Eroding competitive advantage. The looming profit crisis for full service airlines in South East Asia.

The initial paper positions the question as seeking to develop a viable pricing strategy... Page 2 of 13 Eroding competitive advantage. The looming profit crisis for full service airlines in South East Asia. For over twenty years airlines based in South East Asia have enjoyed a competitive advantage derived from a combination oflower labour costs and a geographic position at the centre of major traffic flows. Tight bilateral links maintained relatively high fares and steep barriers to entry for regional destinations within Asia, while the carriers leveraged their cost advantage and location to tap into large long-haul connecting traffic ill markets. This advantage was maintained through the opening of Russian airspace and the introduction of long range aircraft in the 1990's, but it is now rapidly eroding as the new generation of extreme long-haul aircraft allows Middle Eastern carriers to replicate the Asian airlines long haul network structure just as low cost carriers are breaking into the formerly profitable regional operations. Full service airlines in the region now have to rapidly reshape their strategies