AirAsia foresees less intense fare competition

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AirAsia believes that pricing pressures in its Malaysian home market are ameliorating, and is working to greatly boost connecting traffic at its Kuala Lumpur hub.

“There have been improvements in terms of fare movements,” says its group chief executive Tony Fernandes. “Our average fare is on a positive upward trend as competitors have started to become rational again. We foresee capacity in Malaysia reducing and there will be re-alignment of business strategy by competitors to ensure sustainability.”

Fernandes made the comments in an outlook statement that accompanied the low-cost carrier’s second quarter results for its 2014 financial year. Average fares fell 1% to MYR157 ($49.6) during the carrier’s first half, an improvement over the same period last year, it said.

Connecting traffic with the carrier’s “fly-thru” offering at Kuala Lumpur with AirAsia X and other units doubled during the first half of 2014 to 735,000 passengers, generating connecting fees of MYR44.1 million. The carrier operates 739 “fly-thru” routes.

Fernandes also hopes to boost ancillary revenues from MYR45 per passenger now to MYR50 per passenger in the “short-term.” Ancillary initiatives include on-board Wi-Fi, which the carrier recently tested, that offers instant messaging .

“Capacity addition into the region and Malaysia especially will be back to a realistic level in 2H14,’ he adds.

“We still have to ensure we manage our capacity and fleet deliveries, ensuring each market takes the right number of aircraft. Leveraging on our strong relationship with Airbus, we were able to defer and sell some aircraft slots and swapped it to the newly improved fuel efficient Airbus A320neo. We are also on track with the selling of our older aircraft to capitalise on the residual value, and to maintain a young and efficient fleet.”

In addition, he believes AirAsia's Thai and Philippine units should return to the black in the coming months, and is optimistic that AirAsia India will be a success, with support from the carrier’s hub airport at Bengaluru helping to keep costs down.

Flightglobal’s Ascend fleets databases shows that AirAsia has 81 A320s, of which one is in storage. The average age of its fleet is four years.

AirAsia has orders for 316 A320s, which comprise 29 CFM56 powered A320s, and 287 CFM-powered A320neos.