AirAsia X has a dream: to build a network covering the globe and a fleet that rivals even the largest of Gulf carriers.
Speaking to Flightglobal in Kuala Lumpur, the chief executive of AirAsia X’s core Malaysian operations, Benyamin Ismail, elaborates that in order to achieve the goal, the carrier must grow frequencies and capacity “through domination,” which he defines as flying into a destination at least three-times daily.
“It will give us the flexibility to connect through to our short-haul sister airline, AirAsia Berhad. Once the consumer has choice of timings, you will win the market.”
Benyamin adds that such a scenario is what AirAsia X should aspire towards, especially with its turnaround “nearing soon”. He lists several objectives that have to be met: attain a full year of profitably, yields to “hold steady at 20%,” and grow load factors.
For the quarter ended 31 March, its operating profit grew by over 20 times against the previous corresponding period to MYR105 million ($25 million), led by stronger demand on north Asia and Australia routes. It also reversed a net loss of MYR126 million, with a net profit of MYR179 million.
As part of its turnaround programme, Benyamin says the carrier imposed hiring freezes, renegotiated contracts for MRO services and aircraft leases, and reviewed its route network to cut services that were “bleeding like crazy”.
In recent years, the long-haul low-cost carrier cut services to Nagoya, Narita, Adelaide, Chongqing and reduced capacity on its Australian routes to Sydney, Melbourne, Perth.
Benyamin says Australia “is still a vital engine of growth” for AirAsia X and will begin to reinstate frequencies in the coming quarters.
The land down under is not AirAsia X’s only area of focus. It expects to increase frequencies to China by 30%, and to launch more “high yield” routes, such as Tehran in June and Mauritius in October.
In addition, Benyamin reveals that talks with the US Federal Aviation Administration (FAA) “are advancing quite a bit” in launching a Kuala Lumpur – Hawaii service. “We expect the approvals to be in by next month, and could start flying there in time for Christmas. Hawaii has a very huge Japan-dependent passenger base that we could tap on via Osaka.”
EUROPE: “100% ON COURSE”
Europe is also back on AirAsia X’s radar, with London and Paris two destinations of high interest.
“We are 100% on course to re-enter the European market. People are smarter travelers now and three dynamics have changed since the last time we flew there. They don’t mind to sacrifice air travel comfort with a low price, but will splurge on accommodation,” says Benyamin.
The long-haul low-cost operator first launched services to London Stansted in March 2009, later moving to Gatwick. High operating costs from rising prices, coupled with pressure on yields, forced it to suspend the service in less than a year. It was also forced to drop Paris Orly in 2012. One big challenge was that AirAsia X was using fuel guzzling Airbus A340-300 aircraft on the routes amid high fuel prices.
“It was hard to breakeven. Now, the time looks right – especially with fuel this cheap. Even if were to increase, I’m mitigated by my new and much more fuel-efficient aircraft,” Benyamin explains. “I came into the job with the fuel price at $140, as such we internally budget for a high fuel price. Right now, I’m benefiting from the actual price difference.”
Still, the carrier won't attempt European routes until it starts receiving the new A330-900neo and A350-900. Benyamin describes the A330-900neo and A350-900 as “ideal tools that will help do the job excellently”.
AirAsia X Network, June 2016
Flightglobal Fleets Analyzer lists the AirAsia X Group, which includes the core Malaysian operation, Indonesia AirAsia X and Thai AirAsia X, as operating 33 aircraft: 28 A330-300s and five A320-200s. AirAisa X has 20 A330-300s, Thai AirAsia X has eight -300s, and Indonesia AirAsia X has the five -200s.
The group has orders for 66 A330-900neos and 10 A350-900s, but it has not specified how these will be allocated. He adds, however, that the optimum fleet size for the core Malaysian operation is 40 aircraft.
The Group is scheduled to take delivery of two A330-900neos and one A350 in 2018. Deliveries of the -900neos will extend to 2027, while the 10 A350s will have fully arrived by 2022.
In January, AirAsia X cancelled an earlier order for 11 A330-300s, replacing them with -900neos.
Benyamin explains the order conversion was a choice made by the Group to consolidate growth until 2018: “We were having consecutive losses and had to manage capacity. We decided this would be a time to focus on making money and stabilising our routes. Next year, capacity will also be muted.”
AirAsia X also forecasted that with the arrival of the -900neos, the company can expect to post cost savings of MYR6 million ($1.5 million) a year in fuel per aircraft.
MORE OVERSEAS UNITS
AirAsia X also wants to add to its roster of affiliates, and hopes to add AirAsia X outposts in India and Japan.
“The future India AirAsia X is our gateway into the Middle East and Europe, while Japan AirAsia X can help us penetrate the US West Coast,” Benyamin explains. “We would have the first mover advantage as the long-haul, low-cost model is not yet present in these markets. Your ultimate goal as an airline is to make sure you cover the whole earth.”
However, Benyamin acknowledges that it will not be easy and calls for patience – especially with the core AirAsia X carrier.
“We need to make money first. But if the rest (IAAX and Thai AAX) don’t make money too, there’s no point setting up more units.”
He adds that ancillary revenue on long-haul, low-cost provides the advantage. At present, one-fifth of AirAsia X’s total revenue come from ancillary sales. One area where AirAsia X hopes to gain more ancillary revenue is paid Wifi. This is available on A320 flights operated by short-haul affiliate AirAsia, and plans are in train to bring it to AirAsia X's A330s.
Despite not having the same expansive scope as AirAsia, Benyamin is buoyant about AirAsia X’s long-term future and its relevance to the travel market.
“What we need to do is simple: Identify markets that have demand, and be first movers to fly there with multiple frequencies.”
Source: Cirium Dashboard