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AirAsia spreads its wings even further

Budget carrier AirAsia is embarking on a major expansion plan in China and Southeast Asia on the wings of 100 brand-new Airbus A320 planes that will quadruple the size of its fleet and shave costs.

The Malaysia-based airline, which dominates the crowded Southeast Asian low-cost sector, wants to ride the travel boom not only in its home region of half-a-billion people, but also in the emerging China and India markets.

The order for the medium-sized A320 planes, worth some US$6.4 billion at catalogue price and due to start arriving next month, are expected to make AirAsia the largest budget carrier in Asia by 2011 when they are all in service.

The new aircraft are expected to lift profits by lowering operating costs and boosting passenger load and confidence, AirAsia officials and analysts said.

"The A320s will take us to new heights. These brand-new aircraft will spur more people to travel. We will have the biggest and youngest fleet in Asia," AirAsia chief executive Tony Fernandes said.

"This will improve our bottom line as the A320 planes have a bigger capacity and we will be able to offer more cheap tickets," he said.

The 180-seater A320 airplanes will completely replace AirAsia's fleet of 28 148-seat Boeing 737-300s, which will be deployed in its joint-venture operations in Thailand and Indonesia.

AirAsia director Timothy Ross said the new aircraft will boost confidence in the no-frills carrier among those who were wary of boarding the well-used Boeings.

"Before we had people who did not want to fly with us because we had old aircraft. Now with these brand-new A320s, we are confident it will be a crowd puller," he said.

Fernandes said next year promised to be an exciting year for the pioneering airline thanks to strong growth in Asia's travel industry despite the threat of terrorism, rising fuel costs and the bird-flu crisis.

AirAsia reported annual profits of US$29.6 million in June, while budget airline Tiger Airways, a unit of the state-owned Singapore Airlines, and JetStar Asia, in which the government has a stake, reportedly remain unprofitable.

However, the results for the financial year to June were 30 percent below the target set in its initial public offering (IPO) prospectus in October last year, because of higher fuel prices and an aircraft shortage.

The carrier is due to announce its first-quarter results for the next financial year today and analysts expect to see a healthier bottom line.
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