three upstarts were inspired by the successes of Southwest Airlines in the United States, and Ryanair and easyJet in Europe. The emergence of AirAsia in 2001 brought the low-cost fever closer to home.

Yet, many in the industry remained sceptical about low-cost carriers, as they felt consumers here were not ready for them, said a former airline head who was involved in the launch of budget flights here.

Travel was still a luxury in Asia then, and many airlines pitched themselves as delivering a premium service, which came at a high cost and with high fares.

But there was, in fact, a hankering for cheaper flights, and the response to the launch of budget flights in Singapore was huge.

Weeks before Valuair’s first flights, which were priced at a promotional rate of $138 to Bangkok and $300 to Hong Kong, full-service airlines such as SIA and Cathay Pacific began slashing their fares to keep up.

“We proved we could sell at lower fares and turn in operating profits on routes,” said the former airline executive, who declined to be named for this story.

By 2007, Jetstar Asia and Tiger Airways, which was later rebranded as Tigerair, had already made it onto the list of Changi Airport’s 10 largest carriers by passenger numbers.

By 2009, low-cost carriers accounted for 23 per cent of the airport’s total passenger traffic.

While the budget aviation sector has grown over the years, it encountered turbulence along the way. The first storm came shortly after lift-off, as irrational pricing by full-service carriers in response to the competition and expensive fuel made 2005 a tough year for budget airlines.

Countries like Indonesia had also shut the door on foreign low-cost carriers, leaving a few crowded regional routes for Singapore carriers to compete on.

The first casualty was Valuair, which tried to offer a “mid-cost” alternative by providing some frills such as free hot meals and assigned seating. But it did not have deep-enough pockets, nor could it attract enough investors, leading to its merger with Jetstar Asia in 2005.

More turbulence came in the 2010s, after the skies in South-east Asia opened up.

Aggressive expansion by low-cost carriers caused markets to be flooded with seats. Fares tumbled, as did earnings, prompting a scaling back of operations and a wave of consolidations and bailouts.

The growing proportion of low-cost carrier flights from Changi Airport relative to total flights

The rise of budget airlines prompted the development of new airport infrastructure, with the Budget Terminal opening in Singapore in 2006.

With no aerobridges and transfer facilities, the no-frills single-storey terminal at Changi was meant to help budget carriers save on airport costs. Two years later, a $10 million expansion more than doubled the terminal’s capacity from 2.7 million to seven million passengers a year.

In 2012, a decision was made to redevelop the Budget Terminal into the larger Terminal 4.

Mr Lim Ching Kiat, Changi Airport Group’s (CAG) executive vice-president for air hub and cargo development, said this was because the cost savings for low-cost carriers at the Budget Terminal were marginal, and passengers wanted a consistent experience at the airport.

Budget airlines in Singapore started to fly farther as well.

In 2010, Jetstar Asia’s sister airline Jetstar Airways started flying non-stop to Melbourne. Two years later, SIA launched Scoot to serve medium and long-haul routes.

In 2017, Tigerair merged with Scoot to capture a greater share of the low-cost market. Scoot’s first European service to Athens started the same year.

A recent trend has been the arrival of North-east Asian low-cost carriers at Changi Airport, such as South Korea’s Jeju Air and Japan’s Zipair.

The latest additions are Air Japan and Peach Aviation, both subsidiaries of full-service carrier All Nippon Airways.

With the liberalisation of air service agreements and low-cost airlines buying new narrow-body aircraft with longer ranges, CAG’s Mr Lim expects the growth of such carriers in Singapore to continue.

“Because of our location, we can actually access a bigger market, such as the northern parts of India and China, and Central Asia,” he said.

As acceptance of low-cost carriers has grown, the mix of passengers on board has become more varied. Expectations have changed too.

“In the early days, there was this misperception about low-cost airlines being less safe. But over time, people have seen, and the track record has proven, that this is untrue,” said Scoot’s Captain Pang.

Mr Lim said the stereotype that budget airlines are only for travellers on a shoestring is also no longer true, citing the example of Zipair, which offers lie-flat seats on its red-eye Singapore-Tokyo flights, a feature more commonly associated with premium airlines.

“My take is that people are more savvy these days,” he added.

Ms Florence Chan, 38, who joined Scoot as a cabin crew member in 2012, said she still gets questions from passengers about the lack of certain amenities on flights, but these have become less common.

She and other cabin crew members noted that no-frills does not mean no service.

Ms Mei Ng, 49, who has been working as a cabin crew member for 19 years, first with Valuair and then with Jetstar Asia, said: “We’ve had parents request milk, passengers needing earplugs, or even asking for unexpected items like sanitary napkins – all of which we do our best to accommodate.”

Scoot chief executive Leslie Thng said customers are becoming more sophisticated, which is why low-cost carriers now offer different ways to bundle ancillary services, such as checked baggage and in-flight meals.

There has also been a move towards self-service options.

Mr Thng said Scoot is using technology and data in all facets of its operations – from improving sales to simplifying work processes for staff.

Generative artificial intelligence is also a big trend, with both Scoot and AirAsia using it to give their customer chatbots a boost.

Mr Kenji Soh, general manager at corporate travel management company FCM Travel South-east Asia, said low-cost carriers have started offering products aimed at corporate travellers, including quiet zones and business class.

Pointing to a 13 per cent increase in low-cost bookings on FCM Travel’s platform, he said there is a trend of companies incorporating budget carriers into their travel policies for shorter flights.

In the past 20 years, there has also been a growing convergence between the low-cost and full-service models, giving rise to more hybrid airlines.

For example, while traditional low-cost carriers would not facilitate passengers transferring between flights or between other airlines, this is now the norm in Asia, Mr Taylor from Cirium said.

Jetstar Asia was the first to do this here, and it now has interline and codeshare agreements with more than 40 carriers out of Singapore, including Emirates and KLM.

This has allowed the budget airline to grow beyond the reach of its own direct customers.

Scoot is taking a similar approach with SIA.

“We don't have a domestic market, so transit traffic is also very important for us,” Mr Thng said, noting that transfer passengers now make up about a quarter of Scoot’s traffic.

Legacy airlines too have adopted parts of the low-cost carrier playbook, such as charging passengers for ancillary services.

Mr Taylor said this convergence will most likely continue as airlines adapt to the needs of different markets. This could mean more budget carriers adopting a frequent flier programme and offering business class cabins to compete against traditional carriers.

While the Covid-19 pandemic dealt low-cost carriers a major blow, budget airlines in Singapore have bounced back from that.

Between January and September, budget airline passenger traffic at Changi Airport was 101.6 per cent of 2019 levels.

With Covid-19 in the rear-view mirror, the sector is now looking at growth.

Mr Thng said he sees immense potential in South-east Asia, which he views as Scoot’s hinterland.

Scoot has focused on shorter hops within the region in 2024, with the roll-out of its new Embraer E190-E2 jets. But the airline wants to grow its medium- and long-haul network too, pending the delivery of more wide-body Boeing 787s.

AirAsia’s Captain Fareh said Singapore contributes significantly to the carrier’s overall passenger load, and the goal is to also expand its network here.

Growing the airline’s fleet would allow it to increase flight frequencies from the Republic, the former pilot added.

At a regional level, AirAsia has ambitions of turning its Kuala Lumpur and Bangkok bases into low-cost Dubai-like hubs.

It is also eyeing global expansion, with plans to launch routes to Africa, Europe and the US by 2030.

For Jetstar Asia, which has been slower to recover from the pandemic, the aim is to gain a firmer footing after the airline almost doubled its fleet from seven to 13 aircraft in two years.

While it is still short of the 18 jets that it had before Covid-19, Jetstar Asia chief executive John Simeone said the airline is making sure its current network is profitable.

He said the competitive environment within South-east Asia is intense, and Jetstar Asia, like all airlines, faces challenges such as volatility in fuel prices and broader geopolitical tensions.

With revenge travel coming off the boil, demand is likely to slow too.

Other headwinds include supply chain snags, which have delayed plane deliveries and grounded existing ones, and sustainable aviation fuel mandates, which will drive costs up.

While Singapore will continue to play a key role in the growth of low-cost carriers in the region, airlines have highlighted several challenges operating here too.

The biggest concern is Changi’s costs, which are set to rise further over the next six years.

Jetstar Asia’s Mr Simeone said this may impact the number of tickets that the airline can sell below $100, which now make up about two-thirds of all its flights.

The difficulty in securing take-off and landing slots at Changi is another issue, and Captain Fareh believes slot availability at the airport can be better optimised.

Peach Aviation’s chief corporate planning officer Satoru Endo said he hopes that Changi Airport’s capacity will be expanded, so the airline can mount more flights in the future.

“Since Singapore is a popular and busy destination in terms of airport traffic, it is not very easy to get our desired slot,” he added.

A related question that has come up is whether there is room for another Singapore-based low-cost carrier.

This is after AirAsia founder Tony Fernandes told the Malaysian media in September that the carrier will not give up on securing an airline licence in Singapore, despite having been rejected thrice.

Asked about Changi Airport’s capacity for more budget carriers, CAG’s Mr Lim said the airport is committed to working with its existing carriers so they continue to grow, and it is happy to partner with other airlines to drive traffic and expand its network.

In response to a similar query, and about whether there is room for another local budget carrier here, the Civil Aviation Authority of Singapore (CAAS) said only that it will continue to work with CAG to support all airlines that are committed to the Singapore air hub.

CAAS director of air transport Sidney Koh said: “Low-cost carriers have played, and will continue to play, an important role in Singapore.”