AirAsia heads East this year

http://investvine.com/airasia-heads-east-this-year/

osted by Arno Maierbruggeron March 7, 2012 in Airlines

AirAsia, the largest low-cost carrier in Southeast Asia, is currently expanding its network in the growing travel region of Far East. This year will see AirAsia Philippines and AirAsia Japan commence operations. Inside Investor talked to AirAsia CEO Tony Fernandes about his strategies and what he has up his sleeves for further expansion.

Q: Air Asia’s financial report for 2011 has just been released on February 22, 2012. Despite reporting record revenue, net profits fell by almost a half, due to high fuel prices and unfavourable currency exchange rates. How will you address these issues in the running year?
A: All airline results have seen their net profits fall by half as these two topics are something beyond our control. Regarding fuel cost, LCC carriers are more robust and tend to have the ability to pass some cost on to consumers via fuel surcharge and high margin ancillary income. Forex is something that the company has to face as most debts are in US Dollars, hence the income is subject to the strength of local currencies. The key thing for us is to ensure that non-fuel related costs go down, which the company was able to achieve in 2011.

Q: You are looking forward to a stock exchange listing of both Thai AirAsia and Indonesia AirAsia this year. Could you give details on the timing?
A: Both are at their advance stage of listing.

Q: This year will see the delivery of 20 new aircraft for AirAsia. On which routes will these planes be deployed?

A: The new planes will be part of our expansion plans in the Philippines, Vietnam, and other parts of Asia. We plan to allocate planes for AirAsia Philippines, commencing operations from Clark to Davao and Kalibo on March 28, 2012 with two daily flights. We foresee that the route is going to be popular, and I expect to deploy more planes there, for anticipated additional frequencies and the launch of new routes. Planes are also going to AirAsia Japan, which will be commencing operations in August 2012.

Q: Are there any plans to expand further in the region? Do you see a business case for AirAsia China, or AirAsia Vietnam, or even AirAsia India, or others?
A: There are no plans for other joint ventures at the moment. But we’re always looking for opportunities to grow. We see India as a market with lots of potential, second to China in terms of growth. With a population of more than one billion, it’s really a huge market we could and should tap into. We are always looking for ways to not only seize, but also create opportunities for us in India.

Q: How many new regional destinations will be added to the schedule this year?

A: This year we have launched four new destinations, Trang, Nakhon Phanom, Chongqing, and Semarang, and more are to come. Besides new destinations, we are also pushing for increased frequencies on some routes to ensure better connectivity for our guests.

Q: What changes are to be expected for the long-haul route schedule of AirAsia X in 2012?

A: AirAsia X is realigning its network to focus on core markets this year, namely Australasia, Korea, Japan, China, Taiwan and Iran. These changes will improve operating cost efficiencies and consolidate its network to focus on markets where it can build a leadership position in 2012. AirAsia X will concentrate capacity in those markets, where we have built up stable and profitable routes. We intend to open up new routes within these markets, as well as add frequencies on existing routes. We have recently increased flight frequencies on our Tokyo, Haneda, sector which will operate daily flights by June from current three times per week) and announced a new route to Sydney, Australia in January, with flights commencing services on April 1, 2012.

Q: You recently were in the Middle East for talks to set up a budget carrier there. Could you give more details on this venture?

A: It were just initial discussions to look for opportunities in the Middle East, and nothing firm at the moment. We are always looking for possible prospects to allow further business growth.

Q: What are the plans in the non-core business such as hotels & travel, courier and cargo, ticketing, and sponsoring?
A: We look forward to develop more efficient ways to acquire more revenue from these ancillary income streams. It’s important to further boost and develop these areas as ancillary income is the driving force for AirAsia to grow further and roll out more exciting initiatives. For instance, last year we expanded our adjacency businesses and ventured into businesses with established partners which allowed us to keep our focus on our core business. We manage to derive significant profits — in the first six months of operations – via our ventures in the Asian Aviation Centre of Excellence (AirAsia-CAE) and AAE Travel (AirAsia-Expedia). So we are looking for more ventures and opportunities like this to boost ancillary income.