Stiff competition and rising fuel prices will force a shakeout among Asia's budget airlines, and some are likely to be permanently grounded, analysts say.

The success of Malaysia's AirAsia, Southeast Asia's biggest low-cost carrier, has sparked a slew of other budget operators to take to the skies, including spin-offs from major airlines which scrambled to cash in on the phenomenon.

But after a tremendous start which revolutionised travel in the region, a changing business environment may mean an end to the boom, as happened in Europe where no-frills carriers suffered a bloodbath that only the strongest survived.

"Competition is tough. I foresee a drop-out soon," OSK Research aviation analyst Chris Eng said. Singapore's low-cost carriers are considered the most vulnerable because without a domestic market to fall back on in the tiny city-state, they are forced to fight with the major airlines in the international market. Eng said there would be a struggle for survival between privately owned Valuair, Qantas-backed Jetstar and Tiger Airways which is 49 per cent owned by Singapore Airlines.

Get the full story at IndiaDaily