AirAsia X is losing big money on its flights to Australia, but the long haul, low-cost carrier is poised to become the dominant player on routes down under.
In its results for the quarter ended 31 March 2014, AirAsia X declared that despite its M$38 million ($11.8 million) operating loss for the quarter, it is adamant about further ramping up capacity. In the coming quarters it will boost capacity 30%, at the expense of short-term earnings.
One area of particular weakness is found on page nine of the carrier’s earning statement, where it shows that it posted a pre-tax loss of M$53 million on Australian routes in the quarter, down from a profit of M$20 million a year year earlier.
AirAsia X’s other main area of operations, North Asia, by contrast saw a pre-tax profit of M$15 million in the first quarter, a M$2 million improvement from the first quarter of 2013.
AirAsia X’s only destinations outside North Asia and Australia are Kathmandu, Colombo, and Jeddah, but these are sideshows to AirAsia X’s intense development of its Australian and North Asian operations.
FlightMaps Analytics shows that three of AirAsia X’s thickest routes the Australianestinations of Sydney, Melbourne, and Perth.
AirAsia X network, April 2014. Thicker lines depict higher capacity.
Since the carrier commenced service in 2007, it has added capacity to Australia at roughly twice the rate it has added capacity to Asian routes. In 2013, it operated over 1.2 million seats to Australia, more than double the capacity deployed on Asian routes.
AirAsia X capacity growth on Australian, Asian routes
This heavy investment in Australian services has helped AirAsia X reach near parity with its rival, Malaysia Airlines, on routes from Kuala Lumpur to Australia. In April 2014, FlightMaps shows that the two rivals each operated 83,000 seats to Australia, giving each a 47% market share – the remaing 6% is operated by Emirates on the KL-Melbourne route.
In April 2015, however, AirAsia X will have become the market leader on KL-Australian routes, providing 87,000 seats compared with 84,000 for MAS. This will give AirAsia X 47.9% of the market, MAS 46.2%, and Emirates 5.9%. This assumes, of course, that MAS’s financial travails do not force it to pare back its Australian frequencies in the next 12 months.
There are no certainties in the airline business, but it is clear that AirAsia X is determined to keep pressuring MAS on Australian routes – even if it means more short term pain.
Prospective capacity on KLIA-Australia routes, April 2015