AirAsia X reaches out to Europe
By Mark Pilling
Eight years after founding AirAsia as a short-haul low-cost carrier the group's chief executive Tony Fernandes has achieved another business dream: launching a long-haul, low-cost carrier. With advertising in London that proclaimed AirAsia X as the "world's first long-haul, low-cost, less-squeeze airline", its first service between Kuala Lumpur and London Stansted touched down in mid-March.
When he began exploring the idea of establishing an airline Fernandes was put offa long-haul venture by Conor McCarthy, an ex-Aer Lingus and Ryanair executive and one of the industry figures he went to for advice. "He told me my idea of long-haul was rubbish. We tore it up and we started a short-haul carrier. But I said one day we will start a long-haul airline."
With Sir Freddie Laker's Skytrain airline creation as his inspiration, Fernandes never gave up on his dream. A meeting with Virgin Atlantic chief executive Steve Ridgway rekindled his ambition. "This is a crazy idea thatcame up three years ago between good friends talking about silly ideas," says Ridgway.
The Virgin Group became an investor in AirAsia X to the tune of a 16% stake. The majority stake with 48% is a Malaysian group that includes Fernandes, while AirAsia itself has 16%, Japanese aircraft lessor Orix Corporation has 10% and Bahrain's Manara Consortium has 10%.
"Everyone has said this is the craziest idea to start a long-haul, low-cost airline at this time of the economic cycle," says Fernandes. "But we have been very contrarian and we thought that this was a great time to do it as people want value and people want to come to our part of the world."
AirAsia X is serving the route with average one-way fares of £175 ($242) with a single Airbus A340-300 five times a week.
Asked if it can make money with the long-haul, low-cost model,Azran Osman-Rani, AirAsia X chief, says: "What's interesting is we already have. December and January have been back to back net profit numbers basically purely driven by seat density, aircraft utilisation and a single fleet focus." Fernandes says AirAsia X will make £30 million net profit this year.
"Right now our core focus still is the Asia-Pacific," says Azran, but as its London route develops "we'd love to look at Eastern Europe and Central Europe next in terms of long-haul frontiers", but not for at least 12 months.
AirAsia X began operations in late 2007to Australia's Gold Coast and now flies to three destinations in that country and two points in China, as well as the UK. It is seeking more A340-300s for longer-haul routes and has 23 A330-300s on order.
