McCarthy sees explosive growth for AirAsia

AirAsia co-founder Conor McCarthy interrupted his holiday last week to make a quick stop at the Farnborough airshow and sign a $2.6 billion order for 40 additional Airbus A320s. He is seen below celebrating the signing the deal with Airbus sales chief John Leahy.

McCarthy, who showed up for a brief press conference at the Airbus chalet with his wife and kids in tow, sees AirAsia quickly reaching the current size of Ryanair, where he once served as chief operating officer. AirAsia now operates six A320s and 35 737-300s but the new deal with Airbus guarantees it will have an all-A320 fleet of at least 100 aircraft by the end of 2011.

Ryanair currently operates just over 100 737-800s with another 132 on order, according to ACAS. McCarthy predicts Kuala Lumpur-based AirAsia will also reach the 200-aircraft mark and potentially shatter it if it expands beyond Malaysia and the franchises it currently has in Indonesia and Thailand.

"All three markets are doing very well," he told Airline Business deputy editor Brendan Sobie following the 21 July press conference. "We see potentially all three markets are more than capable of taking 60 to 70 aircraft each."

AirAsia's Malaysian operation - which was re-launched as a low-fare carrier in late 2001 after McCarthy, AirAsia chief executive Tony Fernandes and other private investors acquired the carrier - now operates all six of the company's A320s and 19 of the 737-300s, according to ACAS. AirAsia Malaysia is poised to expand further because this month it is taking over several domestic routes being abandoned by loss-making Malaysia Airlines as part of a deal brokered with the Malaysian government in March.

"That has had somewhat of an influence [on the decision to order 40 more A320s], but that wasn't the primary driver," McCarthy says. "The primary driver was organic growth."

Thai AirAsia was launched in 2004 with local partners holding a 51% stake and now operates 10 737-300s. Indonesia AirAsia was launched last year with defunct Indonesian carrier AWAIR as a 51% stakeholder and now operates six 737-300s.

AirAsia plans to earmark some of its new A320s for the Thai franchise after the Malaysian operation transitions to an all A320-fleet. Indonesia AirAsia is slated to be the third franchise to switch to A320s. McCarthy says all 35 of 737-300s will be phased out gradually over the next several years.

McCarthy confirms the carrier is now in talks to establish new franchises in other Asian countries including Bangladesh and the Philippines. But he says the company is not assuming any of the 100 A320s it now has on firm order will be operated by a new franchise and says it is conservative about expanding into new markets and is trying to avoid forging new joint ventures too quickly.

AirAsia originally placed an order in late 2004 for 40 A320s plus 40 options. In March 2005, it ordered another 20 A320s. The new order involves converting the original 40 options into firm orders. As part of the new order, AirAsia also has gained a new batch of 30 options.

The deal signed last week comes as no surprise because AirAsia always had a goal of breaking the 100-aircraft barrier. Upon taking delivery of its first A320 last December, it rolled out a major marketing campaign billing the aircraft as the first of 100 A320s. McCarthy says the 100 firm aircraft plus 30 new options "ensures our continued dominance in the low-cost sector".

He adds AirAsia for now does not foresee any slowdown in the rapid expansion of low-fares travel in Southeast Asia, given most of the region's fast-increasing population still has never flown "We haven't seen it yet. It would be a slowdown in growth, not a reversal in volumes," he says.