Sunday, May 9, 2010

AirAsia settles arrears in airport tax to MAHB

06 May 2010

AS of 2009, AirAsia has settled its arrears in airport tax to Malaysia Airports Holdings Bhd (MAHB), said Deputy Transport Minister Datuk Abdul Rahim Bakri.

He told senator Zainun A. Bakar that MAHB would always monitor the situation to ensure there was no arrears in airport tax by AirAsia.

As of March 31 last year, AirAsia owed MAHB about RM132.1mil in airport tax but was given a RM25mil discount by MAHB.

“AirAsia paid RM111.6mil and has settled the arrears,” he said, adding that the incentive given included other charges like parking, landing and office rental.

Zainun had questioned the rationale for AirAsia to enjoy a RM25mil discount when airport taxes were paid by passengers.

She also said that AirAsia should pay MAHB interest on delayed payment.

“If AirAsia brings in 10 million passengers to the country and enjoys a discount, what about MAS? It also brings tourists into the country,” said Zainun.

Abdul Rahim said MAHB and AirAsia had achieved a commercial decision, adding that airport tax was revenue for MAHB.

To another question by Datuk Daljit Singh Dalliwal, Abdul Rahim said the allegation that AirAsia was not given traffic routes requested were untrue.

“Their allegations are untrue. Actually there are 14 routes given by the ministry to AirAsia, and they have not started operating some of these routes such as Manchester, Zurich and Kathmandu,” said Abdul Rahim.

He said the decision to award the traffic routes depended on several things such as load factors, demand for the routes, availability of traffic rights and the effect of the traffic rights on the company requesting it.

Abdul Rahim added that the decision was also based on how the country would benefit from awarding the route.

The Star

AirAsia X backs a clear national aviation policy

06 May 2010

CEO: We also welcome competition on a level playing field

WE welcome the assertion by Tengku Datuk Azmil Zaharuddin, the MD/CEO of MAS, that “Malaysia needs a clear aviation policy – one that offers real choices to consumers and that benefits the country.” (StarBizWeek, May 1 2010, headlined: “To compete and collaborate”.

It is good to know that MAS is willing to join hands with us to work with the Government on delineating such a policy and ensuring free and fair competition on a level playing field (which Tengku Datuk Azmil says MAS welcomes).

The whole idea, of course, is that consumers should gain and Malaysia can benefit from increased tourist arrivals.

Tourism is listed as one of the National Key Economic Areas. And according to a study commissioned by Khazanah Nasional, the Malaysian aviation sector has a multiplier effect of 12 on the national economy.

Hence, a clear aviation policy, overseen by an independent regulator, provides strategic benefits to a nation’s economy as a whole.

It is in this context that we would like to respond to the article by Tengku Datuk Azmil.

There are several specific points he raised that we take issue with and whose accuracy we question, but we will limit our response to the broader issues.

First and foremost, let’s be clear that MAS and AirAsia X (AAX) serve very different market segments.

We are a low-cost carrier (LCC); MAS is a legacy carrier.

Thus, whether the routes we are allowed to operate overlap with those of MAS should not even be an issue.

We serve the underserved; legacy carriers serve the elite (those wanting premium lounges, unlimited servings of food and drinks, etc).

A four-member Malaysian family whose monthly household income is less than RM 3,000 will find it difficult, if not impossible, to travel to, say, Sydney on a legacy carrier at present.

Neither is an Australian family with a similar sort of income going to be able to visit Malaysia.

AirAsia X’s Airbus A330

But those families may be able to do so if they are given the choice of flying on an LCC.

In short, AAX grows the market.

Here are the facts:

1. Markets have grown significantly wherever AirAsia X has been allowed to fly, even when in parallel to MAS.

In 2009, annual passenger volume grew significantly on routes that AirAsia X operates in parallel with MAS: Perth (66%), Melbourne (41%), London (31%) and Taipei (57% - since July 2009).

This contrasts starkly with long-haul routes where we did not fly: Sydney (-20%), Seoul (-13%), New Delhi (-20%), Tokyo (-10%), Osaka (-16%), and Paris (-15%).

Clearly, we have been able to tap new segments and made it possible for new passengers to travel on the routes we operate.

Interestingly, even when Jetstar was allowed to compete with MAS on the KL-Sydney route, passenger volume grew by 22% during the one year they operated, compared to the previous year.

Beyond passenger volumes, inbound tourists have also grown from markets which AirAsia X operates.

Tourism Malaysia data records the following growth in 2009: Australia (+25%), United Kingdom (+17%), China (+7%), and Taiwan (+4%).

In contrast, markets where we have not operated shrank: South Korea (-15%), Japan (-9%).

It is unfortunate that MAS tried to assert that AirAsia X carries mainly transit passengers that do not contribute to Malaysia’s tourism.

They wrongly referred to a statistic that does not measure transit passengers, but passengers that have another flight up to 14 days later.

Many of our passengers who take AirAsia flights to Penang, Pulau Langkawi and Kota Kinabalu are bona fide tourists, as are those that stay in KL for 2-14 days before taking another flight, as part of the growing multi-destination trend brought about by AirAsia’s low regional fares.

In fact, a more robust analysis using like-for-like data sources such as Australia’s passenger arrival data or the PaxIS data quoted by MAS will show that MAS carries a much higher share of transit passengers that arrive from their Australian flights and connect straight to Europe or India – e.g., MAS transit passengers from Melbourne are 67%, Perth 61% and Sydney 59%, compared to AirAsia X carrying 28%-33% transit passengers.

2. The biggest market growth opportunity for Malaysia is from key trunk routes, and not 34 peripheral cities.

With limited valuable aircraft capacity, Malaysia needs to smartly deploy it to the markets with the biggest unserved demand.

Where does Changi have the biggest gains in passenger volumes compared to KLIA?

There are more than double the flights to and from there from cities like Tokyo, Shanghai, Sydney, Beijing and Seoul which results in over 3.2 million more passengers from 5 cities.

In contrast, there is only a net gap of 224,000 from the 34 peripheral cities MAS is suggesting.

Would Malaysians want more flights to Sydney or Jeddah, or would they want Almaty, Tashkent, Ashgabat, Sana’a, Peshawar, Mahe, Port Moresby, Darwin, Pyongyang, Dili, Changsha?

Where is Malaysia realistically going to get the most economic benefit?

MAS itself has withdrawn from several of the cities that it is now suggesting AirAsia X should operate.

Singapore succeeds because it allows competition to thrive.

It is misleading to say Tiger Airways and SIA do not compete, citing a 17% overlap based on SIA’s route network.

Please check Tiger Airways’ IPO prospectus report dated Jan 13, 2010.

They fly to 20 destinations, and compete head-to-head with SIA/SilkAir on 75% of the routes.

They explicitly mention on page 19 that they regard SIA as a significant competitor and neither coordinate routes nor have any commercial cooperation agreements with SIA.

They don’t fly long-haul because they choose not to do so, not because of any policy to discourage overlapping.

Countries like Australia, New Zealand, UK, Taiwan and South Korea all encourage significant route overlaps among all their local airlines.

When we add more flights to Melbourne, more people do indeed choose to fly from KL instead of Singapore or Bangkok.

Here are the 2009 annual passenger growth rates from Australian Immigration data: Melbourne: +47% from KL vs 0% from Singapore and -2% from Bangkok; Perth: +67% from KL, vs -2% from Singapore and -8% from Bangkok.

In contrast, Sydney: -19% from KL, vs -3% from Singapore and -5% from Bangkok.

How many people flew from Malaysia to Sydney in 2008 that did not use MAS? 86,612 according to the authoritative Australian Passenger Arrival card data.

3. We should not be distracted by irrelevant assertions.

MAS makes a big hue and cry about AirAsia X cancelling a service to Abu Dhabi and not flying on some routes where we were granted approvals.

How does MAS itself justify cutting many more routes and not flying to many more cities for which it has approval?

Let’s name just a few: New York, Stockholm, Manchester, Vienna, Zurich, Fukuoka, Nagoya, Cairo, Ahmadebad, Darwin, Xian, Chengdu.

AirAsia X has also invested in starting new routes, including Gold Coast, Tianjin, Hangzhou, and restarted Chengdu.

These are big cities and destinations in their own right.

MAS is being disingenuous in portraying these new routes as the same as flying to Brisbane, Beijing or Shanghai (each of which is at least 100 kilometres away from the above-mentioned airports).

But if MAS insists on claiming they are the same, perhaps MAS would be willing to swap slots and allow us to fly to Brisbane, Beijing or Shanghai instead?

Other factual inaccuracies that need to be corrected: AirAsia X does fly to Tianjin.

We received formal approval for 7x weekly services to Seoul from the Ministry of Transport on April 14, 2010.

We have not received approval for Paris-Orly. We never applied for Male, Maldives.

That was AirAsia Bhd.

Finally, the issue of Rural Air Services is also irrelevant.

The operations by Fly Asian Xpress were fully audited by the National Audit Department and no anomalies or irregularities were found.

FAX did not make any gain as all government funds were used to cover expenses, which incidentally were higher because of (a) higher global fuel prices, (b) higher service charges by MAS engineering services and pilots, and (c) higher aircraft lease rates charged by Penerbangan Malaysia Bhd, MAS’ parent company.

To be utterly frank: Indonesia allows Lion Air to compete with Garuda to fly to Jeddah to give more options for people to perform the haj and umrah; Singapore allows multiple airlines to fly the same routes and achieves success; and Malaysia has no issue with foreign-owned airlines such as Jetstar and Emirates operating the same routes as MAS to Australia.

So, why is MAS creating a furore over a Malaysian-owned airline, AirAsia X, flying to Sydney?

Yes, AirAsia X is aggressive and outspoken.

That’s because we are deeply passionate about what we do: growing the travel and tourism industry, innovating and breaking down barriers to make it more affordable for everyone to fly.

The data and evidence conclusively prove the benefits to the Malaysian economy and to consumers of allowing competition – not just in aviation but in any industry.

Yes, we will become a “co-pilot” and fly to Sydney and Jeddah together with MAS. And together we will help boost the Malaysian economy.

The writer is the chief executive officer of AirAsia X.

The Star

Melaka Wants Direct Flights To Kuching And Kota Kinabalu

04 May 2010

KUCHING-- Melaka wants low-cost carrier AirAsia to introduce direct flights from the Melaka International Airport (MIA) to Kuching and Kota Kinabalu to boost joint capacity in the tourism sector.

Melaka Chief Minister Datuk Seri Mohd Ali Rustam said the proposal for the direct flights was made to AirAsia chief executive officer (CEO) Datuk Seri Tony Fernandes last year and the airline was now in the process of reviewing its domestic routes.

"I hope there will be at least one direct flight each week to the two destinations. For example, the direct flight departs in the morning and returns in the afternoon or the next day," he told reporters after handing out an official invitation to attend the 13th Malaysia Games (Sukma) to be held in Melaka from June 10 to 19 to Sarawak Chief Minister Tan Sri Abdul Taib Mahmud at Wisma Bapa Malaysia, here Tuesday.

Mohd Ali said AirAsia had the capability to provide the direct flights as the MIA now had the capacity to receive the Boeing 737 and Airbus 320 aircraft.

He said Melaka was also keen to develop the education sector with Sarawak in view of the great potential which could be exploited jointly.


AirAsia hopes to start ops from new terminal

04 May 2010

SEPANG: The eight-year dispute between AirAsia Bhd and Malaysia Airports Holdings Bhd (MAHB) over several issues, including the design and facilities for the new permanent low-cost carrier terminal (PLCCT), has finally been resolved but not without the Prime Minister’s intervention. The carrier hopes to begin operations from the new terminal by March 2012.

This is a major milestone for the aviation industry and means the better cooperation between the two parties could help turn KL International Airport (KLIA) into a more vibrant airport, one that is able to challenge both Singapore’s Changi and Bangkok’s Suvarnabhumi.

“Under this new partnership, both AirAsia and MAHB are committed to working closely to help boost the country’s tourism revenue and the larger economy, thus placing the needs of the nation over lesser parochial interests,’’ AirAsia said in a statement.

Even the slight delay in the completion of the new PLCCT doesn’t matter to AirAsia now, as it is content to move anytime between September 2011 and March 2012. The original timeline for the completion of the PLCCT was the third quarter of 2011.

»Over the last eight years, there have been many battles but the big battle has ended« DATUK SERI TONY FERNANDES

The impact of the delay will be minimal as MAHB will undertake some upgrading works to the existing LCCT to ensure the carrier is able to stay on a little longer than expected to cater to its growing traffic volumes.

The existing LCCT can cater to 15 million passengers, while the new terminal, located near the KLIA, will be able to handle 30 million passengers. MAHB plans to raise RM2bil to RM2.5bil to develop the PLCCT, for which clearing works have started.

AirAsia group chief executive officer Datuk Seri Tony Fernandes caught many by surprise when he said at a press conference yesterday that the long-standing dispute with MAHB had been resolved and that the airline was now able to chart its future 10-year growth path.

As part of its expansion strategy, AirAsia will add Maldives to its route map over the next few months and reinstate flights to Hatyai, Palembang, Balik Papan because it is getting additional parking bays for its aircraft at the LCCT.

“Over the last eight years, there have been many battles but the big battle has ended and we are happy that all the issues have been resolved.

“We both compromised for the benefit of the country. We want to thank the PM for his intervention and Tan Sri Bashir Ahmad (MAHB managing director) made a big impact in trying to resolve our issues,’’ Fernandes said.

Asked if AirAsia had paid its dues to MAHB, Fernandes said: “We have been paying them regularly.’’

The dispute surrounds operational issues to design and facilities. MAHB has agreed to improve signages at the LCCT; add 1,333 carparks to bring the total to 2,707; realign the roads for better traffic flow; provide covered pedestrian walkways; and provide eight more A320 parking bays.

As for the new terminal, AirAsia will get 76 aircraft parking bays; its headquarters will be located at the terminal building; there will be support zones for its engineering, cargo and inflight complexs; and its inputs are incorporated for the semi-automatic baggage handling system and the design and allocation for check-in counters.

Asked if aerobridges were an option, Fernandes said: “We will look into it if it does not burn into our cost as it is all about dollars and cents.’’

Whatever the cost, he does not expect “fares to go up and it is not in our DNA to raise fares.’’

Fernandes also could not say if there will be a rail link. And although there is a plan to link the ERL from KLIA to the new airport, he could not confirm this. But he encourages KTMB to link the airport as then there will be a rail link for those living in the East Coast.

MAHB, when contacted for comments, said it would make an announcement later.

When asked to comment on Malaysia Airlines’ claim that the network of AirAsia overlaps 90% of MAS’s, Fernandes said: “Azran Osman-Rani, our CEO of AirAsia X, will handle deal that. But do you think so?

“(To me) it is 30%–40% overlap, so the claim (by MAS) is incorrect. Do you say Tianjin is next to Beijing when the distance is so far away; it is just like saying Singapore and KL are in the same place.’’

He confirmed that AirAsia X has received the letter from the Government, stating the airline has the rights to fly into Seoul. He, however, declined to comment on the status of AirAsia X’s request for flights into Sydney.

By B.K.Sidhu

The Star

MAS and AirAsia X should co-pilot efforts to achieve nation’s aspirations

01 May 2010

AIRASIA X has been lobbying its cause aggressively in the media locally and abroad to fly to destinations operated by Malaysia Airlines (MAS).

On the surface, its argument appears logical: Open up Sydney, Seoul, etc., as that is best for the country.

There are two sides to any argument and I would like to take this opportunity to put forward the MAS point of view.

A bit of history: Under the domestic rationalisation exercise in March 2006, MAS was asked to give up the operations of the rural areas in Sabah/Sarawak and hand them over to AirAsia Bhd.

MAS was awarded 19 trunk routes to operate and AirAsia was granted both the trunk and non-trunk routes (about 96 routes). AirAsia subcontracted non-trunk routes to its wholly-owned subsidiary, Fly Asian Xpress Sdn Bhd (FAX).

FAX operated the service from September 2006 to September 2007. There were countless complaints about the unreliability of its services which severely and negatively impacted communities, tourism and businesses in Sabah and Sarawak.

The Government asked MAS to take back the rural air services and MAS’s wholly-owned subsdiary, MASwings, took over on Oct 1, 2007. During that one year of FAX’s operation, it was paid more than double what MASwings received for the same scope of services over the past two years.

FAX was subsequently renamed AirAsia X.

In just some three years of operations after dumping the rural air services, AirAsia X has obtained rights for nine routes: London, Melbourne, Perth, Brisbane, Mumbai, New Delhi, Taipei, Beijing and Shanghai.

The MAS-AirAsia X rivalry can be addressed by having a clear aviation policy that offers real choices to consumers and ensures that all local airlines are given equal treatment.

Flight rights and hubs

Recently, AirAsia X announced it has been given rights to fly to Seoul. But to date, there has been no Government announcement. AirAsia X was recently also granted the rights to fly to Male and the rights were transferred to AirAsia.

Excluding the rights to fly to Seoul and Male – assuming this is official – 90% of AirAsia X’s routes overlap with those operated by MAS. On the other hand, only 17% of Tiger, Singapore Airlines (SIA) and SilkAir’s routes overlap.

We will stand up and be counted. Yes, MAS lobbies the Government. So do AirAsia and AirAsia X. As an airline, we have transformed and we are fighting for our rights, as are AirAsia and AirAsia X.

Let me outline our viewpoints and why we stand behind the facts – not blind accusations – that we presented to the Government:

What makes Suvarnabhumi and Changi great hubs is that these airports provide customers with many destination choices.

Some 93 airlines operate out of Suvarnabhumi to over 187 cities in 71 countries. About 85 carriers operate from Changi to more than 200 cities in 60 countries.

On the other hand, some 50 airlines operate from KL International Airport (KLIA) to 100 cities in 44 countries.

What makes Changi a good hub is the number of destinations it offers. This gives consumers greater choice. For example, someone who wants to fly to Moscow has to go via Changi as there are no airlines flying to Moscow directly from KLIA.

If someone from Melbourne wants to fly to Moscow, he is likely to go via, say Changi, and not KLIA. AirAsia X can fly 10 times a day to Melbourne and this passenger is still more likely to use Changi.

If AirAsia X is serious about providing customers “with choices”, it should fly to new destinations. There are 34 or more new destinations that currently do not have direct flights from KL. All these destinations are within the range of AirAsia X’s A330-300s.

AirAsia X has been lobbying the Malaysian Government saying that it deserves to get the rights to fly to any destination because it has bought so many aircraft.

Yet, it is not willing to consider any of these 34 cities because it claims that these cities do not make economic sense.

Amongst the 34 are Fukuoka and Nagoya in Japan, and Chongqing in China. All these routes are operated by both SIA and Cathay Pacific. SIA also operates to Ahmadabad in India and Cairo in Egypt.

One of the destinations which the Transport Ministry lists as being granted to AirAsia X is Paris/Orly. Interestingly, AirAsia X CEO Azran Osman-Rani told MalaysianInsider in an interview dated April 28, 2010: “It (the rights) has yet to land on my desk. Until it does, we cannot initiate detailed plans”.

If AirAsia X’s argument is that it does not have planes or the correct aircraft, note that it has two A340s, each of which has a 12-hour flying range. It can also operate the A330s with one stop in the Middle East.

In addition, AirAsia X has applied for and been granted the rights to fly to many cities which it is not exercising. These cities include Amritsar, Cheongju, Pusan, Tianjin, Xian, Bahrain, Sharjah, Berlin, Manchester, Dublin, Vienna and Moscow.

AirAsia X is not keen to operate to these new destinations as it is well aware that it takes years of investment to make a route profitable.

Case in point is Abu Dhabi. SIA flies to Abu Dhabi. Yet, AirAsia X pulled out from Abu Dhabi after just three months in operation, citing that the route is not profitable.

When MAS flies to a new route, we are likely to incur losses in the first year up to the first five years as we spend money to develop awareness in the new destination and expand the market. This is an investment we are prepared to make, as short-term losses can result in long-term profits. In the long run, it is good for the country and gives consumers more choice.

For example, for the past 20 years, we invested tens of millions (of ringgit). Even today, we invest some RM100mil annually in marketing costs alone in Australia.

If AirAsia X is really serious about “choices for the people”, it will fly to destinations where it has the rights to. But the reality is that AirAsia X is only interested in MAS’ routes. Is this then in the best interest of the country?

For the record, we have been competing with various global, full service carriers for the past 60 years and competition is not new to MAS. We welcome competition as it means that we have to constantly transform ourselves – which is what we have been doing intensely in the past four years.

Passenger numbers

Let us also set the record straight on the information that AirAsia X has been providing to the media to support its claim to fly to Sydney and Seoul.

Azran claimed in the same interview that “some 80,000 Malaysians were flying to Sydney indirect.”

PaxIS (passenger intelligence services) data (collated by the International Air Transport Association), which captures all full service airline transactions, shows that in 2009, only 2,848 passengers travelled from KL to Sydney via Singapore. In 2010, the number is reduced to only 2,359. It would be good if AirAsia X can substantiate its allegations.

For Seoul, Azran claimed: “We should see a reversal of the trend of negative growth in 2009 to a positive growth in 2011” on the assumption that AirAsia X were to fly to Seoul.

For the first three months of 2010, tourist arrivals from South Korea grew by 26% compared with the same period in 2009. MAS’ passenger growth was up 48%. The trend is already strongly positive.

Both MAS and AirAsia X bring in tourists to the country. Tourism studies indicate that there is a 12 times multiplier effect to the country.

This year, we expect to fly in 5.5 million passengers. We expect this to generate some RM12.7bil of tourism dollars for the country.

However, most of AirAsia X’s passengers are in transit. For example, AirAsia X has said that 80% of its Australian passengers on AirAsia X self-connect to other destinations after arriving in KL.

In other words, while AirAsia X increases traffic into the country, most of their passengers transit in KL to other destinations. Although this makes the arrivals figures look higher, these passengers may not spend much money in Malaysia. This means less economic value to the country.

However, if AirAsia X operates to new destinations and invests in promoting Malaysia, it will go a long way to attract tourists from different countries and boost tourism in Malaysia.

In July 2008, when we met the Transport Minister, we proposed a clear framework for the aviation sector.

This framework will involve airlines, airports as well as a range of services to airlines and airports, MRO (maintenance, repair and operation) and catering. The sector contributes about 4% to Malaysia’s gross domestic product. Beyond its direct contributions to the economy, the aviation sector is a key enabler of tourism and commerce.

It is never too late to start. Malaysia needs a clear aviation policy – one that offers real choices to consumers and that benefits the country. It must be a long-term, comprehensive and impartial policy that will ensure that the country and rakyat takes precedence.

One that will ensure that KLIA becomes a regional hub, on par with Changi and Suvarnabhumi and that all local airlines – MAS, Firefly, AirAsia and AirAsia X – are given equal treatment, with consideration given to what is best for the country.

At the time we made the proposal, AirAsia was not advocating this. I am glad that it now thinks that this is a good idea.

The winner should not be the one who shouts the loudest in the media. Nor lobby the hardest. We need to learn to compete and collaborate, and work with the Government to achieve the nation’s aspirations.

Tengku Datuk Azmil Zahruddin (managing director/CEO of MAS)

The Star