Low-Cost Liftoff: How Budget Airlines are Soaring in Central Asia’s Airspace

The ADB's report "Low-Cost Carrier Opportunities, Air Transport Liberalization, and Post-Pandemic Recovery in CAREC" highlights the significant role of low-cost carriers in driving the recovery and growth of the air transport sector in the CAREC region. The report outlines the rise of LCCs, market recovery post-pandemic, opportunities for growth, and provides recommendations to further enhance the sector.

In a comprehensive report published by the Asian Development Bank (ADB) titled "Low-Cost Carrier Opportunities, Air Transport Liberalization, and Post-Pandemic Recovery in CAREC," the transformative potential of low-cost carriers (LCCs) in the Central Asia Regional Economic Cooperation (CAREC) region is highlighted. The report delves into how LCCs are driving market recovery, expanding connectivity, and boosting tourism in the post-pandemic era.

The Rise of Low-Cost Carriers in CAREC

The CAREC region, encompassing nine countries—Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan—has seen a significant rise in the presence and influence of LCCs. Notably, FlyArystan, the largest LCC in the region, has played a pivotal role in this growth. From 2019 to 2022, the LCC penetration rate in CAREC increased from 15 percent to 25 percent, showcasing the increasing preference for affordable air travel. Foreign LCCs such as Flydubai and Air Arabia have also expanded their operations, contributing to the robust recovery of the air transport market in CAREC. These carriers have successfully tapped into the demand for cost-effective travel options, fostering a competitive market environment.

Market Recovery Post-Pandemic

The post-pandemic recovery of the air transport sector in CAREC has been remarkable. The region's international seat capacity has surpassed pre-pandemic levels, driven by both full-service carriers (FSCs) and LCCs. New intra-CAREC routes and non-regional international markets have emerged, providing travelers with more options and improving overall connectivity. In 2022, the CAREC region achieved 98 percent of its 2019 seat capacity levels, with LCCs showing a 61 percent increase in capacity. This recovery was 16 percentage points above the global average, highlighting the resilience and adaptability of the region's air transport sector.

Opportunities for Growth

The report identifies significant opportunities for expanding intra-CAREC routes. Enhanced connectivity within the region can stimulate economic ties and tourism, benefiting both local businesses and travelers. The introduction of fifth and seventh freedom rights, along with a universal visa-free policy for CAREC countries, could further boost intra-regional travel. Kazakhstan and Pakistan, the largest markets in the region, offer substantial growth opportunities in domestic air transport. The launch of new domestic LCCs like Silk Avia in Uzbekistan and Fly Jinnah in Pakistan indicates a growing interest in developing domestic air travel options. Expanding into non-regional international markets is another key opportunity. The report highlights India as a major potential growth market for CAREC. The introduction of flights by India’s leading LCC, IndiGo, to CAREC destinations such as Almaty, Baku, Tashkent, and Tbilisi underscores this potential.

Case Studies: Success Stories

The report includes detailed case studies on six CAREC countries, each illustrating unique developments and opportunities in the LCC sector. In Azerbaijan, Buta Airways has been instrumental in increasing the LCC market share. In Georgia, Kutaisi Airport, developed as an LCC base with Wizz Air, has significantly boosted air travel. Kazakhstan's rapid expansion of FlyArystan highlights the potential for LCC growth. In the Kyrgyz Republic, Air Manas continues to play a crucial role in the domestic and international markets. Mongolia's Eznis Airways is set to resume scheduled services, indicating market recovery. In Uzbekistan, the introduction of Uzbekistan Express and new LCCs like Silk Avia signals a promising future.

The report provides several recommendations to enhance the growth and sustainability of LCCs in the CAREC region. For intra-CAREC travel, granting fifth and seventh freedom rights, adopting a universal visa-free policy, and reducing taxes and charges can facilitate more intra-CAREC flights. Supporting domestic LCC development through policies and subsidy mechanisms is crucial for the domestic market. Revisiting airport pricing structures and implementing strategies to reduce high airfares can make international travel more affordable. Public-private partnerships for airport development and focusing on LCC-friendly facilities are recommended for airport infrastructure.

The ADB report underscores the critical role of low-cost carriers in revitalizing the air transport sector in the CAREC region. By embracing further liberalization and supportive policies, CAREC countries can unlock the full potential of LCCs, enhancing connectivity, stimulating tourism, and driving economic growth. As the region continues to recover and evolve post-pandemic, LCCs are poised to play an even more significant role in shaping the future of air travel in Central Asia.