31 January 2010
AirAsia X will pull out of Abu Dhabi after just three months in operation, a setback for the fledgling carrier’s long-haul, low-cost business plan in the region.
The surprise withdrawal, which is effective on February 21, came just hours before the capital’s airport operator revealed record traffic figures for last year.
The Malaysia-based carrier, which launched its Kuala Lumpur to Abu Dhabi service with great fanfare on November 23, said it hoped to resume services as quickly as possible once it employed a more economical aircraft for the route. It flies a four-engine Airbus A340, but hopes to restart the route using an Airbus A330, which has fewer seats and is more fuel-efficient, with just two engines.
“We don’t have the right aircraft. These are challenging times for the industry,” said Azran Osman Rani, the chief executive of AirAsia X.
“Airlines are trying to fight to survive and unfortunately we have to make these tough decisions and hopefully we’ll have a better, more efficient aircraft and bit more scale to do perhaps a minimum daily service and be able to come back stronger, but the environment is making it a bit too tough.”
The failure follows one of the worst years for airlines since the Second World War. There was a worldwide decrease of 3.5 per cent in traffic from 2008 in a year marked by the global recession and the H1N1 global pandemic. The sole bright spot has been the Middle East, where passenger traffic rose by 11.2 per cent over the same period.
Abu Dhabi Airports Company (ADAC) said traffic increased 7.3 per cent to 9.7 million last year as the home-based Etihad Airways added new planes and routes while eight other airlines launched inaugural services to the capital.
Cargo volumes grew 7 per cent to 32.7 million tonnes, it said.
ADAC’s report follows similar results for Dubai Airports, which said Dubai International Airport’s traffic grew by 9.2 per cent to 40.7 million travellers last year, confirming the UAE’s reputation as an engine of growth for the global aviation sector on the back of the fast-expanding Etihad Airways and Emirates Airline.
“Despite the adverse global economic climate and the consolidation observed in the aviation industry during 2009, Abu Dhabi International has proven to be a resilient airport,” said Khalifa al Mazrouei, the chairman of ADAC.
AirAsia X, a subsidiary of the fast-growing AirAsia, helped pioneer long-haul budget travel, a model previously reserved for short-hop trips of four hours or less.
But the downturn has added more pressure on the new model, said Saj Ahmad, the chief analyst at FBE Aerospace based in London.
“Air Asia X’s decision to abandon Abu Dhabi in just six months underscores not only the fragility of the long-haul, low-cost concept, but also shows just how competitive the GCC region actually is.
“Air Asia X’s decision to first drop Dubai and now Abu Dhabi demonstrates that the maturity of ‘long haul, low cost’ has a long way to go – reducing seat costs by cramming passengers into an aeroplane does not derive success or make you more competitive. That’s precisely why the likes of Southwest Airlines and Ryanair have never ventured to go long haul – the concept doesn’t work as well on a bigger scale.”
Still, Air Asia X plans to institute services from the Malaysian capital to India.
The airline was one of a batch of new carriers that ADAC attracted to the capital amid a heavy marketing campaign to put Abu Dhabi on the map for travel, trade and tourism.
Other airlines starting Abu Dhabi services last year included Bahrain Air, Elite Aviation, Jat Airlines, Jazeera Airways, Safi Airways, Sun Air and Ukraine International Air, while Air France is expected to launch direct Paris services within months.
The five most popular destinations from the UAE capital were London Heathrow, Bangkok, Doha, Manama and Cairo, while 14 new destinations were added by Etihad and other carriers including Athens, Chicago and Tiruchirappalli in India, ADAC said.
* with additional reporting by Matt Kwong