Sydney is still off-limits for AirAsia X to fly to despite the Malaysian government lifting route restrictions on the low-cost, long-haul carrier.
"Basically there will be no further route restrictions on AirAsia X. Previously there was something about you've got to fly three new routes before you are allowed to fly one parallel route with Malaysia Airlines," AirAsia X chief executive Azran Osman-Rani said on the sidelines of last week's Paris air show, during which approval came through.
The route restrictions had been expected to be lifted since last October when the government said such action would be necessary to help Malaysia achieve its economic transformation program.
AirAsia X received approval at the same time to fly to Beijing, Jeddah, Istanbul, Osaka, and Shanghai. "The one exception we did not get was Sydney," Osman-Rani said. He said Sydney was not a rejection but a "not just yet". AirAsia X had hoped to start services to Sydney last year. After it did not receive approval, AirAsia X took its plight to the skies with a "Liberate Sydney. End the monopoly" slogan.
The carrier is now submitting slot applications and preparing operational readiness work with an eye to launch services within the next 12 months to two of the five approved cities--and not more due to limited aircraft availability, Osman-Rani said.
Next year will see further operational changes as AirAsia X replaces the Airbus A340-300s flying to London and Paris with its new A330-200 high gross weight aircraft, Osman-Rani said. The A330-200HGW will offer substantial fuel savings, but will come as Jetstar possibly begins European expansion with its A330-200HGWs either independent or related to Qantas's international restructure. Osman-Rani said there may be some "interesting uses" for the A340s, but declines to specify where.
The past month has brightened AirAsia X's prospect for a forthcoming IPO, Osman-Rani said. Without route restrictions being lifted, he said, "investors are going to say, 'Look if we give you money, you get planes, but you're going to have real constraints getting route approvals.'"
Osman-Rani said Singapore Airlines' announcement last month to start its own long-haul LCC "validates the low-cost, long-haul model for a lot of investors. It also validates the idea that it's different enough that you've got to do it in a different brand." There has been some questioning of why AirAsia X has to be a separate brand and company from AirAsia.
As for competitive pressure from Singapore's LCC, Osman-Rani noted Changi can be a good air hub but "at a high price point".
"We'll hang on to our four-year lead," he said.
On the profitability side, Osman-Rani said AirAsia X was profitable last year and is waiting to see how the second half of this year contributes to the annual result, noting the second half is traditionally stronger. "The mature routes that have been with us for more than 12 months are continuing to be profitable despite the higher fuel price environment. Some of the new routes that we just started last year are obviously struggling because there's not enough traction, there's not enough demand yet, and boom you hit them with $130 jet [fuel]."
Even in the current environment, and perhaps now more than before, Osman-Rani sees AirAsia X's position holding strong. "I've always believed the future for commercial aviation is a real polarisation, rather than a hybridisation. People are finding new positions within the two polar extremes, but there will be two polar extremes."