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Will budget Asian airlines stall or soar? (LUV, JBLU, FAA, LCC)

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Discount airlines in Asia are taking off as US carriers such as Southwest Airlines ( LUV , quote ), US Airways ( LCC , quote ) and JetBlue ( JBLU , quote ) are descending.

Higher fuel costs and anemic U.S. economic growth have decimated many airline stocks. As fuel is about 40% of the total expenses of an airline, rising oil prices have been disastrous for these companies.

Guggenheim Airline ( FAA , quote) , the exchange-traded fund for the U.S.-based side of the industry, is down 30% this year, but budget airlines in Asia such as AirAsia and Tiger Airways, are increasing in traffic.

According to an article in USA Today by Kathy Chu, "Discount Airlines change Asia Travel," these carriers "are leading a revolution in air travel in Asia."

Passenger traffic is expected to increase as the average American flies ten times more than a citizen in China and forty time more than an Indian.

But adverse economic conditions like those impacting Southwest Airlines (LUV) and US Airways (LCC), could bring down discount carriers in Asia -- and Latin America, too .

As Jayant Menon, lead economist at the Asia Development Bank for Regional Economic Integration, warns, "So many middle-income people hover close to the poverty line that any sustained slowdown in economic growth could push them below. Demand for services like travel could fall very sharply."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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