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Low-fare airline carriers catch on in Southeast Asia

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Adriene Hill: For years, Americans have been the world’s biggest spenders on business travel, shelling out 250-billion dollars last year. Chinese businesses are now set to pass that. According to a new study by the Global Business Travel Association, Chinese travelers will be king-of-the-business-travel-hill by 2015. There are a lot of reasons: new airports, more spending, and the growing popularity of air travel in Asia. As Nidhi Dutt reports from Jakarta, Indonesia, the trend extends well beyond business execs.

Nidhi Dutt: While budget carriers are struggling to make money in the United States and Europe, airports across Southeast Asia have never been busier. From the Philippines to Thailand to Indonesia, many millions of passengers are checking in and taking off. And many of those passengers, like 28-year-old Nur Rahmi in Jakarta, are flying for the very first time.

Nur Rahmi: At first I was excited, but when I got to the airport, I was nervous. And then when I got on the plane, I was terrified.

Nur is part of Asia’s growing middle-class, a group that with rising wages can now afford modern luxuries like air travel. And besides the simple fact of more money, more infrastructure spending by governments means more roads and cars. That’s allowed small towns across Southeast Asia to grow better connected to urban airports. Eri Reksoprodjo is with a Jakarta-based firm that has invested in an Indonesian budget carrier.

Eri Reksoprodjo: We’re seeing an upgrade from low-income to middle-income — people have grown their businesses, they demand more travel to see their children, to see their parents and so forth.

Fierce price competition means good deals too. Even international flights in the region can cost as little as $20. By the end of this year, there will be 50 budget carriers operating in Asia — from Malaysia’s Air Asia, to Indonesia’s Lion Air to Cebu Pacific in the Philippines. Con Korfiatis is the vice president of Citlink, another Indonesia airline.

Con Korfiatis: We need to probably be adding 70 to 80 aircraft a year, just growth aircraft, not replacing old aircraft. Additional capacity: introducing that into the domestic market every year just to keep up with natural underlying growth. So we’re not talking about needing to fight other airlines as to who gets the passengers. We’re basically catering to a natural underlying growth in the market that we predict going forward.

Asia’s airports are getting bigger and noisier. Budget airlines have grown from almost nothing 10 years ago to 25 percent of the Asia-Pacific aviation market today. In Jakarta, Indonesia, I’m Nidhi Dutt for Marketplace.

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