Thursday, September 3, 2009

Sri Lanka must have budget terminal: Air Asia founder

01 September 2009

(LBO) - Air Asia’s flamboyant chief executive says Sri Lankan tourism will get a boost if airport expansion plans include budget carrier-friendly infrastructure to reduce the cost of air travel.

Air Asia, which began daily flights to the island from its Kuala Lumpur hub in August, had sold 30,000 tickets before its first flight landed by offering seats at a third of the price charged by full service airlines.

Its chief executive Tony Fernandes says Air Asia’s cost per passenger kilometer is the lowest in the industry despite the airline growing to 82 aircraft carrying 22 million people every year.

LBR’s Shamindra Kulamannage interviewed Tony Fernandes recently. Excerpts:

Q: What’s Air Asia’s Sri Lanka strategy? Do you want to carry tourists between the two destinations or do you think your Colombo flight will help feed in to your network including the long range?

A: I think it would be both. Coming out of the plane today gave me a flavor of what’s to come. Maybe three aspects of the market.

One is that Air Asia brings to any city really the world now. On our flight we had Serbians, Australians, Japanese, and Americans, who have come from Air Asia X from London, Australia etc and from the Air Asia networks. So I think we will bring a lot of tourists from Malaysia and South East Asia and the world to Sri Lanka.

We also provide a network for Sri Lankans who have left Sri Lanka and are living in other countries such as my own country. It was wonderful to meet one man who hadn’t been to Sri Lanka for 27 years and Sri Lankans from Australia coming home after 20 years.

The third aspect is Sri Lankans going to South East Asia and Australia. So those are the three markets. And I also saw lots of businessmen. Air Asia facilitates lots of small and medium enterprises and businesses to start growing. I think we’ll see a growth in trade between Sri Lanka and Malaysia just through the connectivity we provide.

Q: How do full service carriers usually respond to, for instance, a daily frequency by a budget carrier?

A: There is generally an emotional reaction, and I’ve seen it time and time again where they dump their fares or whatever. But ultimately they have a very different cost structure.

It’s hard to compete with us in that way because we have the lowest cost in the world at 2.6 cents (per passenger kilometer). But full service carriers will begin to see that it’s a big enough market for everybody. If every hotel in Sri Lanka was a five star hotel, you are limiting the market and you don’t see the Hilton here competing with a budget hotel. Eventually you form your own market and you realize where your niches are.

Q: What sort of a load factor do you need on a point-to-point route like this?

A: Anything above 60 percent we’ll make money at present fuel prices. We are doing exceptionally well. I think we sold about 30,000 seats, and we are experiencing very high loads of over 85 percent.

Q: You seem to be doing well in pretty much every market that you enter. That’s contrary to the only other budget carrier based here. Is it scale that works for you?

A: I started with two planes, seven years ago against a national carrier, with very little capital and four destinations. So it’s not about size. It’s about the management, the ability, the discipline and the marketing ability.

I think Air Asia is the same as when we started seven years ago. We are still focused on low cost, and high quality. Obviously scale helps because when you roll in to a market where people know you, when you can bring people from all over the world, it helps. But seven years ago we only had two planes. You’ve got to start somewhere; you can’t start on day one with 82 planes.

Q: Colombo’s main airport at Katunayake doesn’t have a budget carrier terminal. Is this something we should look in to in the long term?

A: I think it’s a big opportunity for Sri Lanka. Airport charges are high here in my view and there are only one or two service providers. It’s one of the most expensive places I’ve come to.

Actually the country loses out. If you reduce fees and increase volume you get money anyway. The tourism spend in the country is really where the benefits are. You know, in Malaysia an average tourist spends about 500 US dollars. You multiply that by the 10 million tourists that we bring in and you’re are talking about billions of dollars and the multiplier effect is 12 times. So we are talking about hundreds of billions.

Sri Lanka is a beautiful country, there’s so much to see, people are great, but it’s expensive getting here. I think that’s an area the government should look at.

Q: You’ve managed to grow passenger numbers by 20 percent so far this year. Looking at the broader South East Asian economy, does it look like consumer confidence has recovered after the hit it took last year?

A: I don’t think consumer confidence was ever hit that badly. You can’t run away from the fact that Asia was affected, but less affected because our banking systems were more solid and we weren’t leveraged as America and Europe.

We (Air Asia) are in a unique market, where when business is bad people will trade down to us. If economies are booming there are more people flying. People want to fly provided the costs are low. If anything, people want to fly more to get away from depression and have a holiday and it’s a matter of price. We’ve able to grow principally, not because confidence has come back but because we are offering great value and low prices and there is a market for that.

Q: One thing that’s been picking up for you are the little extras you sell. You charge premiums for better seats and meals aren’t free. Is this revenue significant?

A: What we are trying to do is to peel away the various airline costs, which you think you’re getting for free. You buy a ticket; you get food. But everything has a cost associated with it. We are giving people a complete choice and a menu of services but you pay. So if you want food you pay for it. You want a nice seat, you pay for it. If you want a basic product, it’s there. We give you the choice all the way up to a full service carrier, but still much cheaper.

Ancillaries come in two ways. One is the aviation ancillaries, two is selling to the database we have, whether it’s insurance, whether it's duty free products, credit cards etc. Nothing related to the airline per se but related to the brand that we’ve built. I think it's very significant - about 15 percent or 30 Ringgit per passenger I think it can go up to 60 Ringgit. It’s a different airline model that we’re building but it’s a robust one that can stand the volatility.

Q: Exactly my next question. What are the big risk factors? Are they oil, Swine Flue, possible economic down turn?

A: I knew you were coming to that.

We’ve been through everything known to mankind. We’ve been through SAARS, Bird Flu, governments’ protection of national airlines, tsunami, earthquakes, terrorism, you name it, we’ve had it. We’ve always been resilient.

When I started this business oil was 30 dollars and went up to 200 dollars. Ancillaries have come as a good defense to oil prices.

We have become smarter, in some ways like a virus; you know when you pound it with antibiotic it morphs in to something more virulent. We have found ways to deal with everything. There’s nothing out there that can scare me. I’ve never heard of H1N1 or SAARS till they hit and all I will say to our investors and shareholders is that we will manage it better than most.

Q: Any other plans for the South Asian region?

A: It’s our last frontier so to speak. We started from Malaysia and grew out to ASEAN. We did China. We finally reached the Indian shores and now Colombo. Really over the next 18 months India, Colombo and Maldives will be important. We see tremendous opportunities. I’m very bullish on Sri Lanka.

I hope the government sees low cost airlines are a different business from full service airlines. I’m not cannibalizing anyone but we are really growing the pie and the country will benefit. My country has benefited immensely from low cost travel. But it would not be low cost unless we have low cost facilities. Our low cost terminal in Malaysia does not have aero-bridges. It cost 50 million dollars to build and charges passengers five dollars. The volumes are massive.

I hope Sri Lank will look at building a low cost terminal. The benefits to tourism are immense.

Monday, August 31, 2009

AirAsia X rules out Abu Dhabi hub

31 August 2009

AirAsia X has ruled out setting up a hub in Abu Dhabi, dealing a blow the emirate’s hope Malaysia’s long-haul budget carrier would use it has a base to expand into Europe and North Africa.

AirAsia X CEO Azran Osman Rani said the airline instead wants to focus on building a successful Kuala Lumpur-Abu Dhabi route when it is launched in November.

"We do not have any plans to setup a hub in Abu Dhabi or base any aircraft in Abu Dhabi. Nor do we have plans to hire any people in Abu Dhabi to do maintenance,” Azran told Maktoob Business in a telephone interview.

"Our primary focus right now is to make our Kuala Lumpur to Abu Dhabi service work. We see Abu Dhabi as a major destination in AirAsia’s network,” he said.

An Abu Dhabi Airports Co (ADAC) executive was quoted as saying earlier this month that the airport operator was in talks with AirAsia to use Abu Dhabi airport as a regional hub.

Abu Dhabi, home to fast-growing Etihad Airways, has ambitious plans to become an air transportation hub like neighbouring Dubai and has been keen to attract new airlines.

AirAsia and ADAC on Aug. 19 unveiled plans to launch direct flights Kuala Lumpur to Abu Dhabi.

The UAE capital is big step in the expansion of the no-frills carrier’s international network.

The airline will use the service to attract tourists from the Gulf to Malaysia and encourage them to use AirAsia’s services on short flights in Southeast Asia and on long-haul routes to destinations such as Australia.

Initially the airline will fly five times a week to Abu Dhabi, but Azran said there are plans to take the service daily.

“In six months we can make it a daily service, and within 12 to 18 months we can start a second daily service. There is a lot of latent potential demand,” he said.

The airline hopes to benefit from more services by Gulf low-cost airlines serving Abu Dhabi in its budget travel promotion between Malaysia and the UAE, particularly Saudi Arabia.

“Right now there is very limited supply of direct flights from Southeast Asia going to Saudi Arabia, so Southeast Asians can go to Saudi Arabia via Abu Dhabi (using low-cost carriers),” he said.

“That is great for our customers and strengthens Abu Dhabi’s position as one of the gateways in the Gulf.”

Saudi Arabia remains of particular interest to AirAsia because of demand from Malaysian pilgrims travelling to the holy city of Mecca. The airline is interested in launching direct flights between Kuala Lumpur and Jeddah.

The airline hopes its long-haul services will contribute to the growth of the regional budget travel sector, which constitutes only about 5 percent of all airline travel in the Middle East.

“This in our experience is a proven model. When we fly to London, 30 percent of our passengers from London Stansted take a connecting Ryanair or EasyJet flight to so many places around Europe,” Azran said.

While the airline has ruled out a hub in Abu Dhabi, it is keen to exercise fifth freedom rights, which allow airlines to carry traffic between a second and third country, for onward journeys to some destinations in the region.

“Once we have established the Kuala Lumpur-Abu Dhabi route, we have the option of looking at exercising fifth freedom rights available in Abu Dhabi to do onward flights to other markets,” Azran said.

Asked which destinations are of interest to the airline, he said: “This is very preliminary since we have not done any market research and not talked to any destinations.”

But he said AirAsia will look for places that are not directly connected with Kuala Lumpur nor served by Etihad to avoid competing with the Abu Dhabi-based carrier.

Indonesia AirAsia about to operate Jakarta-HCMC direct flights

31 August 2009

Indonesia AirAsia said the low-cost carrier would launch its direct service between Jakarta and Ho Chi Minh City on Sep. 18 with four flights per week on Mondays, Wednesday, Fridays and Sundays.

An AirAsia statement dated Aug. 19 said Indonesia AirAsia would offer a promotional fare from 199,000 rupiah (almost US$20) from Jakarta to Ho Chi Minh City and an all-in-fare of US$35, also promotional, from Ho Chi Minh City to Jakarta.

The new service will mark the first flight for Indonesia AirAsia heading towards Vietnam, the carrier said in the announcement.

Indonesia AirAsia marketing and distribution director Widijastoro Nugroho said in the statement, “With four times weekly frequency between Jakarta and Ho Chi Minh City, mutual economic, social and cultural benefits can be expected, as AirAsia’s low fares and innovative services will definitely stimulate more travel both inbound and outbound from these two destinations.”

Indonesia AirAsia chief executive officer Dharmadi was quoted as saying, “We believe that Ho Chi Minh City is a dynamic and industrious center. With a number of seven million inhabitants, it is one of the most potential cities and considered as the economic capital in Vietnam.”

AirAsia is a Malaysia-based airline group. AirAsia Bhd. in Malaysia and Thailand AirAsia have their fleets already flying to Hanoi and Ho Chi Minh City, targeting a overall average load factor of 75-85%, the group says.

JetBlue/Lufthansa seeking codeshare partnership, Ryanair, easyJet and AirAsia shares slip

31 August 2009

Lufthansa is not only actively securing its European partnerships. The German airline and JetBlue reportedly plan to file a request with the US Department of Transportation today seeking regulatory approval to enter a codeshare partnership.

Lufthansa acquired a 19% stake in the New York JFK-based LCC last year for USD300 million. JetBlue's shares gained 2.5% on Friday.

NB: DAILY LCC SECTOR strategic updates from around the world are NOW AVAILABLE! Sign up today for your free trial subscription to Peanuts! Daily.

In Europe, Air Berlin's shares slipped 2.0%. The carrier stated it plans to meet with Vereinigung Cockpit Union on 02-Sep-09 to discuss an improved pay offer to pilots at its LTU unit and seek to avert a strike. Also in Europe, easyJet and Ryanair shares were also weaker, down 0.7% and 0.2%, respectively.

In the Asia Pacific region, AirAsia shares slipped 1.5%, while Virgin Blue's shares soared 10.0%. Air New Zealand stated it is not planning to purchase a stake in or merge with Virgin Blue.

Virgin Blue, which is celebrating its ninth birthday, reported a full year net loss of AUD160 million (USD132 million) in the 12 months to Jun-2009 (hurt by falling passenger demand amid the "toughest operating conditions” in its nine year history and one-off costs (AUD74 million) associated with the launch of its long haul V Australian operations. See separate report: ‘Virgin Blue expects breakeven in FY2010 after sinking to a deep loss in FY2009

Selected LCCs daily share price movements (% change): 28-Aug-09

Sunday, August 30, 2009

Now, everyone can have fun too!

AT Air Asia, everyone is part of one big, happy family.

And everyone is also equal, or so it seems, as an employee’s name card simply states the division that he is in, without offering a designation. What you do is not as important as how well you do it.

Air Asia may be a budget airline but work ethics are a big deal and no expense is spared to ensure its employees receive the best training and are happy to come to work – after all, smiling staff equals happy passengers!

StarMag speaks to three people employed by the airline and it is pretty clear that all of them take pride in their jobs.

Talking less, doing more

Tony Quek hopes to run network management with air force precision!

Lt. Col (Rtd) Tony Quek, a graduate of the Royal Military College in Malaysia and formerly with the Malaysian air force, brings a reservoir of experience to Air Asia.

Born in Kluang, Johor, the 59-year-old is head of network management and is responsible for the regional operations centre, which oversees flight operations, crew and operational systems. He joined Air Asia in March 2006 as he was inspired by Datuk Seri Tony Fernandes’ – founder and group chief executive officer of Air Asia – vision to create an Asean airline.

“Fernandes gave me the opportunity to do things that people dream about and he is willing to push the extra mile,” he says.

When he joined the company, Air Asia was moving from the main terminal at the Kuala Lumpur International Airport to the Low Cost Carrier Terminal (LCCT). That was a massive operation to handle but Quek recalls, “I never took ‘no’ for an answer and just learnt to think off the cuff.”

“Network management is a matter of consolidating your assets. Although the methodology is military, the application is not. There are no estimates, being on time is the target, and we always set ourselves a much higher standard.”

When he joined the company, he saw problems in several areas that led to a lot of wasted time.

“In achieving efficient operations, I looked at reducing the amount of talking and increasing the amount of looking, listening and acting,” he says.

Airlines generally try to arrive and leave on time, but he challenged this thinking: “We were given a very hard time for flight delays, and I was given the task of rectifying this,” he says. “We must strive to be early, even if it is by one minute, and no passengers will complain if we leave early.”

Air Asia works on the formula that happy employees will ensure satisfied passengers. Here, passengers board the inaugural flight from KL to London at LCCT. AZMAN GHANI / The Star

Quek set out to find out which delays could be avoided, as opposed to the ones that could not – usually due to weather and air traffic control.

“When the plane came in and parked at the bay, we watched the bay. We clocked every activity to see which activity was delaying other sections. This allowed us to identify if it was people or processes,” he explains.

Quek’s “baywatch” approach allowed him to feed information into an excel spreadsheet. Today, this it has become a tool to which everyone has access to monitor flight schedules.

Quek recalls enduring days of no sleep during those times, or if he caught a nap, it was in his car!

Bo Lingam ensures that staff are well-trained and provide the best service to passengers.

Another system that he implemented was the use of the short messaging system for crew to check-in or report sick. Previously, they each had to rely on a computer to check-in or make a call, and he realised that not everyone had access to a computer, so the mobile phone was a better bet.

Getting this SMS procedure up and going was harder than it seemed: Air Asia’s crew come from all Asean nations, and there are Koreans, Japanese, Chinese, Iranians, Iraqis, South Americans and Europeans too.

“My toughest challenge was standardising procedures for all countries. Because they are brought up in diverse backgrounds, it is not easy to persuade them to do what we want!,” he quips.

Best view in the world

While studying for a degree in performing arts and management in the United States, Selangor-born Norashikin Onn decided to take flying lessons during her free time.

She received her pilot’s training in Florida and obtained her pilot’s licence at the age of 22.

Norashikin Onn has been flying with Air Asia for four years and recently earned her extra stripe as captain.

Upon her return to Malaysia in 1993, Norashikin started the 4B Youth Flying Club together with some friends in Malacca. Then in 1996, she joined regional airline, Pelangi Air, where she worked for eight years, starting as co-pilot on Dornier228 and Fokker50 aircrafts and later, as captain on the Fokker50.

Norashikin joined Air Asia three years ago.

“I’ve always been amazed with flying and I knew this was what I wanted to do,” says the single, 40-something Norashikin who is now senior first officer. She recently earned her fourth stripe and can now captain an airbus..

“Being a captain means more responsibility which I am more than ready to take on,” she says.

Does she find it difficult working in a male-dominated profession?

“It has never bothered me. My male colleagues show me the same respect as anyone else so I don’t have any issues,” she says.

“In fact, women are good at discipline and we’re brilliant at multi-tasking. So this job is perfect for us,’’ she says, adding that other musts include good health and technical capabilities.

A pilot’s main concern is safety: “Even with all the training that we go through, we need to be prepared for any situation,” she says.

Norashikin has had her share of precarious situations.

“There was one local flight where we had to shut down one engine because the oil pressure was low and, thankfully, we managed to land safely. Last year, while passing through Hong Kong on the way to Shenzhen, there was a typhoon. It was a very bumpy flight and lasted quite a while,” she recalls animatedly.

While undergoing her pilot training in the US, Norashikin says she gained a lot of experience in flying through its many airports with different runways.

“It’s the tricky ones that tests your skills and you need to rely on your brains more,” she quips. In her book, the most difficult airports in the region are Indonesia’s Manado International Airport and Yogyakarta Airport as both lie in hilly areas, and Hong Kong’s notoriously difficult Chek Lap Kok airport.

Despite the occasional nait-biting moments, Norashikin isn’t ready to give up flying just yet. She is, however, completing her PhD in management at a local university and may rethink what the future holds in store when she has finished studying.

“I love working at Air Asia as I enjoy the culture and the fast pace,” she says, and having the big boss (Fernandes) come into the aircraft for a chat makes it all the more rewarding.

The biggest plus point?

“I think that it is a great accomplishment to be able to take passengers from one point to another. Plus, I have the best view of the world and I never get tired of that!”

Getting staff on board

Tharumalingam K, better known as Bo Lingam, started his working career with a reputable book publisher. Then in 1990, the KL-born lad moved on to the music industry and worked with EMI Music for three years and another eight years with Warner Music.

Coincidentally, Air Asia’s Fernandes was managing director of Warner Music at that time and when Fernandes left, he asked if Bo would like to join him at his new venture, Tune Air (the company which introduced the airline to Malaysians).

Bo, 44, recalls: “When I found out that it was a budget airline, I had no idea what I could do in such a company.”

Nevertheless, he jumped on board in November 2001 as ground operations manager and went on to become regional director of guest services and senior manager of purchasing and supplies. Bo now has the honour of being head of people quality and excellence, which involves hiring and training Air Asia staff with regards to service.

Moving from the music to the airline industry certainly wasn’t as cushy as he thought: “Being used to the offices at Warner Music, I found myself in a very run-down office at Terminal 3 at Subang Airport (Selangor), and it was a challenging job to keep passengers happy,” Bo recalls.

He laughs when he recollects an incident during his first week which he says was his “scariest moment”: 40 female prison wardens were scheduled to fly to Kota Kinabalu and the flight was cancelled because birds were sucked into the aircraft’s engine.

“All these big, female prison wardens barged into our office, demanding to get on the next flight,” he remembers. “I told them that there was nothing we could do as we did not have another flight that day.”

Bo says that he was threatened and even had his collar grabbed by one of them, but after being calming down with some food, the warden apologised!

These days, Bo handles emergencies involving mentally unstable, drunk and violent passengers. And moving 20,000 passengers per day through LCCT is no small feat.

“Despite the pressures, I love the excitement of coming to work every day – learning something different, and finding ways to see how I can do things better,” he says.

He is one of the few who has experience in running Air Asia’s various departments – with the exception of marketing and finance – and says that with a staff of 6,800 people, the company will need two years to get everybody to the standard that it is looking at.

According to Bo: “The quality that we look for when hiring people is attitude. They must have the willingness to learn, to experience new things ... and not just want a job.”

“We have one aim and that is for all of us to make our passengers happy, so everyone has to pull their weight in making this happen,” Bo says.

Having conducted numerous job interviews for Air Asia, he is adamant that young Malaysians are mostly unprepared for such interviews and some even turn up in slippers! And many lack the ability to think out of the box.

“These young people can work for years and not be able to tap into their creativity to get something done or done better,” he laments.

To motivate staff, Air Asia ensures that it constantly talks with staff to ensure a “feel good factor’’.

“People simply want to be acknowledged when they’ve done something well,” he says. “We have grown so big so quickly that this is essential.’’

For his contribution to the airline, Bo has been given the biggest honour by Fernandes – he will have an aircraft named after him! The special plane is currently being spray painted in Tolouse, France, and therefore, couldn’t be photographed.

“I was completely blown away ... it’s amazing to have a plane with my name on it. This is also for the many people who have worked tirelessly alongside with me,” Bo says.

Banking on a perfect flight plan

28 August 2009
Rani says AirAsia X is one of the most efficiently run airline.

When AirAsia X, the world's definitive long-haul, low-cost airline, announced the launch of a Middle East operation last week it caught everyone by surprise – the region, the industry… and even its CEO.

The carrier, a dominant player in Southeast Asia with roots in Malaysia and international connections to Australia, China and the UK, brought forward the launch of its Abu Dhabi service, which was initially planned for late 2010-early 2011, CEO Azran Osman Rani told Emirates Business.

"We didn't think we would reach this stage so fast," he said. "But the Abu Dhabi Airports Company (ADAC) team has been very persistent. They kept meeting us in Kuala Lumpur and bringing us here to showcase this as a destination. And once you come here and think about what is going to happen to Abu Dhabi over the next few years it is mind blowing."

AirAsia X postponed the launch of services to the Indian cities of Amritsar, Delhi and Mumbai so it could start flying between Abu Dhabi and Kuala Lumpur before the end of the year.

The airline spent a considerable amount of time mulling over Bahrain "very seriously", Sharjah "very, very seriously" and Dubai as its regional hub before zeroing in on Abu Dhabi. It was ADAC's dedication to the low-cost model that sealed the deal.

"It came down to the commitment of the airport to work with us to create new markets and encourage other low-cast carriers to fly into the market," added 38-year-old Rani. "So we're very keen to see more Jazeeras and Bahrain Airs flying in. Hopefully we'll get to see a 'flyabudhabi' providing more regional connectivity – that's what we're banking on."

Regional connectivity is crucial to AirAsia X's viability. It is what sets it apart in a world that has longed to make long-haul flights – above four hours' travel time – easily affordable to the mass market. Only the legendary Sir Freddie Laker pulled it off in the 1970s with his famous Skytrain service between London and New York. That was until British Airways and Pan Am priced Laker Airways into oblivion.

Later attempts by the likes of Canadian Zoom Airlines and Oasis Hong Kong Airlines were defeated by volatile fuel prices and huge operational losses. Well aware of these dangers, AirAsia X's dynamic young team – drawn from a multitude of other sectors – responded with a razor-sharp business model that forced the aviation industry to sit up and take notice.

A gigantic saving of $50 (Dh183) per passenger on its food and beverage service and an unprecedented cost per available seat mile of just 2.4 cents, achieved through optimised aircraft utilisation and online operations, were the obvious achievements.

But this motley crew of media, finance, customer relations and aviation honchos also unearthed the much sought-after answer to the segment's most fundamental problem – the need for onward connections. Cheap transcontinental flights are inevitably flooded with travellers eager to explore the terrain beyond the initial destinations.

"One of the most important and compelling insights we've been able to derive over the past two years is that when you fly long haul you have to use these big, wide-bodied jets," said Rani. "So it means to fill up those planes every day you cannot just rely on point-to-point traffic, you have to rely on the connection feed.

"And what we've realised is that you don't need all these sophisticated code-sharing, inter-aligning alliances, getting computer systems to talk to each other and payment settlement systems that just add so much complexity and cost.

"We realised that people today can buy two tickets on the internet. They can buy separate tickets from Germany to Stansted in the UK and from Stansted to Kuala Lampur very easily and still connect."

While traditional carriers remained focused on conveniently timed optimal connections through a hub-and-spoke model that kept planes waiting for long, Rani's team rewrote the book.

"They probably use their plane 13 or 14 hours a day. We use our planes close to 18 hours a day by not adhering to these age-old norms. So you're buying the same plane but extracting 30 to 35 per cent more use from it.

"Even if your fares are lower you still get the same revenue. You also have more seats on your plane because you don't have the big first class, big toilets, big galleys for big trolleys. And more seats for more hours means you can lower your prices and still earn money."

The decision to do away with first, business and economy class segregation led to the addition of 80 more seats on the airline's A330s, with only nine cabin crew as opposed to the 14 other airlines employ. Paid-for, pre-selected meals removed the need for a free trolley service – and the resulting wastage.

"When you add the extra number of cabin crew, the working hours, the overnight stays and divide the wastage and all the other extra costs the saving comes to $50 per person on food and beverages alone. We scrubbed through every single line item to figure out what it is that you really need to deliver to your passengers."

The Abu Dhabi route is due to become operational in November with fares starting at Dh99, and Rani has his eyes set on connections from the capital to Spain, North Africa and Scandinavia.

Another development brewing in the Air Asia X camp is a rapid expansion of its budget express courier service, Redbox.

"You have to keep finding new ways of earning money, new ancillary revenue opportunities. Redbox is an express courier service to take on the UPSs and DHLs of the world with a low-cost model. We have practically unused capacity on our planes so we can offer 50 per cent lower express rates.

"It's a new way of earning money with the same aircraft and it will be a $100 million business for us over the next few years."

In addition, the airline has "gone big" on online sales of merchandise, event and concert tickets, ground transportation, hotels and tourist attractions.

At a time when traditional carriers are struggling to mitigate the effects of the global recession, AirAsia X has unabashedly reported growth, expansion and aircraft orders with much fanfare. At this year's Paris Air Show it joined Qatar Airways as one of just two carriers to place aircraft orders – for 10 A350s at a list price of $200 million each, to be delivered in 2016.

In the seven years leading up to the arrival of these new-generation aircraft from Airbus the carrier will add 23 A330s to its existing five-plane fleet – three A330s and two A340s. And it plans to expand services to its core markets of Australia, China, India, Japan, Korea and the Middle East. The US and Europe will play much smaller roles.

AirAsia X hopes to switch to A330s on Abu Dhabi route

27 August 2009

AirAsia X is hoping it can generate enough traffic to Abu Dhabi that it can switch aircraft type to Airbus A330s.

The carrier's CEO Azran Osman-Rani says if traffic on the Abu Dhabi route increases it will switch to an A330 from an Airbus A340 and launch services from Abu Dhabi to destinations in Africa, the Middle East and Europe.

He says it may have some one-stop services from Kuala Lumpur to London Stansted via Abu Dhabi using A330s but will continue to also have non-stop services using the A340s.

But he says a higher priority is to launch A330 services through Abu Dhabi to destinations in Africa and other points in Europe.

AirAsia offers Krispy Kreme onboard

27 August 2009

FOUR years ago, AirAsia CEO Datuk Seri Tony Fernandes walked into Harrods department store in London and had his first taste of Krispy Kreme doughnuts. The experience left him a satisfied customer with a craving for another taste of these wonderful doughnuts again.

(From left) Lee, Fernandes and Berjaya Corporation Berhad executive
director Datuk Robin Tan at the Sweet Deal launch.

Now, AirAsia passengers will be able to savour this tasty treat as the budget airline and Berjaya Krispy Kreme have sealed a partnership to introduce the doughnuts on AirAsia’s in-flight menu.

Four great tasting Krispy Kreme varieties – Chocolate Iced Glazed, Glazed Chocolate Cake, Glazed Vanilla Cake and Chocolate Peanut Butter – will be available.

Made from Krispy Kreme’s proprietary 72-year recipe, these varieties are some of the most popular of the company’s offerings.

"With the addition of Krispy Kreme into our Snack Attack in-flight menu, we offer our guests another best-of-its-class product," said Fernandes at the launch of the Sweet Deal partnership on Monday.

"AirAsia is committed to making flying a pleasurable experience, and offering the delights of an immensely popular food product at 30,000 feet is part of making such experience possible.

"We expect our guests’ enjoyment of this new addition to contribute to our profits starting this quarter."

Berjaya Krispy Kreme Doughnuts executive director Datuk Francis Lee said: "Krispy Kreme Malaysia is excited to be flying our doughnuts this high with AirAsia as it is the first-of-its-kind venture, and to be exposed to this incredibly large market of AirAsia guests. Now AirAsia guests will be able to enjoy our premium quality doughnuts onboard and we invite them to visit our stores when they are in Kuala Lumpur.

"Like AirAsia, Krispy Kreme is a buzz word that millions recognise as synonymous with quality, affordability, easy accessibility and good times."

The Krispy Kreme doughnuts will be available from Sept 1 onwards and is available in a double pack, perfect as an affordable indulgence or a treat to share with a travelling partner.

Guests may buy the doughnuts and other Snack Attack in-flight food on board.

They are encouraged to pre-book their food during online bookings to ensure their availability during flight and to enjoy savings up to 20%.

AirAsia X flying to home of the Pandas soon

PETALING JAYA, MALAYSIA - AirAsia is introducing a new route connecting Kuala Lumpur to Chengdu from Oct 20.

To be operated by AirAsia X, the four direct weekly flights come at all-in-fares as low as RM129 (S$52.9) one-way.

Reservations can be done online via AirAsia's website at or

The booking period is from Aug 26 to Aug 30 2009, for the travel period between Oct 20, 2009 and July 31, 2010.

AirAsia's Regional Head of Commercial Kathleen Tan said: "Our China network has remained incomplete without a presence capable of unlocking the potential of travel to the western territories of China.

"With Chengdu now added on to our network, AirAsia can now boast that we have mainland China covered with 160 weekly flights." She added that at present, there is no direct air connectivity between Kuala Lumpur and Chengdu, home to China's living natural heritage, the Pandas.

AirAsia X CEO, Azran Osman-Rani said that despite the gloomy global economy, China remained an important trading and economic partner for Malaysia and the Asean region.

"The launch of this new route is expected to enhance the exchange of trade and tourism, and to strengthen the economic development of Kuala Lumpur and Chengdu.

"AirAsia X's low fares and innovative services will also stimulate more travels both in-bound and outbound from these two destinations as the Chinese public can take advantage of Kuala Lumpur's status as a gateway to Asia, Australia and Europe," he said.

Off-market trade in 2.1% of AirAsia

26 August 2009

KUALA LUMPUR: AirAsia Bhd had a 2.1% stake traded off-market for RM72mil yesterday, according to stock exchange data.

About 50 million shares changed hands at RM1.44 each, stock exchange data showed. Neither the buyer nor seller was identified, Bloomberg reported.

On Aug 12, AirAsia saw the entry of a new foreign substantial shareholder in Luxembourg incorporated firm Genesis Smaller Companies SICAV, which acquired a 5.4% stake in the low-cost carrier. The stock closed at RM1.42 on Aug 12.

According to a filing with Bursa Malaysia on Aug 14, Genesis acquired 128.3 million AirAsia shares from the market.

AirAsia to lift ancillary income

25 August 2009

KUALA LUMPUR: AirAsia Bhd, which raked in RM177mil in ancillary income for financial year ended Dec 31 (FY08), aims to increase this figure by 20% in two years, says group chief executive officer Datuk Seri Tony Fernandes.

He said food and beverage (F&B) sales contributed RM30mil in FY08 and with the introduction of more new in-flight menus, the target was achievable.

“Average passenger spending on F&B currently is about RM3.25 and we are targeting to increase this to RM5 with the introduction of new menus such as Krispy Kreme doughnuts,” he said yesterday after the launch of “AirAsia Introduces Krispy Kreme Onboard”.

Datuk Seri Tony Fernandes ... ‘We are targeting to increase average passenger spending on F&B to RM5.’

AirAsia’s ancillary income in the first half year hit RM186mil with food sales contributing a major portion. Fernandes said the introduction of the doughnut was a first as no other airline had done it before and it would complement well other food offered on AirAsia flights.

“With the addition of Krispy= Kreme in our snack attack in-flight menu, we offer our guests another best-of-its-class product. We expect this new addition to contribute to our profit starting this quarter,” he said.

Berjaya Krispy Kreme Doughnuts Sdn Bhd director Datuk Francis Lee said it was excited to be exposed to this large market of AirAsia guests.

“Now AirAsia guests will be able to enjoy our premium quality doughnuts onboard. Like AirAsia, Krispy Kreme is a buzzword that millions recognise as synonymous to quality, affordability, easy accessibility and good times,” he said.

The company is the master franchisee for Krispy Kreme doughnuts in Malaysia.

Available from Sept 1 on all AirAsia flights, Krispy Kreme doughnuts will be offered at RM7 per pack of two.

Air Asia plane makes emergency landing on Macao airport

MACAO, Aug. 24 (Xinhua) -- An Air Asia plane carrying 148 passengers made an emergency landing Monday morning on Macao International Airport after the plane's emergency door warning light was falsely activated, but no one was injured in the accident.

The Airbus A320 plane, Flight No. AK50, took off in Kuala Lumpur earlier this morning and at around 10:00 a.m. local time (GMT 0200), when the plane was flying into Macao, a warning light was set off, signaling that the aircraft's emergency door was open. The pilot then informed Macao International Airport (MIA) and made an emergency landing.

None of the passengers on board the plane was injured as the plane made a safe landing on the airport's runway, a spokeswoman from the MIA said.

Air Asia later confirmed that the emergency door of the plane turned out to be securely locked when the plane was on the air and the warning light was just falsely activated.

Being one of the low-fare airlines in Asia, Air Asia has a fleet of 72 aircraft and operates over 400 flights every day from hubs located in Malaysia, Thailand and Indonesia.

AirAsia X launching services to Chengdu

24 August 2009

Malaysian carrier AirAsia X is launching services to Chengdu in southwest China and plans to have some of its Abu Dhabi services go onto London Stansted.

A five-times weekly AirAsia X Kuala Lumpur-Chengdu service will be starting on 22 October using Airbus A330s, says an AirAsia X spokesman.

According to Innovata no airlines currently operate on the Kuala Lumpur-Chengdu route.

He also says some of the Airbus A340 Kuala Lumpur-Abu Dhabi services the carrier will be launching on 23 November will go onto London Stansted.

AirAsia X already operates to London Stansted non-stop using A340s but the change means in future it will have a mix of non-stop and one-stop services to London Stansted.

30,000 seats sold on AirAsia's new KL – Colombo flights

23 August 2009

The success of budget airline AirAsia’s launch of its Kuala Lumpur – Colombo daily route this week has the airline already planning a second and third flight, another from Kuala Lumpur and the other from Bangkok.

AirAsia CEO Tony Fernandes gestures during the briefing with High Commisioner of Malaysia Rosli Ismail (left) Pic by Sanka Vidanagama

The airline said approximately 30,000 seats have been sold since tickets opened for sale about two months ago. At a press conference to commemorate the launch in Colombo on Tuesday, Group CEO of AirAsia Berhad Tony Fernandes said the airline could easily do five flights per day if airport costs could be brought down and fares stay low which will also boost tourist arrivals to Sri Lanka.

Prior to the launch of the Kuala Lumpur – Colombo route, Mr. Fernandes said Colombo was promoted aggressively to Malaysians across the ASEAN region and even beyond to destinations such as Australia and the UK. “We have also included Colombo in our recent ‘Big Sale’ campaign and cross sell it to other destinations,” he said. “We are also promoting Colombo on our website,” Mr. Fernandes added that the airline is certain Colombo will leverage from the huge exposure gained from these initiatives.

Colombo which is AirAsia’s third destination in South Asia will complement the airline’s aggressive growth in that market besides feeding more traffic to both countries. The airline expects mutual economic benefits between Sri Lankan and Malaysia as low fares and innovative services will stimulate more travel both inbound and outbound from the two destinations.

Mr. Fernandes noted that passengers on the inaugural flight were from a range of different countries such as Serbia, Turkey, Japan, the UK, US and Australia who were coming to Sri Lanka for the first time. Several Sri Lankan’s living abroad were also aboard including one passenger who had not been back for the past 27 years.

Cutting prices and making money

22 August 2009

IT has never been tougher being in the aviation industry. Key issues of gyrating fuel costs, lower traffic volumes and pressure on yields have seen legacy airlines globally buckling while low-cost carriers flourish.

Over in Malaysia, the trend couldn’t have been clearer with the recent earnings announcements by national carrier Malaysia Airlines (MAS) and budget player AirAsia Bhd.

Recently, the industry was greeted with bad news when MAS announced disappointing results.

It posted a net profit of RM875.5mil for the second quarter to June 30, but sustained an operating loss of RM420mil after taking out a gain of RM1.34bil from a partial reversal of provisions of nearly RM4bil for derivative losses.

Looking at the proforma income statement prepared on non-FRS 139 basis, it actually showed net losses of RM804.5mil and RM1.6bil for the second quarter and the first half respectively.

(The airline has opted to be an early adopter of FRS 139, the financial reporting standard that covers the recognition and measurement of financial instruments, beginning from financial year 2009.)

Its dwindling cash position is another key concern. The first half’s cash flow statement shows some worrying cash outflow items such as the net settlement derivative losses of RM1.3bil. These consist of RM798mil for the settlement of expired derivatives and RM546mil for the premium of the restructuring of the derivatives.

“Though the RM546mil premium might be a one-off item, the RM798mil settlement on derivative losses might be repeated in the next two years if oil prices stay below US$100 per barrel,” says an analyst from ECM Libra. He says the main concern is when the fuel hedges expire, as the contracts have to be settled in cash.

At present, MAS has hedged 47% of its fuel requirement at around US$100 per barrel for the rest of 2009 and about 63% at US$90 to US$100 per barrel for 2010 and 2011.

“If the oil prices stay at current level of US$71 per barrel, MAS will have to settle financial derivative liabilities amounting to RM1.6bil as at June 30, 2009. Of this amount, RM833mil will be due within the next 12 months. By the time all of its derivatives expire in 2011, MAS’ cash pile may be depleted to RM1.3bil,” he says.

Furthermore, there are issues concerning its cost-cutting measures. Under its business turnaround plan, MAS had earlier mentioned it will embark on such measures that will yield savings of RM700mil to RM1bil. So far, MAS has not achieved this.

“In fact, non-fuel costs actually increased 12% on a quarterly basis to RM2.2bil,” says the ECM analyst.

On a more positive note, OSK Investment Research analyst Ng Sem Guan feels that MAS’ earnings have probably bottomed in the second quarter.

Based on reported passenger numbers, especially on the growth in the domestic market, he feels MAS’ losses will gradually reduce in the third and fourth quarter.

Its various promotions have helped to boost system-wide load factors to 66% in the second quarter, and the aggressive capacity reduction has also pushed the international load factor to 65%.

“MAS has managed to attract some customers back from the low-cost carriers. That’s a good sign. It’s step one,” says Ng.

Furthermore, with the restructuring of MAS’ hedging positions, Ng opines this will provide a certain degree of protection with respect to its unrealised MTM (mark-to-market) exposure in the event fuel price falls again.

MAS has spent RM564mil restructuring its hedge positions, to lengthen the maturity of part of its positions as the board is of the view that crude oil will eventually go up in the longer run. It has also selectively bought put options, which will reduce the downside exposure of its existing fuel hedges.

AirAsia flying high

Across the budget aisle, we see a classic case of a low-cost carrier faring well during a downturn. AirAsia posted a sterling first-half net profit of RM294.2mil in what is normally a seasonally weaker first half of the year. These results beat street estimates by a resounding 73%.

Its second-quarter core net profit (taking out the exceptional items) of RM128mil is a 4.41 times increase from the period a year ago, and is impressive, considering it was achieved by cutting ticket prices by 19% to RM160 per passenger and with no fuel hedging gains to buffer its performance.

According to data provided by the International Air Travel Association (IATA), global passenger demand declined 7.2% in June. However, AirAsia’s passenger traffic increased 11.8% quarter-on-quarter (qoq) to 3.5 million passengers, while RPK (revenue passenger km) increased 16.3% qoq to 4 million km.

In addition, AirAsia managed to keep its seat load factor steady at 74.8% despite a 6% qoq increase in ASK (available seat-km), a yardstick for capacity.

Interestingly, AirAsia’s second quarter revenue/RPK dropped 21% on a quarterly basis to 16.2 sen, which is rather similar to the 20% revenue yield decline experienced by MAS in the same period.

“While MAS’ fare cutting resulted in operational losses, AirAsia posted operating profit of RM271.3mil,” says the ECM analyst.

“We continue to like AirAsia for its resilience amidst the challenging operating environment,” says KAF Research analyst Vince Ng in his report. He is reiterating a target price of RM2 for the stock.

While earnings may be running ahead, and traffic in the second half is seasonally stronger, Ng is still maintaining his core net profit forecast of RM332mil for AirAsia as yield pressures and rising crude oil prices can be a concern in the coming quarters.

The analyst from ECM has a target of RM1.90 based on a discounted cashflow valuation.

Meanwhile, how do airport operators fare during present trying times?

Maybank Investment Bank analyst Khair Mirza says Malaysia Airports Holdings Bhd’s (MAHB) second-quarter passenger data, and MAS’ second-quarter results confirm his view of AirAsia getting bigger market share.

Data from both carriers and the airport operator confirm that AirAsia has widened the gap with MAS in terms of passengers carried in the Malaysian air travel market in the first half of the year.

Overall passenger movements at KL International Airport increased 4.1% to 7.13 million, while movements in other Malaysian airports increased 7.8% to 5.31 million.

“MAS’ first half market share of the air travel market fell by 5.3 points on a yearly comparison to 22%, while AirAsia gained 6 points to 37%. The two carriers’ combined share remained at 58%-59%. It has been stagnant at this level since 2005,” he says.

On this note, Khair is bullish on MAHB as it merely collects “toll.” He expects publicity-shy MAHB to report higher airport non-aeronautical revenues in its second quarter results this month.

MAHB has been investing in its airport non-aeronautical segment. These include more effective selling of advertising space at KLIA’s main and the low cost carrier terminals. MAHB has also increased retail space at all international terminals. This will help compensate for the lower charges MAHB collects from these passengers.

Khair is also confident that MAHB will deliver the new LCCT in the second half of 2011.

Logojets can help promote routes and regions; AirAsia X unveils Oakland Raiders sponsorship

21 August 2009

Oakland California is one of several destinations AirAsia’s long-haul division, AirAsia X, is believed to be interested in operating to as its fleet grows. In an apparent move to lobby for this desire the airline has become the proud sponsor of the Oakland Raiders football team, which participates in the AFC west division of the NFL, unveiling an A340 used on its route from Kuala Lumpur to London Stansted which has been branded “Raiders”.

The outdoor advertising potential of aircraft has not been exploited to the same degree as buses and trams the world over - because aircraft travel between different countries their attraction as an advertising vehicle tends to be centred on global brands which easily travel across borders. Taking this forward into a more strategic vein benefiting network development, some airlines have also used their aircraft to promote destinations or regions served as well as related theme parks, hotels and major sporting events (football, Olympics, Formula 1 Grand Prix events).

Southwest has painted several of its many 737s in a colour scheme to promote a particular state, the most recent being “Illinois One” (one of the airline’s biggest bases is at Chicago Midway in the state of Illinois). Likewise, before being merged with US Airways America West operated a number of state-themed aircraft including “Ohio”.

In Europe Germanwings helped promote the launch of a new base at Berlin Schönefeld with the unveiling of a “Berlin bear” logojet while fellow German LCC hlx (now part of promoted routes to Austria and Italy with specially painted 737s in “Kärnten” and “Cagliari - south of Sardinia” colours. For a while SkyEurope promoted its winter ski flights to Austria with a special “Tirol” colour scheme. Cathay Pacific operated a “Hong Kong - World City” aircraft while on a smaller scale UK regional Eastern Airways flew a Saab 2000 with “Aberdeen - City and Shire” markings.

Regional airlines often uses a geographic reference in their names, a trend that has proven particularly popular in Germany (airberlin, Augsburg Airways, and Hamburg International). Some airlines, such as Dubrovnik Airline go as far as featuring a nice aerial view of their home town on the aircraft.

Germanwings and Travel Servis have gone so far as to brand one of their aircraft in the colours of their home airports, in this case Cologne/Bonn and Prague respectively. After the recent outbreak of swine flu in Mexico inbound tourism suffered so Mexicana combined with the Mexican Tourism Council to launch a “Vive México” campaign which involved large lettering on the sides of two A320s and two Fokker 100s.

Tune Talk subscribers can enjoy lower IDD rates over other mobile operators

SEPANG: New mobile operator Tune Talk Sdn Bhd, which operates the prefix 010 for its prepaid cellular service, aims to beat the competition by offering IDD rates that are 10% cheaper.

The company will charge a flat rate of 22 sen per minute for calls to any operator in the country, while an SMS cost 5 sen each.

Chief executive officer Jason Lo said Tune Talk would focus on voice calls and SMS but would be introducing GPRS services sometime next month.

Speaking after the launch of Tune Talk at the Sepang Aircraft Engineering Sdn Bhd’s hangar yesterday, Lo said the Tune Talk SIM pack was sold at RM5 and it came with a RM5 pre-loaded worth of talk time.

Chairman Datuk Seri Tony Fernandes said he expected one million subscribers for Tune Talk and AirAsia Bhd also hoped to bring in the customers for its mobile services.

All smiles: (from left) Shazalli, Lo, one of AirAsia’s shareholder Datuk Kamarudin Meranun, and Fernandes smiling for the camera at the official launch of Tune Talk at the Sepang Aircraft Engineering Sdn Bhd’s hangar Wednesday.

Tune Talk would become profitable in the next six months and its cash position would also be positive by then, he added.

Tune Talk operates a mobile virtual network operator (MVNO) that rides on Celcom’s 2.5G cellular infrastructure to roll out services.

Celcom chief executive officer Datuk Ser Shazalli Ramly said the partnership will enable Celcom to leverage on both Tune Talk’s and AirAsia’s successful Internet business models.

Lo said Tune Talk also aimed to make inbound advertising as a key source of income.

It had secured AirAsia, Etiqa Insurance Bhd and 99 Speedmart Sdn Bhd as its SIM pack co-branding partners.

He said all Tune Talk subscribers would be given a free RM100,000 personal accident coverage from Etiqa Insurance.

It is also giving over RM1mil worth of AirAsia e-gift vouchers to its top 10 callers everyday for the next 12 months.

Jetstar and AirAsia X looking to Europe - Southwest falls following share downgrade

AirAsia X stated it is currently in talks with Middle Eastern investors, including institutions and sovereign wealth funds, for fresh capital to fund its European and African expansion plans.

The carrier plans to expand to destinations that are “unexploited, under-served”, including destinations in Spain, Scandinavia and East and North Africa. AirAsia's shares were steady yesterday.

Also looking to Europe is Jetstar, which stated it is again considering expanding into Europe in the next two years, and is looking into new Asian hubs to become stopovers for the services, following the Qantas Group’s announcement of plans to lease a further four A330 (and possibly a fifth) aircraft for the subsidiary. According to Jetstar CEO, Bruce Buchanan, a change in design on the new A330s meant the aircraft would have improved payload capability, enabling the carrier to offer services to Southern European destinations without restrictions. The carrier is also actively expanding its Pan-Asian strategy, with the carrier planning to increase capacity from Singapore by 46% in FY2010.

In the US, Southwest Airlines' shares fell 4.1% yesterday, after Jesump & Lamont downgraded the carrier’s stock from “hold” to “sell”, stating the shares were overpriced as the carrier is profitable, but not growing.

The analysts set a price target of USD4 for the shares, with this price almost 13 times the estimated earnings per share for 2010. The analysts also expressed concern that the carrier’s slow-growth strategy will limit the carrier’s earnings potential over the next 18 months. The carrier plans to reduce capacity (ASKs) by approximately 6% in 2009.

Also gaining in the Americas yesterday was GOL, up 6.5% following the previous day’s 9.6% gain, while in Europe, easyJet was stronger (+1.7%), while Ryanair was down slightly again (-0.6%).

Selected LCCs daily share price movements (% change): 19-Aug-09

ADAC welcomes AirAsia X's announcement of services Kuala Lumpur - Abu Dhabi

19 August 2009

The world's leading long haul low cost carrier to touch down in Abu Dhabi in November

Abu Dhabi strengthens connections between Middle East and South East Asia

Abu Dhabi, UAE, 19 August 2009: Abu Dhabi Airports Company (ADAC) t
oday welcomed AirAsia X's imminent arrival in the UAE capital, as the world's leading long haul low fare airline announced its new Kuala Lumpur - Abu Dhabi route.

Following industry rumours and press speculation surrounding AirAsia X's first destination in the Middle East, the carrier today confirmed its commitment to Abu Dhabi at a press conference in the UAE capital. The inaugural flight will touch down in Abu Dhabi on 23 November 2009 at 01:30, and depart for the Malaysian capital Kuala Lumpur again at 02:55 the same day.

The new route will enhance Abu Dhabi's already strong connectivity to South East Asia - one of the Emirate's largest markets- and beyond, with five flights per week. There is currently a Malaysian population of 3,200 in the UAE, and wider South East Asian and Oceanian population of 566,700, according to national embassies in the UAE. As expatriate residents in UAE are entitled to at least one return ticket to their country of origin, and many travel more frequently, there is a strong market for the low cost carrier.

Abu Dhabi is the airline's eighth long haul destination and its first destination in the Middle East. The route will be served by an Airbus A340-300 configured for 256 seats in economy cabin and 30 Premium seats on Mondays, Tuesdays, Fridays, Saturdays, and Sundays.

This new route, which is due to begin in mid-November this year, will help to enhance the Emirate's connectivity to the Far East and beyond.

ADAC is very focused on the resident population and on the needs of the local community, and it is apparent that there is a large market for this low cost carrier. South East Asia is one of our largest markets, with 2008 statistics showing a 24 per cent increase in origin and destination passengers from Abu Dhabi to this region. Kuala Lumpur is the third most popular destination and a convenient entry point to the rest of the South East Asia.

Mohammed Al Bulooki, Vice President of Airline Marketing and Aeronautical Revenue, ADAC


"Abu Dhabi aims to increase its reputation as the capitals' airport, and we continue to increase connectivity and the range and breadth of services we offer to our local community, as well as our customers from further afield.

"We are delighted with the AirAsia X business concept that stimulates travellers from Asia to visit the UAE, offering increased access to the culture and hospitality of Abu Dhabi, in particular opening up opportunities for Islamic tourism between our two nations. There is also the potential economic benefit to the Emirate that comes with passengers travelling at bargain rates, potentially having increased spending power as they experience the UAE".

AirAsia X CEO Azran Osman-Rani said:

"We are ecstatic with our first long haul route into the Middle East from Kuala Lumpur. This clearly indicates that our expansion plans are on track which represents our determination in providing truly low fares on our long-haul, low fare services across the globe. We believe our low fares will help to stimulate and trigger new travel demand, and will help to boost tourism potential on both ends. This is part of our overall strategy in expanding into the Middle East. We see an untapped market which has strong economic potential for the route. Abu Dhabi is the largest city in UAE, with a population of 2 million - in which more than 80% of the populations are frequent traveling expatriates. Hence, we foresee an increasing trend of UAE travelers flying to Malaysia for holidays; tapping into a very lucrative market. There will also be potential demand from Malaysian and ASEAN travelers who dream to experience the wonders of the Middle East for the first time, as it is now so affordable to do so."

"There is no better way than to have low fares to get travelers from Abu Dhabi and the region to see the multi-color cultures of Malaysia, exciting shopping and sample gastronomic cuisines. More importantly, many in the UAE can now come through Kuala Lumpur to connect and feed on AirAsia's incredible route network to ASEAN, India, China, Australia and Europe where we boast to have the biggest connections in South East Asia. AirAsia is committed and poised to position Malaysia as Asia's biggest low cost hub," concludes Azran.

Kuala Lumpur is currently the third largest origin and destination market in South East Asia for the UAE, and a popular entry point to the rest of the South East Asian region. The new route will support the strong demand in both countries for leisure, Islamic tourism and business travel.

AirAsia X launched in 2007 with four weekly flights between Kuala Lumpur and the Gold Coast in Australia. The airline has since extended its network to cover Perth and Melbourne in Australia, Tianjin (Beijing) and Hangzhou (Shanghai) in China, Taipei in Taiwan, and London, UK. It now operates a fleet of five aircraft: three Airbus A330-300 and two Airbus A340-300 with firm orders for another 33 aircraft.

Thai AirAsia sees losses fall by 80%

20 August 2009

The no-frills carrier Thai AirAsia saw its losses narrow by 81.84% in the second quarter to 81 million baht from 446 million in the same period last year.

The airline, part of Asia's largest low-cost carrier, attributed the second-quarter loss to the impact of Bangkok's April riots and the H1N1 outbreak which sharply reduced air travel demand.

Without those negative factors, Thai AirAsia should have turned a profit in the April-June period, the airline's chief executive Tassapon Bijleveld told the Bangkok Post yesterday.

Tony Fernandes, chief executive of AirAsia Group, said in a statement that Thai AirAsia had performed well by containing losses, despite weakened consumer sentiment caused by the domestic political situation and the second quarter being a seasonally weak period for Thailand.

Thai AirAsia - 51% Thai-owned with 49% held by Malaysia-listed AirAsia Bhd - saw its second-quarter revenue slip by 2% year-on-year to 2.02 billion baht, due partly to the 15% decline in the average fare.

The airline carried 10% more passengers in the second quarter with a 69% load factor. As of June, it operated a 17-strong fleet.

Thai AirAsia made a net profit of 217 million baht in the first quarter, and after subtracting the second-quarter loss, the airline still made a 136-million-baht profit in the first half of the year, said Mr Tassapon.

He said he remained upbeat about the the airline's operations this year.

"We will definitely make a profit, in the range of 800 million baht to one billion baht, for the whole of 2009," said Mr Tassapon.

That would be a major turnaround from last year when Thai AirAsia recorded massive losses, largely due to the spike in oil prices, which caused most airlines around the world to post huge losses.

Mr Fernandes echoed the view, saying the outlook for Thai AirAsia is positive with satisfactory passenger growth expected. The airline has also captured a significant market share while competitors are scaling back capacities and cancelling flights, he said.

The Thai operation is also enjoying the cost benefits of using the more fuel-efficient Airbus A320 aircraft. It recently increased the number in its fleet to nine.

AirAsia as a group posted sharply higher earnings in the second quarter as dwindling demand for full-service carriers amid the economic downturn boosted budget airlines.

The group made a net profit of 139.2 million ringgit (1.33 billion baht) in the April-June quarter against 9.4 million ringgit a year earlier.

The airline recorded a seat load factor at 75% during the quarter, a five-percentage-point increase over its first quarter performance.

AirAsia Seeks ME Investments

20 August 2009

ABU DHABI — AirAsia X, the long-haul, low-cost wing of the Kuala Lumpur-based airline Air Asia, has initiated talks with the investors from Middle East including some of the sovereign wealth funds to sell an unspecified share of its equity to mobilise funds for its future expansion plans.

This was disclosed by Azran Osman Rani, the Chief Executive Officer of AirAsia X, at a Press conference here on Wednesday to announce the launch of the direct flight between Kuala Lumpur and Abu Dhabi from November 23. Initially, services will be available five days a week and later on a daily basis.

“Our present equity base will sustain our expansion plans up to 2010 only. We will have to inject more equity to carry out further expansions. We haven’t decided what portion of the equity will have to be sold. It is for our shareholders to decide. Also it is for them to invite private investors to join or go for IPO or opt for other routes to mobilise funds,” he said.

“We already have investors from the Middle East as investors in our company. About 10 per cent of our shares are being held by a financial consortium from Bahrain,” he said.

The Ambassador of Malaysia in the UAE Dato Yahay bin Abdul Jabar, who was also present at the Press conference, later told Khaleej Times that he was encouraging the AirAsia X and the investors in the United Arab Emirates to explore the possibilities of launching a joint venture to set up a low-cost carrier in Abu Dhabi.

The other emirates like Dubai and Sharjah already have low cost carriers, he recalled.

Considered to be the leading low cost carrier in Asia, Air Asia services the extensive network of 130 routes, covering 6 destinations.

The airline has carried over 75 million passengers and have grown its fleet strength from two to 83, since its inception seven years ago. Air Asia X had only one aircraft when it was launched last year, and now we have five aircraft,” Azran Osman Rani said.“We are set to roughly triple our revenues in 2009 compared to 2008. Last year, we had a revenue of about Ringgits215 million (roughly Dh215 million), and this year we will be making Ringgits 950 million. We will have eight planes by the end of the year, and by the end of 2011 we will have 17 aircraft.”

The airline had a load factor of 75 per cent last year and hopes to achieve 80 per cent this year.

Abu Dhabi has been selected as the virtual hub of the Air Asia X in the Middle East because it can act as the gateway to the region.

“We are not merely targeting the to and fro passengers between Abu Dhabi and Kuala Lumpur. But both these destinations will be treated as transit points also for travels beyond to other countries in the regions and outside.

Also there are developments happening in Abu Dhabi which in future will elevate it to the status of major global tourism destination, the Chief Executive Officer said. Air Asia X will be the 48th carrier operating from Abu Dhabi.