ANALYSIS: AirAsia X's A330neo deal reveals breathtaking ambition

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AirAsia X’s deal for 50 A330-900neos represents a staggering bet on the yet-to-be-proven long-haul, low-cost model, and will put it in a different league than regional peers Scoot or Cebu Pacific. But let there be no mistake: the real victim will be Malaysia Airlines.

The deal, if confirmed, will effectively double AirAsia X’s orderbook to 105 aircraft. Flightglobal’s Ascend Fleets database shows that the A330-900neo acquisition will add to existing firm orders for 37 A330-300s and 10 A350-900XWBs. In addition, AirAsia X has options for five A350-900XWBs and three A330-300s.

AirAsia X orderbook - 17 July 2014

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Ascend

The size of AirAsia X’s orderbook dwarfs the backlog of Singapore Airlines unit Scoot, which has firm orders for 20 787s, equally divided between the -8 and -9 variants. The arrival of the 787s from November 2014 will see Scoot phase out the six 777-200ERs that form its fleet today.

As for Cebu Pacific, which operates four A330s and has two on order, the long haul, low cost model is, for the time being, a tactical play to key destinations with large Filipino communities, namely in the Middle East. Nonetheless, this ambitious carrier is likely a prime sales candidate for the re-engined A330.

Incoming widebodies by build year for AirAsia X, Scoot, and Cebu Pacific

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Ascend

While AirAsia X will no doubt pressure regional peers, namely Scoot, by collecting feed from AirAsia in Kuala Lumpur, the true victim of all this incoming capacity will be Malaysia Airlines.

Malaysia’s flag carrier is only beginning to recover from the tragedy of MH370 in March, taking tentative steps to resume marketing and branding activities. Weeks prior to MH370, the carrier reported a MYR1 billion ($318 million) net loss for 2013. On 15 May it reported a pre-tax loss of MYR439 million for its fiscal first quarter ended 31 March, 58% off a year earlier.

The moribund carrier presents a major dilemma for the Malaysian government, which is wary about pushing through a major restructuring, which will result in politically unpopular job cuts.

And although MAS reportedly has plans to invest in new widebody aircraft, Ascend shows no widebodies on its orderbook. Given the parlous state of the carrier, it will be years before its widebody fleet recieves a major refresh. Morever, Ascend shows that the average age of its widebody fleet, of which 41 aircraft are in service and five are in storage, is eight years.

MAS’s regional widebody fleet presents a mixed bag. The average age of its 19 A330 aircraft is just three years, but the average age of its 14 Boeing 777-200ERs is 15 years. The average age of AirAsia X’s 15 in-service A330s is five years.

Assuming MAS is unable to obtain new widebodies in the coming years, and it keeps its agining 777s in service, AirAsia X should outnumber it in the key heavy-twin category in 2016-2017. From 2018, when AirAsia X stands to take 19 aircraft, its capacity dominance over the flag carrier will become unassailable.

In the context of MAS’s travails, AirAsia X’s massive bet on the A330neo is not so much a gamble on an unproven business model, but an expression of confidence that it will become Malaysia’s dominant carrier - and one of Southeast Asia’s top long-haul airlines.