Thursday, October 8, 2009

AirAsia delays delivery of 8 more planes

05 October 2009

It is also unwinding leases with GE Commercial Aviation Services and others

PETALING JAYA: AirAsia Bhd has received the nod from Airbus SAS to delay delivery of eight A320-200 aircraft originally scheduled for 2011.

This means the low-cost carrier will now defer a third or 16 of 48 aircraft deliveries scheduled for 2010 and 2011, after making a similar move in July when it deferred the delivery of eight aircraft for 2010.

The budget carrier is also unwinding all its leases with GE Commercial Aviation Services (GECAS) and other lessors for early return of 13 B737.

It will also sell two of its own B737 aircraft in a bid to realign capacity with the increased demand and move towards using one aircraft type for greater efficiency.

“We will defer eight of the 24 deliveries (scheduled) for 2011. We got the deferment from Airbus,’’ AirAsia group chief executive officer Datuk Seri Tony Fernandes told StarBiz.

The deferments will push back deliveries to 2014.

Globally, many airlines have delayed taking delivery of new aircraft due to the sluggish economic conditions and lack of passenger demand.

In AirAsia’s case, Fernandes also attributed the aircraft deferment in 2011 to doubts over the timely completion of the new low-cost carrier terminal.

This is despite assurance from Malaysia Airports Holdings Bhd the new terminal will be completed on time by the third quarter of 2011.

AirAsia became the largest customer for the Airbus A320-200 in December 2007 after it placed a firm order for a total 175 aircraft, with an option for 50 more. The budget carrier has so far taken delivery of 63 A320s, which are used for its services in Malaysia, Indonesia and Thailand.

Additionally, it has a fleet of 17 B737s, of which four are its own while the other 13 are leased from GECAS and other lessors.

“We have also closed a deal with GECAS to return nine of the B737s leased from them in stages in 2010 and sell two of our own to Mexico’s VivaAerobus,’’ Fernandes said.

AirAsia is also in talks with several parties to sell the balance two of its B737s and unwind leases for the remaining B737.

He said proceeds from the sale would be used to pay off loans for the aircraft and that the sale would have no impact on AirAsia’s bottom line.

“This alignment will have a huge impact on our Indonesian and Thai operations as they will increasingly be using the A320 instead of B737 and that makes them hugely more efficient,” he said.

“We see the two operations turning the corner and there should be positive upswing in their profits,’’ he said, adding: “We are really bullish on Indonesia and the growth in passenger numbers in the last quarter was very encouraging.”

“Our Indonesian operations have the potential to be as strong as our Malaysian operations and we see stronger revenue growth from our Thai operations,” Fernandes said. “Having two strong affiliates on top of our Malaysian operations puts us in a position of strength.’’

For airlines, the third quarter is usually the weakest quarter but Fernandes said: “AirAsia is seeing better passenger growth.

“We are very pleased with the third-quarter numbers but they will not be as good as the second quarter.”

AirAsia reported a net profit of RM139.2mil for the second quarter ended June 30 on revenue of RM657mil due to improved passenger volumes, higher ancillary income as well as write-backs on certain provisions.

After the company’s private placement of shares last month, Fernandes said the company was targeting RM1bil in reserves by the year-end.

On route expansion, he said plans were in place for the carrier to fly to three routes in India – Coachin, Calcutta and Trivandrum – this year.

“Most of our growth is in new routes but these are not new destinations. It is how we link the dots once we go to a new destination,’’ he said.

Fernandes was recently named Team Principal of 1Malaysia F1 Team Sdn Bhd, which will participate in the next season of Formula One via Lotus F1.

Asked if his involvement will see him paying more attention to F1, he said: “I am very much on top of things at AirAsia, that’s my baby.’’

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