Mon, Jan 08, 2007 page10

• AirAsia X set to shake up aviation market

  • AFP
  • • 
    • 
    • 

  If anyone can make budget airline travel profitable on long-haul routes, it is Malaysian aviation pioneer Tony Fernandes, analysts say.

  The man who brought cheap flights to Southeast Asia five years ago with his low-cost carrier AirAsia surprised the industry on Friday by announcing a new budget airline for long-haul routes.

  Fernandes said AirAsia X would take off in July with flights to Britain for as little as 9.99 ringgit, or less than US$3.

  

  AirAsia X stewardesses pose for photographs at the launch of the new airline in Kuala Lumpur on Friday.

  PHOTO: AP

  "If anyone can do it, I suppose Tony will have a go at it, because he's proven a lot of people wrong since he started AirAsia," said Shukor Yusof, aviation analyst with Standard & Poor's equity research.

  But Yusof said he remained skeptical that Fernandes' successful business model could work in the long-haul sector.

  Tom Ballantyne, chief correspondent for the industry magazine Orient Aviation, was more optimistic.

  "Personally I think it will work," Ballantyne said. "He's shown the ability at starting off at a certain level and growing."

  AirAsia X will service other European destinations besides Britain as well as China and India, Fernandes said.

  The airline will be operated by Malaysian carrier Fly Asian Express (FAX), also founded by Fernandes. It currently provides rural air services on Borneo.

  Fernandes said he expected AirAsia X to carry 500,000 passengers in its first year of operation, and was looking to acquire 20 new aircraft -- either the Boeing 777-300 or Airbus A330-300, both of which are twin-aisle jets.

  "I find it peculiar that he would depart from his extremely successful low-cost model to go into something which could make or break the company," Yusof said.

  Fernandes launched AirAsia as a budget carrier in December 2001 with two aircraft. It now has 50 planes flying to Malaysia, Thailand, Indonesia, Singapore, Cambodia, Vietnam and the Philippines.

  Ballantyne expressed surprise at Fernandes' new venture, as the tycoon had often said he did not think the low-cost model would work on longer routes.

  "He obviously now sees an opportunity," Ballantyne said from Sydney. "He believes they can make money pretty well right away."

  Fernandes is not the first to try budget long-haul air travel but it nevertheless remains a new concept.

  "It still has to be proven," Ballantyne said.

  Hong Kong's Oasis claimed to be the world's first long-haul budget carrier in October when it began flying with one aircraft between Hong Kong and London.

  Jetstar, a budget offshoot of Australian flag carrier Qantas, has begun budget flights to Hawaii.

  Yusof said a long-haul budget operation is "an entirely different product" from a short-haul low-cost model.

  A long-haul operator, for example, faces higher costs for fuel and flight crews, he told reporters.

  "There are also big hurdles to overcome including established international carriers that have bigger fleets that allow them to spread their costs better, as well as the ability to offer cheaper fares at the back of their aircraft," Yusof wrote in a separate research note.

  Despite his reservations, Yusof said there is room for a medium-haul low-cost airline covering routes of six or seven hours, especially if it carries cargo as well as passengers.

  Ballantyne said a low-cost carrier "would have a very good chance of success" on the so-called kangaroo routes from Australia, through Asia to Europe.

  Even a small percentage of that traffic would mean a lot of passengers, he said, and Europeans bound for Thailand and similar holiday destinations could feed into AirAsia's regional network.
• Most Popular

  • 1

    MRT extension linking New Taipei and Taoyuan set to start in 2026

  • 2

    Hsieh and Hung win badminton doubles title at BWF Super 300 Macau Open

  • 3

    Three former employees of TSMC detained

  • 4

    Crew safe after Peru incident: Evergreen

  • 5

    Teenager Victoria Mboko upsets Coco Gauff