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Q1: In general, the demand for low-fare service is high throughout the world. North America and Europe have seen high demand from 1990s, since most of the countries in those regions have air travel liberalization. When we look at the two markets, we find some differences in the two markets…
However, they tend to value quality service, and are willing to pay for excellent service. On the other hand, Asians are less likely to concentrate on quality of service, and are willing to compromise quality service for a low price. Furthermore, people in the U.S. and Europe can use other forms of transport for short trips such as speed rail, bus etc. However, there are hardly any world class rails in Asia, and air travel remains the only option for many travelers. Some people in Asia might use bus, but the advent of budget airlines has made it cheaper for travelers to fly instead. Given today's economic climate, low-fare service would be a hit in any part of the world and the Gulf region is no exception. Although, the Gulf region has a good per capita income, lower and middle class travelers would nevertheless welcome low-fare service and it would definitely affect the large carriers in the Gulf Region.
Q2: Air Asia is a budget airline which was on the verge of bankruptcy, but sprang up in 2001 to become the world's cheapest airline. Air Asia is a budget airline and succeeded in getting the lowest cost per kilometer of any airline. It was largely in part because of the declining demand for air travel and fleet purchases in the aftermath of 9/11. Thus, time was a key player in ensuring that Air Asia got the lowest cost structure possible. ...
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