Malaysia-based AirAsia is evaluating whether to launch a domestic operation in Australia.
Azran Osman-Rani, the CEO of AirAsia's long-haul carrier Asia X, made the announcement on the sidelines of the Australia Pacific Aviation Outlook Summit in Sydney.
AirAsia's launch of an Australian base would depend on one of the existing mass-market carriers moving up-market and the remaining carriers rationalising capacity and increasing fares, Azran says.
"The way it is now, if you've got three players competing aggressively for the mass market segment that's all the industry can take," Azran says.
Although he does not explicitly name Virgin Blue, the latter has made clear its intention to increase its corporate market share and continue to move away from its low-cost roots.
Virgin Blue moving up-market would leave Tiger Airways and the Qantas Group's Jetstar Airways as the only domestic carriers targeting Australia's mass market. Under Azran's reckoning, Virgin Blue leaving the market would create room for AirAsia.
"If the market dynamic changed and suddenly there is space and existing players start to rationalise fights and increase fares, it will be very tempting," he says of AirAsia launching a domestic Australian operation.
An AirAsia operation in Australian would easily have a lower cost base than Tiger and could offer cheaper fares consistently, says Azran.
He adds the carrier would use Airbus A320s and would be majority foreign-owned. The Australian market is unique for permitting majority foreign-owned carriers to operate domestically.
Australia is also attractive to AirAsia for its transparent regulations, says Azran.
"It's a lot easier to operate here than it is trying to get into markets like Vietnam," he says. AirAsia has partnered with Vietnam's VietJet to create a low-cost carrier in Vietnam. But Vietnamese regulators have objected to the carrier using AirAsia's name. Vietnamese regulators also took issue with Jetstar group's Jetstar Pacific carrier using Jetstar branding. Earlier this month Vietnam released two Jetstar Pacific executives who since December had been barred from leaving the country while regulators investigated the carrier's fuel-hedging losses.
AirAsia has subsidiaries in Indonesia and Thailand in addition to its partnership in Vietnam.