As low-cost carriers scramble to get the jump on their regional rivals, turbulence looms as the majors gear up for battle Cheap airline tickets will fill Thai skies early next year as low-cost carriers compete for the first time in Asia. They, and other airlines about to take off, may face a far bumpier ride than counterparts in Europe or the United States. This month, Orient Thai's One-Two-Go began services in Thailand, staking out its position before Malaysia's AirAsia, which enters the same routes early next year, having launched services between the two neighbours. 'There's a potential there. I think Thailand's a great market, I think it's run by a very pragmatic, pro-business government. If we didn't look at it, we'd be silly,' says AirAsia chief executive Tony Fernandes. Brisk sales are pushing One-Two-Go to add flights faster than planned. Despite making heavy losses on domestic routes for years, flag carrier Thai Airways also plans to launch a low-cost subsidiary next year. There is trouble ahead, predicts Mr Fernandes: 'The difficulty is when the low-cost carrier starts competing with [Thai]. That's when you start getting issues.' Thai's plan bothers neither Mr Fernandes nor Udom Tantiprasongchai, managing director of Orient Thai. Mr Fernandes said: 'I think our strongest weapon against competition is our ability to generate cash and generate profitability in tough periods and being able to generate profit at a very low fare.' Despite AirAsia's success in Malaysia, earning a M$30 million (HK$61.3 million) profit in the year to June, and One-Two-Go's warm reception, Atichart Athakravisunthorn, president of regional-carrier Air Andaman, is worried. 'The normal fares charged in Thailand are already equal to low fares in Europe,' he said. 'How low can you go? If you lower fares to the point where low-fare airlines can operate, there will only be a few more travellers. The idea sounds good, but if you look at the details, I don't think it will work.' AirAsia sells a few seats dirt-cheap to stoke demand. Average fares, however, are substantially higher, but still cheaper than Malaysia Airlines' domestic prices. Mr Atichart remains unconvinced. 'We will see the disappearance of services to many provincial airports. It might even mean the demise of regional airlines out of Bangkok. 'After one or two years, I think the low-cost airlines will collapse, too. To work, it has to be regional. We don't have open skies in Asia yet.' In many ways, densely populated Asia mirrors Europe in the early 1990s - a potentially huge market sliced and diced by borders, route restrictions and disparate national regulations, all costly barriers for new entrants. Low-cost airlines in the single-market European Union and the US succeeded because they face none of these obstacles. To circumvent rules barring foreign airlines from operating within Thailand, AirAsia formed AirAsia Aviation, a joint venture with Thai communications giant Shin Corp - owned by Prime Minister Thaksin Shinawatra's family. There are also hundreds of destinations European and US no-frills airlines can serve. In Asia, there are relatively few. Asia's profitable major airlines make almost as much money carrying freight as they do from passengers. However, steady economic growth in India and Indonesia, along with racing economies in China and Thailand, are fast creating millions more prospective passengers, making more routes viable. Governments making good on promises to relax regulations over the next few years will also help. 'The future in Asia is going to be one where up to one-third of travel will be by low-cost carriers, as long as the politicians allow it. Once the region opens up there is huge opportunity for airlines that are well financed and politically adept,' says Jim Eckes, who heads consultancy Indo-Swiss Aviation. Asia's national airlines are unlikely to stand aside. Virgin Blue's roaring success in Australia forced Qantas to respond with Jetstar. Singapore Airlines will launch Tiger Airlines next year, in association with Ireland's Ryanair. But Richard Stirland, director-general of the Association of Asia Pacific Airlines, thinks upstart airlines are in for a deadly dogfight. 'If a genuine low-cost carrier tries to establish itself in places like Singapore, Hong Kong, Taiwan or South Korea, the incumbents will zap them.'