AirAsia set to conquer Asian skies

By Y. Sulaiman
KUALA  LUMPUR, Malaysia (eTN) — In a massive series of moves involving government plans and its ‘fresh minds and new hands’ approach to the airline industry, Asia’s biggest low-cost carrier AirAsia is setting its sights at the bigger Asian market.

Market watchers are, at the same time, starting to raise doubts if the four-year-old carrier is not moving at a "breakneck speed" it might find too fast to halt, should it run into the same problems which national carrier Malaysia Airlines (MAS) now in the midst of restructuring, says will take it three years to sort out.

On the eve of moving to its new home at the Asia’s first dedicated Low Cost Carrier Terminal (LCCT) some 20km away from its present base in the KLIA main terminal, AirAsia has been informed by the government it will split domestic routes presently serviced by MAS.

“The government has decided on a ‘win-win’ solution that will see both carriers leveraging on each others strengths,” said a communique from the prime minister’s department. “The cabinet decision is to ‘rationalize’ the domestic routes of both airlines.”

MAS currently operates 31 domestic routes. To ensure international connectivity, the airline said it will still fly to premier destinations such as Penang, Kuching, Kota Kinbalu, Alor Star and Langkawi.

Though the domestic operations will still be owned by Penerbengan Malaysia (PMB), AirAsia, which has been appealing to the government, says it can fly the remaining domestic and rural routes profitably.

“Malaysia will now have two strong carriers,” said Tony Fernandes, CEO of AirAsia. “We believe there should be a separation of premium and low cost flights in the market.”

AirAsia had offered the Malaysian government to acquire or lease up to nine of MAS 737 aircrafts, plus recruit up to 1,600 present MAS ancillary staff in return for splitting the domestic routes.

“Why wait for a year to solve the problem when we can offer a solution now?” Fernandes was quoted as saying. “The market for aircrafts is currently buoyant.”

“MAS can now concentrate on high-yielding international routes, flying the country’s flag and image while restructuring itself into a profitable carrier, while AirAsia develops its no-frills, affordable flights with its fleet of A320s,” said a market analyst.

“The government’s decision will now allow both carriers to move on and provide more efficient and cheaper services to the public,” added an airline analyst.

Chris Eng, an airline analyst, predicts AirAsia will double its RPK (revenue per km) in 2006/2007 because of the rationalization exercise by the Malaysian government. “It can expect more than 60 percent growth in the current financial year.”

Meanwhile, AirAsia said it will begin flights to Bangladesh by year-end in cooperation with East West Airlines from Bangladesh.

“Flights will begin from the winter season,” said Salman Obaidul Karim, managing director of East West. “We expect demand for regional travel to flourish.”

AirAsia has also been offered landing rights in Ho Chi Minh City, which the airline sees as a lucrative market due to Malaysian business interests, if it agrees to a counter-proposal by the Vietnamese government to add Hanoi and other northern routes in the country.

Presently, its joint-venture airline Thai AirAsia, and Singapore’s Tiger Airways fly to Vietnam.

AirAsia has forecast, as demand for low cost travel increases in the region, it will fly five million passengers this year, reaching ten million passengers by 2010. The International Air Transport Association (IATA) predicts  passenger traffic may rise up to 6.5 percent for Asian airlines until 2009 as economic growth bolsters demand.
 

March 21, 2006   Posted in: Airlines & Railways