Air Raiders

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With so many budget carriers starting up, they might be a bigger threat to one another than to the major carriers. Thailand has no fewer than seven low-cost operators. In September, Singapore's A-Sonic Aerospace said it plans to start a budget carrier in China with a Chinese state company. Tiny Singapore will be home to three low-cost airlines: Valuair, Jetstar Asia (which boasts Australia's Qantas Airways as a large shareholder) and Tiger Airways (backed by Singapore Airlines). "We'll grow as quickly as we can and fly wherever we can," vows Stephen Johnson of Indigo Partners, an investment company based in Phoenix, Ariz., that owns 24% of Tiger. But for all those grandiose dreams, executives believe that not all the budget carriers can survive. "There is going to have to be a consolidation or shake-out," warns Tiger's chairman, William Franke, a former CEO of America West.

The rivalry among no-frills flyers is already getting brutal. When Tiger offered a 59¢ one-way ticket to Bangkok from Singapore on September flights, AirAsia countered with a 29¢ fare. Fernandes advertised the promotion with his usual flair. Ads showing two beautiful flight attendants draped over a subdued tiger boasted, "AirAsia tames even the wildest tiger." Udom Tantiprasongchai, chief executive of Orient Thai Airlines, says fierce competition from AirAsia and flag carrier Thai Airways forced him to slash the fare on his One-Two-Go budget service from Bangkok to Chiang Mai to less than $25, about 30% lower than he had planned. At that price, he admitted, he lost money. But Udom has wreaked revenge. He says he routinely employs a team in his office to go on the Internet and buy as many of the cheapest tickets on AirAsia flights as it can get, often spending more than $3,500 a day. That's a small price to pay, he argues, to keep the low-price tickets out of the hands of potential AirAsia customers and to foster ill will toward his competitor. (Fernandes contends that this has not damaged his business in Thailand.) "I buy them and throw them away," Udom says, adding, "I didn't expect this dogfight to be so serious."