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MAIN STORYGoing the distanceFernandes targets long-haul services, while boosting AirAsia’s fleetBy Tom BallantyneTony Fernandes, the ebullientchief of Malaysian low-costcarrier (LCC), AirAsia, hadlittle time for celebration as theNew Year got underway. It wasall business. Fernandes was in London readyto make two of the biggest announcementssince the car rier was established inDecember 2001.First, the AirAsia brand was going longhaulwith AirAsia X, targeting China,India, Australia and Europe. Second, hewas placing an order – worth US$6.7 billionat list prices – for up to 100 new A320 jets,a move that could see his LCC fleet grow toaround 200.The latter was hardly a surprise. AirAsiahas been one of the fastest-growing carriersin Asia, leading the region’s no-frills boom.The first announcement was unexpected.Fernandes has repeatedly and publicly saidthe LCC model would not work beyond threeto four hours’ range.But with long-haul, low-cost operationssurging – Oasis Hong Kong Airlines andQantas’ Jetstar International are alreadypointing the way – Fernandes clearlyrecognizes an opportunity. And as always,he isn’t hanging around to let it pass.AirAsia X, he declared, “will bringindependence to the long-haul, low-costtraveller by providing a choice of service fortheir long-haul travel requirement.”The new airline, owned by Fly AsianExpress (FAX), a company establishedby Fernandes, Air Asia executive directorKamarudin bin Meranun and former AirAsiachief financial officer Raja Azmi, willoperate as a separate entity. FAX currentlyutilizes Fokker 50 and Twin Otter turbopropsin rural Malaysia. It started operations lastAugust when AirAsia took over rural airroutes from Malaysia Airlines (MAS). Undera 30-year franchise, AirAsia X will use theAirAsia brand, its website for bookings, andother services.The new carrier will launch mid-year withthree aircraft, have five operating by the endof its first year and reach its planned size of20 by the end of the fourth year. A decision onfleet type was expected by the end of Januaryor early February, with the A330-300 and theB777-300ER under consideration.AirAsia X expects to carry 500,000passengers in the first year. Average ticketprices will be about half those of full-serviceairlines. Inaugural flights, planned in July,will be to Tianjin and Hangzhou in China,and to either Manchester or London in the‘Within the next seven years, Iam convinced we will be thelargest airline in the worldwith 54 million passengers ayear’Tony FernandesChief ExecutiveAirAsiaUnited Kingdom. If AirAsia X ends upflying to London, it will operate from one ofEurope’s major LCC hubs, Stansted airport,said Fernandes.India and Australia are firmly on theradar screen, with flights to the U.S. andSouth America also under consideration.Malaysia and Australia are already in talksto open a low-cost air route between the twocountries.A deal would likely involve access forJetstar to the low-cost terminal at KualaLumpur International Airport, with AirAsiaX flying to Avalon, a similar terminal nearMelbourne.AirAsia’s domestic and Asian regionalflights will interlink with AirAsia X longhaulservices. “While AirAsia and AirAsiaX will be two separate legal entities andhave separate management teams, I believeAirAsia X and AirAsia will have a symbioticrelationship.Both carriers will enhance the feed ofpassengers into each other’s operations,and ensure passengers enjoy a seamlessexperience,” said Fernandes, who has notruled out future tie-ups with LCCs in Europesuch as easyJet and the Virgin Atlantic group,or Virgin Blue in Australia.As for AirAsia itself, Fernandes made itclear the latest Airbus order marks a majorleap forward. “Within the next seven years, Iam convinced we will be the largest airline inthe world with 54 million passengers a year,”he said. The airline carried about 15 millionpassengers last year and expects to reach 18million by the end of 2007.AirAsia already has 100 A320s on order,with 16 having been delivered. There are also36 B737-300s in the current fleet, but theywill gradually be replaced by A320s. TheJanuary deal was for another 50 firm orders,with 50 options.The aircraft will be distributed among theAirAsia group, which includes Thai AirAsiaand Indonesia AirAsia. Fernandes said thepurchases would be funded by a combinationof borrowings, internal reserves and cashgenerated by operations.They will all have arrived by 2014. “Weexpect about 20 aircraft to be delivered eachyear, beginning this year,” said Fernandes.With access to some 500 million peoplein the region, AirAsia needed more aircraftto properly fuel growth. “As we enter chaptertwo of AirAsia, the additional order forA320s will allow us to further strengthenour route network by developing our hubsin Bangkok and Jakarta, connecting morepoints and expanding into Indochina,Indonesia, southern China and India,” hesaid.18 ORIENT AVIATION February 2007