Thursday, January 7, 2010

Jetstar and AirAsia form cost-based alliance, pressure on Airbus/Boeing for new narrowbodies

06 January 2010

JetStar and AirAsia are claiming a world-first in the establishment of their new alliance centred on cost reduction and the pooling of expertise that aims to deliver cheaper fares for passengers of both carriers. The core of the agreement is a “proposed joint specification for the next generation of narrow body aircraft, that will best meet the needs of the low fare customer of the future”. Both airline groups will also investigate opportunities for the joint procurement of aircraft, adding “in coming years Jetstar and AirAsia want to work with manufacturers on the next generation aircraft to ensure it best meets our business requirements”.

Boeing and Airbus on notice to deliver new narrowbodies

The alliance is expected to intensify pressure on leading manufacturers, including Boeing and Airbus to move more quickly on next-generation narrowbody types, to replace their B737 and A320 offerings. The current timeframe sees replacements well after 2020, although there is a push for new generation engines to be installed on the current narrowbody airframes to improve efficiency within the next four to six years, depending on engine certification. Airbus and Boeing have been focused over the past two decades in enhancing their widebody offerings.

Asia Pacific LCCs are expected to play an increasingly dominant role in regional aviation over the next decade and already have significant order books for new aircraft. This is giving them a stronger voice in aviation matters ranging from government policy through to supplies of equipment, including aircraft and parts. The development of a coalition between two of the region's leading LCCs will only strengthen this position, increasing their leverage and influence over suppliers and driving the changes the airlines need to grow their presence and lower costs.

Qanta CEO, Alan Joyce, stated the announcement “breaks the mould of traditional airline alliances and establishes a new model for achieving reduced costs and increased efficiency".

The agreement includes the development of cooperation in areas such as:

  • Future fleet specification – both carriers will investigate opportunities for joint procurement of the next generation of narrow body aircraft. A collective goal is to achieve cost reductions in terms of order volume and influencing design specification to deliver more efficient, low cost operations;
  • Airport passenger and ramp handling services – developing cooperative arrangements for the provision of passenger and ground handling in Australia and within Asia at overlapping airports by leveraging scale;
  • Shared aircraft parts and ‘pooling’ – pooling inventory arrangements for aircraft components and spare parts;
  • Procurement – Joint procurement, with a focus on engineering and maintenance supplies and services, with Jetstar maintaining its existing use of and commitment to Australian facilities; and
  • Passenger disruption arrangements – reciprocal arrangements for passenger management (i.e. support for passenger disruptions and recovery onto the other airline’s service) across both the AirAsia and Jetstar flying networks.

The (non-equity) alliance does not cover aircraft maintenance services or revenue generating activities, such as codesharing and other marketing tie-ups at this stage. However, it is expected the alliance could evolve over time to include more areas of cooperation.

Costs must be cut further, as oil rises, yields fall

The alliance is acknowledgment by Jetstar and AirAsia that fuel prices are likely to stay high for the foreseeable future - making sustainable cost reduction strategies all the more urgent. During last year's oil price peak, AirAsia's oil prices spiraled to represent 67% of total operating costs (in the Jul-Sep-2008 quarter).

The alliance also puts rival full service carriers on notice that low fare competition in the Asia Pacific is here to stay and will only intensify on short-haul routes in the future. This will put additional long-term pressure on yields that have been slashed over the past 18 months amid the global economic crisis.

Jetstar Chief Executive Officer, Bruce Buchanan, stated that while Jetstar is reducing its controllable costs by up to 5% annually, the agreement with AirAsia will “enable a further step-change in our cost position and ensure sustainable low fares”.

AirAsia Group CEO Datuk Seri Tony Fernandes hailed the agreement as another step in the airline’s strategy to maintain its global leadership as the lowest-cost airline operator. Mr Fernandes added, “with joint purchasing power it means that we can potentially work with airline manufacturers on the right configuration and design of an aircraft specifically for AirAsia and that best suits our operational needs for the future”.

The alliance comes as rival tiger airways launches its investor roadshow for its planned IPO in Singapore later this month.

Center for Asia Pacific Aviation

WEST HAM: Air Asia tycoon to make bid for club

04 January 2010

WEST HAM will have another takeover bid to contend with after Air Asia boss Tony Fernandes claimed he will make a move for the troubled Upton Park club.

Fernandes, a keen Hammers fan, told the Sun: “Soon West Ham fans will have an owner who can make a difference and who cares.”

The tycoon is expected to make an official offer soon, although he is likely to face competition from two other interested parties.

London-based financial company Intermarket are believed to have submitted an offer – believed to be in the region of £100m - to Rothschilds, who have been appointed by West Ham's owners, CB Holding, to handle any bids.

Former Birmingham City owners David Gold and David Sullivan are also understood to have lodged an offer for the club, reported to be around £50m for a 50 per cent stake in the club.

Troubled Icelandic bank Straumur, which owns 70 per cent of West Ham, were granted a moratorium on their debts until September this year; a decision which has bought them time and has alleviated the pressure to make a quick sale.

Guardian Series

Tuesday, January 5, 2010

What CEOs wish for

02 January 2009

Leading names in corporate Malaysia share their hopes and aspirations for 2010.

Datuk Seri Tony Fernandes
AirAsia Bhd group CEO/team principal of Malaysia Team Lotus F1

I HOPE the airport industry will be deregulated this year to allow the entry of more entrepreneurs and foreign investors as has been done in the power, banking, telecoms, ports and road sectors. This will create a dynamic industry that has lower costs and will make Malaysia even more competitive regionally.

Industries in which government-linked companies and entrepreneurs compete should have fair and effective regulators like Bank Negara.

This year, I also hope that AirAsia really gets to make Malaysia the hub that drives more passengers from all points. There are many routes which we hope to fly to in 2010 and all routes that we have flown to we normally grow the market. There has not been a single route which were entered where the market has not grown. I hope to see all Malaysians get behind F1. It would be great to see a sell-out crowd in Sepang.

I wish that Asean leaders will really move from a political institution to a more economic and cultural institution because Asean is a huge economic force. It has mostly focused on politics but a shift is needed to turn its attention to the business side.

I promise to fly all Sikhs to Amritsar in 2010. We want to launch the flight and reunite the Sikhs in Asean and take them to the Golden Temple. That’s my promise.

Compiled by Yap Leng Kuen, Anita Gabriel and B.K.Sidhu

The Star

Telling The Futures

02 January 2010

MAS and AirAsia open up about travel trends and what they are doing to jazz up the market.

To get a better insight into travel trends, Malaysia’s two major airlines agreed to share information regarding the preferences of their customers.

Malaysia Airlines (MAS) senior general manager, network & revenue management Dr Amin Khan says that the company’s focus in 2009 was to stimulate demand for travel by creating innovative fare promotions.

Their aggressive campaigns paid off with MAS registering 3.3 million passengers in the third quarter of 2009, the highest number since early 2008. Dr Amin further revealed that customers opted to travel within Malaysia and the region in the first nine months of 2009 due to the economic downturn.

Malaysia Airlines and Air Asia expect a pick-up in travel next year and are wooing travellers through their online portals. — AFP PHOTO

“We increased domestic capacity by 10% to cope with the demand, adding frequencies to popular destinations such as Bali, Seoul, Taipei, Maldives and Colombo.”

During the school holidays, Malaysians flew to cities like Brisbane, Sydney, Tokyo and Shanghai, all of which are within nine hours of flight time. On the other hand, passengers from Europe, UK and Australia were travelling to destinations beyond the nine-hour range.

Long haul travels increased in the last three months with the top three popular destinations being London, Melbourne and Hong Kong.

“People have been staying home for a while now, and of late, we have been seeing a lot of pent-up demand for travel,” says Dr Amin.

Since moving to an online travel portal, MAS has enjoyed a steady increase in bookings through MASholidays (, reflecting a major shift in consumer behaviour where they now purchase holiday packages online without a travel consultant to guide them.

“The DIY option for MASholidays is easily done online whereby customers can choose what they want, from air tickets, hotel, transfers to tour packages. This demonstrates that customers are more knowledgeable and more confident of the security aspect of online transactions. That’s why big ticket item purchases such as long haul and extended duration holidays which have a higher than average selling price have not deterred customers from transacting online,” says Dr Amin.

MAS expects the domestic and regional destinations to be popular, and the long-haul demand to pick up if the economic recovery is sustainable.

“We are continuously working on offering new and better services. We have just launched which allows travellers to book, pay, check-in and fly with us via the mobile phone. Travellers can also check for the best fares, addresses and locations of MAS’s offices globally and share their travel itinerary with friends,” says Dr Amin.

Dr Amin Khan.

In terms of new routes, MAS will offer two new weekly non-stop flights from Kuala Lumpur to Brisbane come March 2010. They are also looking at key regions such as Asia Pacific, China, India and the Middle East where growth is more robust.

Meanwhile, AirAsia was unable to provide their statistics as a group but gave an idea on the buying trends of their GO Holiday (travel portal) customers instead. Darren Goh, head of Go Holiday (commercial) revealed that domestic travel increased for 2009, especially to Langkawi and Sabah and Sarawak.

Their largest outbound is still Thailand and Indonesia with strong showing for Hong Kong and Macau. Inbound top markets come from Singapore, Indonesia, Thailand and Australia, with Taiwan and China fast emerging.

Goh says that their customers usually travel in small groups of four and below, taking an average trip of 3.3 days throughout the year and 4.5 days for year-end holidays. The trend is to take frequent short breaks.

GO Holiday customers are usually in the 24-45 age group comprising professionals, independent travellers and couples. Around 60% purchase flight and hotel, 25% just hotel and 15% purchase the whole package.

To attract more customers, GO Holiday is launching a new website ( this month featuring special interest tours like spa, golf, wellness and honeymoon and special project products like EPL and motorsports.

“Travellers are becoming more discerning, and it is very hard to find online travel agents that can bundle all the components at value rates. Travel based on activities are on the rise and product differentiation is the key for survival,” says Goh.

Goh expects their load factor to soar next year with the inclusion of new routes to India and added frequency to some of their hot destinations. They are targeting online customers, travellers who previously booked from traditional travel agents and those looking for niche tours.

“Our flight and hotel packages will still be the key driver with more focus on local chains, boutique and new hotels and resorts. We are confident in increasing our customer growth with our new booking engine,” says Goh.

Stories by Joleen LunJew

The Star

Family spends seven hours on plane

01 January 2010

A SUNSHINE Coast family who spent seven hours stranded on a plane on the tarmac at Brisbane Airport has likened the experience to being held ransom by terrorists.

Ron Pratt, his wife Marina and their son Jaymin, 11, had to endure the agonising wait with only rations of food and water.

The ordeal began when their AirAsia X flight left Kuala Lumpur on December 28 at 7.40pm Queensland time and flew into the Gold Coast at 7.50am in wet weather.

Visibility was so poor the aircraft was forced to divert to Brisbane for the first time in the two years that AirAsia X has been operating into Gold Coast.

Several hours later, after refuelling in Brisbane and being advised by air traffic control weather had cleared, the flight took off for the Gold Coast.

However, on approach, the weather took a turn for the worse, leading to four failed landing attempts.

The flight was diverted back to Brisbane for refuelling again.

Delays were further experienced in Brisbane the second time due to congestion at the airport.

At this time passengers were given the option to disembark, but were told AirAsia X did not have either the resources or time to offload baggage.

Concerned about their luggage, the Pratt’s stayed onboard.

During the third approach into the Gold Coast, the weather had again deteriorated, but with some openings through the clouds, the captain performed a safe landing just after 4pm.

“We do not hold AirAsia to be irresponsible professionally in any way for the conduct of the flight,” Mr Pratt said. “What we don’t understand is how or why more than 300 passengers could be held at ransom like we’re hostages?

“One irate Australian passenger trying to leave was tackled, handcuffed and led away by airport police.”

AirAsia sent an email out to the passengers of the flight apologising.

“We truly apologise for the discomfort you faced,” it read.

“Rest assured, we(’re) looking into improving our service recovery process to reduce discomfort to our valued guests at times like this.

“Kindly note that passenger safety is of paramount importance to us.

“We apologise that you were kept onboard throughout the seven hour-plus ordeal.”

Bianca Clare

Sunshine Coast Daily

AirAsia optimistic about 2010; Ryanair’s airport battles continue

31 December 2009

AirAsia’s shares declined 2.2% yesterday, with the carrier’s CEO, Tony Fernandes, in an interview with today's Business Times, stating the LCC is optimistic about the airline’s prospects for next year, with forward bookings “looking good” for Jan/Feb-2010.

Ryanair’s shares dropped 3.8%, on continued speculation that the carrier will make a third takeover bid for Aer Lingus, and as the dispute widens with the Italian Civil Aviation regulator.

Also in Europe, Vueling gained 3.6%, with easyJet down 2.1% and Air Berlin’s shares slightly weaker (down 0.3%).

In the US, Southwest’s shares remained stable, with JetBlue slightly weaker (down 0.5%) and AirTran up slightly (0.8%).

Selected LCCs daily share price movements (% change): 30-Dec-2009

CEO: AirAsia ends 2010 with record sales

31 December 2009

PETALING JAYA: AirAsia finished the last month of 2009 with “record sales” while forward bookings for the first two months of 2010 are looking very strong, said its group chief executive officer Datuk Seri Tony Fernandes.

“We cannot reveal our fourth quarter financial numbers yet but from a sales point, we have had record sales for December and it has been the best month ever in the history of the airline in all the three countries (Malaysia, Indonesia and Thailand) that we operate in.

“January sales are better than what we have seen before and sales in February, with the Chinese New Year (coming), are looking very strong,’’ Fernandes told StarBiz yesterday.

December is traditionally a strong month for AirAsia.

Traditionally, December is a strong month for AirAsia and most other airlines.

At the end of today, the budget airline would have carried a total of 24 million passengers, and when combined with its sister airline AirAsia X, the total is over 25 million.

“That makes us one of the larger airlines in the region,’’ he said.

Maybank Investment Bank Bhd has forecast RM160mil in net profit for AirAsia for the last quarter of 2009 while consensus estimates by analysts compiled by Bloomberg indicate RM77.4mil.

For full-year net profit, the Bloomberg consensus estimate is RM500mil while Maybank Investment’s forecast is higher at RM580mil.

“We expect them to perform very well in the fourth quarter and this may not be (reflected) in the consensus estimates.

“But if you stick to the fundamentals of crude oil (pricing) and historical trend of passenger (loads) for AirAsia, we expect the airline to post a very strong fourth quarter,’’ Maybank Investment Bank senior analyst Khair Mirza said.

While other airlines were struggling through the economic downturn, AirAsia pushed ahead and expanded, strengthening its network and the “investment is now paying off as the economy recovers,’’ Fernandes said.

He added that “the real joy for me is to see AirAsia Thailand and AirAsia Indonesia both experiencing a strong turnaround’’.

Fernandes is bullish on 2010, saying it will be a “very promising year for us’’.

The airline’s operational cost is the lowest in the world while its flexible fare pricing allows it to deal with any fuel shocks. And as its routes mature, it is in a position to raise fares.

Fares will certainly go up as the economic recovery lifts demand for air travel. “Even a RM10 rise in airfares will be good for us as we fly more than 25 million passengers a year,’’ Fernandes said.

“We have a strong balance sheet, our cash is growing and all our airplanes for next year have been financed, so that is why we say 2010 could be an even better year for us.

“Even the contribution in passenger loads and profits from our Indonesian and Thai operations will be much in 2010,’’ he added.

Fernandes also expects AirAsia X to break even this year, with the airline increasing frequencies to existing destinations and ply new routes such as New Delhi, Mumbai and Paris.

But the US is certainly not on its radar screen for 2010.

“We are also modifying the seats for AirAsia X as we now have another supplier for the seats and this will make the planes more comfortable,’’ he said.

Industry-wise, he reckons that the “bottom has arrived and while we did well at the bottom, the economic recovery will be great for us’’.

Meanwhile, AirAsia will fly to Balik Papan and other routes in Indonesia, along with Hyderabad and Bangalore next year.

“Whatever skeptics have said over the past eight years, we will say we are in a good position now as all our investments made in terms of airplanes, people and branding are beginning to pay off,’’ Fernandes said.

By B.K.Sidhu

The Star

CEO: AirAsia ends 2010 with record sales

31 December 2009

PETALING JAYA: The proposed partnership between AirAsia Bhd and Jetstar is nearing fruition after a year of talks and the deal will be announced in the first week of January.

A media conference has been scheduled for Jan 6 in Sydney where both parties and Qantas will announce the details of a strategic agreement and how these parties will work “innovatively together’’ so as to drive greater cost efficiencies across AirAsia and Jetstar.

Datuk Seri Tony Fernandes and Jetstar CEO Bruce Buchanan will present the details on Jan 6.

AirAsia group chief executive officer Datuk Seri Tony Fernandes and Jetstar CEO Bruce Buchanan will be at hand to present the details. Jetstar’s parent, Qantas, will be represented by its CEO Alan Joyce.

AirAsia is Asia’s largest low-cost carrier whose unit cost is the lowest in the world. It flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia. Its sister airline is AirAsia X which began flights to Australia in 2007 and has expanded to China, Britain and the Middle East.

The Jetstar group includes wholly-owned Qantas subsidiaries operating from Australia and New Zealand, partner carriers including Jetstar Asia and Valuair in Singapore and Jetstar Pacific in Vietnam. Jetstar Asia/Valuair is 51% owned by Westbrook Investments Pte Ltd and 49% owned by Qantas, which in turn has a 27% stake in Jetstar Pacific in Vietnam. The Jetstar group operates 1,900 weekly flights to 15 countries.

“Cost efficiencies is only one of the many things this new partnership will bring about,’’ said a source.

StarBiz was the first to report on a proposed partnership on Dec 23 last year. Then, both parties including Qantas had started preliminary talks for a proposed merger. The parties had met several times over the year and even conducted some audit work.

How the eventual partnership will pan out is unclear, but given the challenges the aviation industry faces, partnerships and mergers are not new and if parties can pool resources for greater efficienies, it helps airlines in difficult times.

AirAsia boss Fernandes, when contacted yesterday, did not want to shed any light on the partnership. Will this deal involve any codeshare arrangements between the two airlines?

Codeshare is a prominent feature with full service carriers and if low cost carriers can see some benefit from sharing of flights, then they may be setting new grounds.

An analyst, however, has a contrarian view. He said: “It goes against the (low cost) airlines’ rule of keeping it simple in the no-frills business to codeshare but a lot depends on the intention of the airlines.’’

One route that may be shared is the KL-Sydney sector which AirAsia has failed thus far to get rights to ply. Jetstar, even though it has stopped plying the route since September 2008, has the rights. Will that rights be shared by AirAsia?

The Kangaroo route (from any Australian point to KL and on to Europe) is a possible route that these airlines will capitalise on and with the partnership, AirAsia will be able to offer connectivity all over Australia via Jetstar Australia and it can take Jetstar’s passengers to Europe, India and the Middle East where Jetstar is not flying.

By B.K.Sidhu

The Star

AirAsia incorporates wholly-owned subsidiary in the UK

30 December 2009

AirAsia Berhad (AirAsia or the Company) is pleased to announce that it has incorporated a wholly-owned subsidiary in United Kingdom known as Asia Air Limited (AAL) (the Transaction) with its registered office situated at 41, Chalton Street, London, NW1 1JD. The objective of establishing AAL is to facilitate business transaction of AirAsia Group.

Information on AAL

AAL is a limited liability company and it was incorporated on 21st December 2009. The issued and paid-up capital of AAL is GBP1.00 only comprising one ordinary share of GBP1.00 each.

Financial effects of the Transaction.
The Transaction is not expected to have any material effect on the earnings and net tangible assets of the AirAsia Group for the financial year ending 31 December, 2009.

Directors' and/or Substantial Shareholders' and/or Persons Connected with Directors or Substantial Shareholder' Interest.

To the best of the knowledge of the Company, none of the Directors or Substantial Shareholders of the Company and/or persons connected to them has any interest, directly or indirectly, in the above Transaction.

Peanuts Online