AirAsia sees strong passenger load

30 October 2009

Group CEO says carrier is ‘not yield driven but volume driven’

PETALING JAYA: AirAsia Bhd, which has steadfastly widened its reach to new markets even as the financial crisis was unfolding, expects its passenger load factor to remain robust next year, according to group chief executive officer Datuk Seri Tony Fernandes.

“Our business is great. Our passenger numbers are up even during the puasa (fasting) month. Ancillary incomes are coming up very fast and we’re getting rights to many destinations,” Fernandes told StarBiz.

AirAsia’s load factor stood at 75% in the second quarter ended June 30. He said given the green shoots of economic recovery, yields were likely to improve and that things were not as gloomy as they were a year ago.

As such, “we are in a better position” now. However, he pointed out that the airline was “not yield driven but volume driven. That’s the key to a low-cost carrier (LCC).”

Datuk Seri Tony Fernandes ... ‘Ancillary incomes are coming up very fast and we’re getting rights to many destinations.’ - Filepic

In keeping with its aggressive route expansion, Fernandes said by year-end, AirAsia would add seven more routes to India.

It currently flies to four Indian destinations – Kolkata, Kochi, Tiruchirappalli and Trivandrum. It would continue its expansion mode next year as well, he said.

The carrier has deferred taking delivery of a third – or 16 of 48 – aircraft originally scheduled for 2010 and 2011 due to doubts over the timely completion of the new LCC terminal.

On whether this move might limit the airline’s capacity to tap the opportunities if there was a strong uptick in demand for air travel, he said it would be highly unlikely.

“We’ve got 82 planes! And we’re still getting deliveries. But if that’s the case, then it will just push our yields up.”

In a filing to Bursa Malaysia yesterday, AirAsia said it did not have to pay any penalty for the revision of delivery dates for eight Airbus A320 aircraft, initially scheduled for delivery in 2011 to 2014 and 2015.

The deferment is because it “foresees infrastructural constraints with the current airport facilities” and needs to “optimise its fleet and avoid the costs associated with leaving idle or under-utilised aircraft” due to such limitations.

The carrier had signed an amendment agreement with Airbus SAS for the revision. Under a purchase agreement signed in 2005 and a number of amendment agreements, AirAsia had agreed to a firm order of 175 Airbus A320 aircraft.

AirAsia said the original number of deliveries in 2014 would be increased from 18 aircraft to 24 whereas, in 2015, the company would take delivery of two aircraft as opposed to none from before.

AirAsia had much earlier unwound its fuel hedges, a stance Fernandes said the airline would continue to adopt for a while, even as crude oil prices might rise next year on the back of an economic recovery.

“Even if it (oil price) reaches US$100 per barrel we’re ready for it. We are okay at the moment,” he said, pointing out that the budget carrier had overcome the turbulence even when oil prices skyrocketed to a high of US$150 a barrel.

Over the last two weeks, crude oil had been trading around US$79 a barrel, touching a high of US$81.37 last Wednesday.

“Fuel price is a fake price. Eventually it (price) will settle on real demand,” Fernandes said, adding that it was also painful to hedge sometimes, especially given the high volatility of oil prices.

As such, he said that although AirAsia might remain “naked” or unhedged, it might hedge some fuel requirement over three- to 12-month contracts.

Although there were green shoots of recovery, the economy still remained fragile, he said.

Last year, fuel prices fell sharply from US$145.29 a barrel in July to a low of US$33.87 in December. AirAsia had unwound huge hedging contracts in the third quarter last year that led it to post its first quarterly loss of RM465.5mil since its listing in 2004.

Since then, AirAsia has not got into new hedges. In any case, Fernandes said, fuel hedging only offered short-term benefits. “What we have to do is to build a sustainable business.”

Spring Airlines keen to work with AirAsia X

30 October 2009

But the latter does not see any chemistry between them

BEIJING: China’s No.1 privately-owned budget carrier Spring Airlines wants to work with AirAsia X but the latter does not see any chemistry between them.

Spring Airlines chairman Wang Zhenghua could not hide his disappointment that he could not meet the AirAsia X boss even once.

“If I put it in a not so nice manner, they seem evasive. We invited them for a meeting and tried to see them. But, every time we tried to meet, they did not want to see us,” he told reporters at the Aviation Outlook Asia conference here on Wednesday.

»Spring Airlines needs to understand we are not interested in interlining code-sharing of flights« AZRAN OSMAN-RANI

Wang said his company really wanted to collaborate with the Malaysian carrier and share flight resources. He said both low-cost carriers could combine routes in China and South-East Asia to expand their passenger base.

AirAsia X chief executive officer Azran Osman-Rani said his company was not looking for any profit or code-sharing model if it were to cooperate with other airlines.

“I think Spring Airlines needs to understand we are not interested in interlining code-sharing of flights. We prefer to cooperate on the basis of doing simple marketing such as I tell my passengers they can fly to Shanghai (by Spring Airlines) and you tell your customers they can fly to KL (by AirAsia X),” he said.

Azran added that the interlining code-sharing incurred costs as it required both parties to connect to each other’s system and AirAsia X wanted to keep its operational cost low.

Shanghai-based Spring Airlines flies to almost all major cities in China while AirAsia X has routes from KL to seven Chinese cities – Haikou, Shenzhen, Guangzhou, Tianjin, Hangzhou, Chengdu and Guilin.

Capa award winner Fernandes an aviation Legend

29 October 2009

BEIJING: Datuk Seri Tony Fernandes is now a legend of sorts — the AirAsia group chief executive officer was conferred the Capa (Centre for AsiaPacific Aviation) Legend Award for 2009, the youngest receipient so far.

To add another feather in his cap, the Malaysian low-cost carrier and its long-haul budget airline AirAsia X walked away with the prestigious Airline of the Year Award.

Fernandes said it felt “odd” to win the big individual award and joked that maybe the judges were giving him a signal that he should be on his way out of the industry.

“It’s a great honour for me and the company. I would be lying if I said I am not happy. You would be a legend only because of the people behind you,” he told The Star after the award presentation held here last night.

Fernandes said he was pleased that his fairy-tale success in introducing a budget carrier had given a lot of motivation to children and university students to believe in their dreams.

The Capa Legend Award (Aviation Hall of Fame) is given to outstanding individuals who bring about a revolutionary force in the aviation industry.

He said the award proved that Malaysian companies were capable and to win during a time of financial crisis meant even more for AirAsia.

Capa executive chairman Peter Harbison said Fernandes was the youngest inductee into the Hall of Fame, but his impact on Asia Pacific aviation had been profound.

Airasia Revises Delivery Of A320s

29 October 2009

KUALA LUMPUR-- AirAsia Bhd has signed an amendment agreement with European airplane maker Airbus to revise the delivery dates of eight A320 aircraft originally scheduled for delivery in 2011 to 2014 and 2015.

In a statement to Bursa Malaysia Thursday, the regional low-cost carrier said with the deferments, the original delivery of 23 aircraft in 2011 would be reduced to 15 aircraft.

The original number of deliveries in 2014 would also be increased to 24 aircraft from 18 aircraft while in 2015, the airline would take delivery of two aircraft as opposed to nil, it said.

No penalties are payable by AirAsia in revising the delivery schedule of the 2011 aircraft, it added.

AirAsia said the deferral of the 2011 aircraft was due to forecast infrastructural constraints with the current airport facilities.

It said that until the new low-cost carrier terminal was constructed, the present infrastructure at the low-cost terminal would not be able to accommodate AirAsia's fleet expansion in the number of aircraft originally scheduled to be delivered in 2010 and 2011.

The scaling down of the aircraft delivery in 2011 is to further enable AirAsia to optimise its fleet and avoid the costs associated with leaving idle or underutilised aircraft, thus avoiding incurring depreciation, interest expense and other costs without earning revenue.

'People' And 'Positive' Behind Airasia's Success, Says Founder

29 October 2009

BEIJING -- The two "P"s -- "People" and "Positive" -- coupled with other factors have contributed to the success of Datuk Seri Tony Fernandes and AirAsia, the low-cost airline founded by him.

"We have great people, very good discipline, been very positive and we operate at lowest cost," said Fernandes in an interview with Bernama in Beijing Wednesday.

AirAsia and AirAsia X were jointly awarded "Best Airline of the Year 2009" and Fernandes received the CAPA (Centre for Asia Pacific Aviation) Legend Award at the CAPA Aviation Awards for Excellence presentation ceremony in Beijing Wednesday night.

The CAPA Legend Award (Aviation Hall of Fame) is given to outstanding individuals who bring about a revolutionary change in the aviation industry.

"I think there is always business for us if we are positive. If you are negative, always worry about problems, always complain, then you lost 50 per cent," said Fernandes, who is also AirAsia's group chief executive officer.

"If you encounter problems, don't put your head in the sand. Even if you have to cry, cry for half a day and then bounce back," he said.

At the award presentation, Fernandes was praised for "his drive, creativity, enthusiasm in driving liberalisation of the aviation industry across the region".

AirAsia managed to show growth in the first half of 2009 with even greater growth in the second quarter despite the global financial crisis and the pandemic H1N1 flu which affected many airlines across the world.

The AirAsia group achieved an operating profit of RM288 million in first half 2009, which was five times more than same period of 2008. It also achieved a passenger growth of 24 per cent year-on-year.

"Being an airline that make the most impact for the year, we are one of those which achieved the highest profit performance, and being innovative in developing new routes, I think these contributed to our winning," Fernandes said.

AirAsia set up AirAsia X, a new business model which put low-cost long-haul travel to work.

"No one else had done it before, and a Malaysian company did it," Fernandes said.

"It is a great honour for a Malaysian company to come to Beijing and beat China Airlines, Cathay Pacific Airlines, Singapore Airlines and others. We should be very proud," he said.

"It shows you that Malaysia can be the best," he added.

On AirAsia's performance in the China market, Fernandes said: "The China market is fantastic and I think we just scrapped the surface. There is a lot more development that can be done. We are looking at routes from Kota Kinabalu and Penang to China cities."

"We are now running 193 flights a week in China, we are bringing a lot of tourists to the Malaysian market," he said.

Within just three years, AirAsia has started its Hong Kong, Macao, Shenzhen, Guangzhou, Haikou, Guilin and Hangzhou routes while AirAsia X launched its long-haul route from Kuala Lumpur-Tianjin route in February, followed by the Kuala Lumpur-Chengdu route in October.

"We are looking at opening up new routes to four or five more cities, like Wuhan, Ningbo, Xian, Chongqing and probaly another eight to nine routes in next two to three years," Fernandes said.

Asked if Airasia encountered difficulties in operating new routes in China, he said: "No issue at all, the Chinese government has been very supportive, they see it as a win-win situation. As AirAsia brings in more tourists, the local governments always ask us to fly in."

"AirAsia X has been a good surprise too. We carried six million people in China, that is a huge number," he added.

Fernandes said AirAsia X was looking at a few new routes in China, but in next few years the airline would probably focus more in India before coming back to China.

Asked on the possibility of AirAsia collaborating with China's airlines such as its low-cost carrier Spring Air, he said that AirAsia was currently focusing on the Asean market.

"But we can always collaborate with local airlines. We bring a lot of people to the major hubs like Tianjin and Chengdu and we can cooperate with local carriers in the sharing of passengers," he added.

On whether AirAsia considered it a challenge if China's low-cost carriers were to expand overseas, Fernandes said: "The market is huge and I think we mustn't worried about competition, there is big enough market for all of us. I take a very different approach from many other airlines which want to keep the market closed."

Asked if Airasia was considering buying China's home-made aircraft like the C919 from China Commercial Aircraft Corporation in future, Fernandes said the airline had already placed a big order for Airbus aircraft.

"I don't see it happening anytime soon, but for next five to 10 years, some of our aircraft may come from the factory in Tianjin."

AirAsia X set to increase capacity to Australia

29 October 2009

AirAsia X Wednesday announced that it would be increasing capacity to both Melbourne and the Gold Coast from February next year in response to higher levels of consumer demand.

Between Kuala Lumpur and the Gold Coast AirAsia will increase its frequency from six weekly services to seven from the 6th of February, 2010, while Kuala Lumpur to Melbourne will lift from eleven weekly flights a week to twelve from the 3rd of February, 2010.

In addition, the new services will also see the inclusion of the new premium economy product from AirAsia X.

"This is a great achievement for AirAsia," said Darren Wright, AirAsia X General Manager Australia. "We're very proud of the fact that the Gold Coast was our first flight destination and we've seen an increase in passenger traffic on this route every quarter."

"The Kuala-Lumpur - Melbourne route has been particularly popular for us and it shows no signs of weakening any time soon."

AirAsia X is the long-haul arm of budget carrier AirAsia, and operates with a fleet of four A330-300s and two A340-300s.

AirAsia/AirAsia X scoop top award at Centre for Asia Pacific Aviation's annual Awards for Excellence

28 October 2009

(Beijing, 28 October 2009) AirAsia and AirAsia X were named the joint winners of the prestigious Centre for Asia Pacific Aviation (CAPA) Airline of the Year Award for 2009 at a gala reception in Beijing this evening. The Awards Ceremony was held as part of this year’s sixth annual Asia Aviation Outlook summit, showcasing airline and airport CEOs from around the Asia Pacific and Middle East regions.

The CAPA Airline of the Year is awarded to the airline that has had the greatest impact on the development of the airline industry in the region, establishing itself as a leader, and the benchmark for others to follow.

“AirAsia has had another superlative year amid some of the toughest conditions to hit the airline industry on record. An innovator in revenue generation, with a strongly developing network and consistent focus on maintaining its world leading low cost base, AirAsia was the outstanding performer in 2009. AirAsia and AirAsia X are leading the way in developing short-haul to long-haul connectivity in ways which promise to revolutionise the international marketplace”, said Peter Harbison, Executive Chairman of the Centre for Asia Pacific Aviation.

Other winners of this year's CAPA Awards included:

Beijing Capital International Airport, named the CAPA International Airport of the Year

“Beijing Airport has had an outstanding 18 months, handling the demands of the Olympic and Paralympic Games and performing with distinction amid a difficult market environment", said Mr Harbison.

Air Arabia was named CAPA Low Cost Airline of the Year

“Air Arabia has again demonstrated its contribution to the development and expansion of regional air markets, with continued growth at its primary Sharjah hub and exciting new cross-border ventures in Morocco and now Egypt. Air Arabia has maintained a disciplined business model over the past 12 months and, headed by a strong management team, is one of the world’s best positioned LCCs to benefit from the growth in economic development and liberalisation of aviation markets”, said Mr Harbison.

Minister Li Jiaxiang, Minister of the General Administration of Civil Aviation of China was recognised as the CAPA Aviation Minister of the Year

Mr Harbison stated, "Minister Li has provided strong leadership of and support to the Chinese aviation sector that is both confronted by tremendous opportunities, as well as significant challenges. Minister Li oversaw a highly successful air transport operation during the Olympic Games and has continued the task of developing China’s aviation infrastructure and policy settings as it takes a leadership role in global aviation this century”.

Mr Kong Dong, Chairman of Air China, accepted the CAPA Aviation Executive of the Year

“Our Executive of the Year has been a tireless advocate for the reform and streamlining of the structure of the Chinese aviation industry and has effectively guided Air China through a difficult period for the sector. The airline is well positioned to benefit from the upswing in Mainland and SAR aviation markets and the vast opportunities presented in North Asia and beyond in the coming years", said Mr Harbison.

Dato’ Sri Tony Fernandes, CEO of AirAsia Group Bhd joined the CAPA Hall of Fame, when he accepted the CAPA Legend’s Award

He joins Ray Webster (fmr Chief Executive Officer of easyJet), Dr Cheong Choong Kong (fmr Deputy Chairman and Chief Executive Officer of Singapore Airlines) and Maurice Flanagan (Vice Chairman, Emirates Airline) and Dato' Seri Bashir Ahmad, Managing Director of Malaysia Airports Holdings Bhd in the CAPA Hall of Fame.

"This award honours strategic leadership, vision, innovation and influence in the aviation industry. Tony Fernandes is the youngest inductee into the Hall of Fame, but his impact on Asia Pacific aviation has been profound. Pioneering the cross-border joint venture model in Asia to open up new opportunities beyond its Malaysian base in Thailand and Indonesia, as well as low-cost long-haul services to link the region globally, the AirAsia Group is on track to handle 24 million passengers in 2009 – some 30% more than in 2008, despite the global economic slowdown. But AirAsia’s impact is much more than its generation of strong traffic growth. The airline is catalysing positive change in the way governments, suppliers and its rivals are thinking and acting. We are delighted to recognise Tony Fernandes’ leadership role in driving our industry forward”, said Peter Harbison.

Abu Dhabi Airports Company received the Award for the New Airport Development of the Year

Mr Harbison noted, “Abu Dhabi’s excellent new terminal facilities, which came on line in March this year, provided the breathing space the airport needs ahead of its exciting multi-billion dollar midfield terminal development that will deliver further capacity next decade to spearhead Abu Dhabi’s development as a global aviation centre. Abu Dhabi Airports Company is to be commended for its active pursuit of airline partnerships, which has helped propel the airport forward”.

Incheon International Airport received the new Award for CAPA Airport City of the Year

“Incheon International Airport is leading the way in the region as a multi-service airport hub, offering an array of logistics, transportation, leisure, accommodation and attractions infrastructure that is unparalleled in the region. The developments have raised South Korea’s regional competitiveness and positioned it well to benefit from the coming recovery in the aviation business”, said Mr Harbison.

Melbourne International Airport was named the CAPA Low Cost Airport of the Year

“Melbourne International Airport has been one of the world’s best performing airports amid the global economic downturn, regularly attracting new domestic and international services. Management’s focus on delivering outstanding facilities and services at affordable rates for the airline sector is driving results, as Melbourne continues to win new business from full service and low cost carriers, which is growing the aviation, trade and tourism opportunities for the local area and the wider State of Victoria”, said Mr Harbison.

Tianjin Airlines accepted the CAPA Regional Airline of the Year

Mr Harbison stated, “Tianjin Airlines is a relatively new face in the regional Chinese aviation market, but it is having strong early success as it continues to roll out an aggressive fleet and network expansion agenda. We look forward to witnessing the airline’s continued growth in what remains a very high potential segment of the overall Chinese aviation opportunity”.

Civil Aviation Authority of Singapore accepted the new award recognising the CAPA ANSP Provider of the Year

This CAPA Award is a new one in 2009, in recognition of the increasingly vital role that ANSPs and their governments can play in helping improve air traffic systems, thereby supporting airline efficiencies and particularly in order to reduce greenhouse gas emissions. The CAPA ANSP of the Year is awarded to the air navigation services provider that has shown leadership in addressing the operational and costs needs of the industry and to promoting environmentally-friendly procedures, so as to offer a benchmark.

“CAAS, in coordination with the airlines and with ICAO, has allocated financial and human resources in ways that have substantially improved Singapore’s ATM and runway procedures, helping reduce flight times and improve traffic flow. From an already high base, this has produced a model for others to imitate. CAAS’ leadership also extends to this year’s move to restructure CAAS and corporatise the operations of Changi Airport, improving functionality and accountability”, said Peter Harbison.

Cathay Pacific accepted the new award recognising the CAPA Airline Environmental Performance of the Year

Mr Harbison stated, “Cathay Pacific has shown outstanding environment leadership and concern, spanning practical applications to reduce the company’s carbon footprint, to championing big picture policy issues that will impact the sector for decades to come. The industry thanks leaders like Cathay Pacific to drive a thoughtful agenda to minimise aviation’s impact on the environment.

GMR Hyderabad International Airport accepted the new award recognising the CAPA Airport Environmental Performance of the Year

GMR Hyderabad International Airport (GHIAL), which opened in March 2008, represents a new era in India’s airport infrastructure development. Mr Harbison stated, “GHIAL is to be commended for incorporating sustainability in the airport development, as a result of which it is the first airport in Asia to achieve a LEED Silver certification for Leadership in Energy and Environmental Design from the US Green Building Council. This sets a benchmark for other airports in the region to follow”.

About the judging process: Asia Pacific airports, airlines and the industry are reviewed constantly through the year via the Centre's extensive data and information services gathering and reporting. This daily performance analysis, along with feedback from our Members, is accumulated into a series of recommendations. A highly experienced aviation advisory panel – including industry CEOs - reviews and decides on our recommendations.