Airbus can't build A320s fast enough for AirAsia. Earlier this week the Malaysia-based low-cost carrier ordered another 50 A320s, lifting its total firm order to 150 aircraft.
That may seem ambitious for an airline that now only operates 50 aircraft, including 15 A320s and 35 Boeing 737-300s which will be phased out before the 150th A320 arrives in 2013. But chief executive and co-founder Tony Fernandes is quick to point out that at 500 million people, South-east Asia has a population bigger than the USA and Southwest Airlines already operates over 400 aircraft. And if you include the rest of Asia, there is a total population of two billion, most of which is within the reach of an AirAsia A320.
"Just in case you thought we were going bananas, we are conservative people," Fernandes insists.
In choosing a venue to sign the new 50-aircraft order, Fernandes decided to return to London, the city he was in when he first decided he would launch a low-cost carrier. Fernandes, then a music industry executive, was in London six years ago during a stopover on his way back to Kuala Lumpur from New York when he saw easyJet founder Stelios Haji-Ioannu on television.
"London is a very special place to me," Ferandes said at the press conference (see picture above) announcing the order. "(In London) I decided my next life would be running a low-cost airline."
He recalls how he took a train to London Luton Airport to check out how low-cost carriers operate. In a later trip to London he went to Stansted, where he met for the first time former Ryanair executive Conor McCarthy "at the lowest-cost coffee shop in town". McCarthy (pictured below at the far left) would become a major investor and co-founder of AirAsia, which launched in late 2001.
The new 50-aircraft order ensures AirAsia "will become the Ryanair and Southwest Airlines of Asia", Fernandes says.
The AirAsia group, which now also includes affiliates in Indonesia and Thailand, carried 15 million passengers in 2006 and expects to carry 21 million passengers in 2007, which Fernandes says will make AirAsia bigger than most large Asian network carriers, including Malaysia Airlines, Thai Airways and Singapore Airlines.
Fernandes is proud to say AirAsia by 2013 will become one of the largest A320 operators in the world and by far the largest in Asia. In 2015, Fernandes estimates AirAsia will carry 60 million passengers to 70 destinations. For that to be achieved, AirAsia will have to exercise its options for another 50 A320s, lifting its total firm order to 200. "All 200 aircraft would be needed for the three franchises" Fernandes says, adding new franchises are not required to support the group's potential 200-aircraft fleet.
He says the A320s are helping AirAsia reduce its available seat kilometre cost from 2.5 cents to only 2 cents. "With our cost base we can reach 500 million people," Fernandes says.
"That's the lowest cost I've seen anywhere," John Leahy, Airbus chief operating officers customers, said at the contract signing.
Leahy signed his first deal with Fernandes in late 2004, for 40 A320s and 40 options. A second 20-aircraft contract was signed in March 2005. In July 2006 they signed a contract for another 40 firm aircraft. The new order, for 50 firm aircraft and 50 options, means AirAsia will take an average of almost two A320s per month.
"We wish John could deliver them faster," Fernandes says, joking he has been trying to convince Leahy to cancel the Airbus A380 programme to make room for more A320s.
Not surprisingly Fernandes isn't exactly paying the $70 million per aircraft list price. "I would like to see in my lifetime Conor McCarthy and Tony Fernandes actually paying catalogue price," Leahy jokes. "We'll settle for what we can get here."
Airbus will have another opportunity to praise AirAsia next week in Toulouse when the carrier takes the 3,000th A320 to roll off the assembly line. AirAsia is just about the best story Airbus has to recount these days, when A350 and A380 delays seem to capture the headlines.