By Neil Chatterjee and Felicia Loo

SINGAPORE, Sept 19 (Reuters) - Asia's budget airlines are poised for huge growth, despite recent damaging crashes, as cheap fares and new planes lure millions of passengers who have more money to spend on travel and leisure.

The latest budget airline disaster, a crash landing on the Thai resort island of Phuket this week killing 89 people, follows an Indonesian crash in January that raised safety fears for a cost-cutting sector facing soaring fuel prices and a shortage of pilots. But experts say maintenance standards are as strictly regulated for budget airlines as for mainstream carriers, while Asia is a global centre for outsourcing major repairs. "It makes for a great media story to say that another budget airline has crashed, but it's probably not fair. It's up to the governments to regulate their airlines and they should get no less stringent treatment than the full service airlines," said Nicholas Ionides, Asia Editor for Flight Magazine.

Budget flights have proliferated in the region, following a similar trend in the United States and Europe, as firms such as Malaysia's AirAsia <AIRA.KL>, Australia's Virgin Blue <VBA.AX> and Singapore's Tiger Airways aim to tap Asia's growing wealth.

Such carriers undercut prices at major airlines by using aircraft more frequently, removing the widely spaced first-class compartments and packing in more seats, selling tickets directly via Web sites rather than travel agents, cutting inflight services such as free drinks and by buying older planes.

"They focus on the cost line like a laser," said Richard Pinkham, of the consultancy Centre for Asia Pacific Aviation. "More and more budget airlines are buying new planes for fuel and maintenance reasons."

Older planes such as One-Two-Go's McDonnell Douglas MD-82 that crashed near Phuket are cheaper to buy, but are fuel inefficient and have higher repair bills.

International rules mean a plane has to undergo maintenance based on flight hours and the number of take-offs and landings, so a more heavily used budget plane would undergo more regular maintenance. And there is no lack of technical expertise in Asia.

International airlines are sending planes for maintenance work such as co-called D-checks, which test the plane's systems and structure, to Asian firms such as Singapore's SIA Engineering <SIAE.SI> and Hong Kong Aircraft Engineering Co Ltd <0044.HK>.

PRESSURES

Passenger traffic in Asia-Pacific climbed over 6 percent this year to July, with the region now accounting for 32 percent of the global market, according to industry body IATA.

According to IATA forecasts, Asia passenger growth of nearly 6 percent in 2006-10 will comfortably beat total global growth of below 5 percent, though will lag the Middle East.

However, there are plenty of strains on budget airlines and perceptions of poor service may still put off some customers.

"I may not fly with budget carriers -- it's not worth the risk. I'd rather pay for safety, service and comfort," said Lynn Cha, a schoolteacher in Singapore.

One cost pressure is a shortage of trained pilots, leading to a bidding war even at major airlines where pilots are being poached, but harder to bear for budget carriers. China said this month it faces a shortfall of 2,000 pilots in the next few years.

The Indonesian pilot on the ill-fated One-Two-Go flight tried to land despite being warned of windshear threats, a top Thai aviation official has said. There are international rules on how often a pilot can fly, though rules on planes vary.

Indonesia, whose airlines are banned from European airspace due to safety concerns, issued a law in 2006 that new airlines must not use planes older than 20 years. It considered cutting this to 10 years after January's Adam Air crash that killed 102.

The civil aviation department in Thailand, which relies on tourism for about 7 percent of its GDP, told Reuters it is not considering age limits for commercial airliners, and experts said other Asian governments are unlikely to follow Indonesia.

Airline shares in the region have been hammered after the latest crash, and with jet fuel prices <JET-SIN> surging to record highs over $93 a barrel this week. But Adam Air said this month its passenger numbers have rebounded after slumping by a third.

"No-frill carriers could face the heat from record fuel prices, but the growth in demand is so strong and that is enough to keep such airlines flying," said Tony Regan at consultancy Nexant. "People are migrating from coaches to airlines." (Additional reporting by Darren Schuettler in BANGKOK and Ahmad Pathoni in JAKARTA)

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