a day ago
- Business
- New Straits Times
AirAsia positions itself as regional aviation powerhouse in Asean
SEPANG: The future of Asia's best low-cost airline, AirAsia, is being reshaped by a strategic consolidation of its short-haul and long-haul operations under a single umbrella in what is set to become a streamlined and more cost-efficient airline group poised to compete more effectively in Asean.
AirAsia Aviation Group Limited (AAGL) deputy group chief executive officer (CEO) (corporate), Farouk Kamal, said the consolidation is part of a long-standing vision that had been in discussion even before the COVID-19 pandemic but was accelerated by the crisis.
"This idea of combining the airlines (AirAsia and AirAsia X Bhd) is not new. It's just that COVID accelerated it. By integrating short-haul and long-haul networks, we can better cross-subsidise routes and improve profitability on an end-to-end basis," he told Business Times in an interview recently.
Farouk added that the consolidation of AirAsia and AirAsia X, which will see the latter as the listed parent company, will allow routes to be planned more holistically, such as linking a long-haul flight from Kazakhstan to Kuala Lumpur with a short-haul connection to Bali, resulting in an economically viable full route.
In future, all short-haul operations under AirAsia will be housed under AirAsia X and rebranded under a group identity to reflect the new structure.
In March this year, Capital A Bhd CEO Tan Sri Tony Fernandes said the group would be renamed as AirAsia Group.
Capital A, the current parent company of AAGL and AirAsia, has agreed to divest the airline group and AirAsia to AirAsia X for RM6.8 billion.
As part of the deal, Capital A will receive RM3 billion worth of AirAsia X shares, while the latter will assume RM3.83 billion in debt belonging to Capital A.
Farouk said post-merger, AAGL's current group CEO Bo Lingam will continue leading the consolidated airline business, while the existing CEOs of individual AirAsia affiliates in countries such as Malaysia, Thailand, Cambodia, and the Philippines will retain their roles.
Bo added that the consolidation also aligns with AAGL's aggressive fleet strategy, as it will take delivery of 14 new aircraft this year, all Airbus A321s, with five already received. The remaining nine aircraft will be delivered progressively until year-end.
He also said AirAsia avoided major delivery disruptions, unlike other airlines, by not cancelling aircraft orders during the Covid-19 downturn.
"I read that some (airlines) had one year, two years delay; no, we don't have that. There are delays like a month, a month and a half, two months (but) that's fine," Bo said in the interview, adding that AAGL's single-type fleet approach helps streamline production with Airbus.
The group remains optimistic about its fleet expansion plans, supported by an existing order book of 358 A320 family aircraft, including the LR (long-range) and XLR (extra long-range) variants, capable of flying up to 10 hours.
Farouk said these aeroplanes diminish the distinction between long-haul and short-haul flights and help the airline group to serve long routes more efficiently than the wide-body A330s, managing the seasonality and capacity better.
Looking beyond Airbus, AAGL is actively evaluating aircraft from Brazilian plane maker Embraer and the Commercial Aircraft Corporation of China Ltd (COMAC) to serve niche or underserved regional routes.
Farouk said the A220 and Embraer E2, both with smaller capacities of 130 to 160 seats, are under consideration for secondary markets and point-to-point operations.
Bo added that smaller narrow-body aircraft with extended range are a good complement to AAGL's fleet mix that could open up new opportunities in Indonesia, the Philippines, Cambodia or regional hubs such as Kota Kinabalu.
Bo also said discussions are ongoing with several aircraft manufacturers on the purchase of new aircraft.
AirAsia is also in the midst of a network rationalisation programme aimed at improving route profitability.
Bo said that the airline is focused on ceasing unprofitable routes and prioritising core markets in Asean, India, China, and other key Asian destinations.
"We're looking at the routes that aren't profitable anymore. We cannot be doing routes just for the sake of being there," he said, adding that the destinations that AirAsia flies to have to make commercial sense.
The rationalisation will also support AirAsia's vision of strengthening Kuala Lumpur's position as a hub by building strong connectivity to neighbouring countries.
"We want to develop a network where travellers can stop in KL and connect easily to other destinations like Indonesia, the Philippines, Cambodia, and so forth," Bo said, adding that most of the network adjustments should be completed in time for the winter schedule.
In March, Business Times reported that AirAsia will discontinue eight international routes and reduce flight frequencies on four others as part of a route network optimisation strategy.
According to AeroRoutes, the affected routes are Ipoh-Singapore, Kota Kinabalu-Kaohsiung, Kota Kinabalu-Kunming, Kota Kinabalu-Manado, Kota Kinabalu-Ningbo, Kota Kinabalu-Wuhan, Kuala Lumpur-Port Blair, and Penang-Hong Kong.
The final flights for these routes were between March 27 and May 5 this year.
Also in March, AirAsia announced that it will relocate its flights to Sabah and Sarawak from Sultan Abdul Aziz Shah Airport, or Subang Airport, to Kuala Lumpur International Airport (KLIA) Terminal 2 starting April 7.
