AirAsia to offer flights to China in February
AirAsia to offer flights to China in February
Haslinda Amin and Khoo Hsu Chuang, Bloomberg/China
AirAsia Bhd., Southeast Asia's biggest discount airline, plans to start flights to China in February, expanding outside of Southeast Asia, as it prepares to face competition from as many as eight low-cost rivals.
The airline will start flying to four or five cities in China, possibly including Guangzhou and Hainan, from Bangkok in Thailand and Kota Kinabalu in Malaysia, Chief Executive Officer Tony Fernandes, 40, said in an interview in Vientiane, Laos.
Tapping rising demand for travel between Southeast Asia and China may help AirAsia stay ahead of competitors including Singapore Airlines Ltd.'s Tiger Airways and Qantas Airways Ltd.'s Jetstar Asia, which plans to offer flights to China after starting services next month.
"China, a huge market, will enhance their earnings," said Ying Mei Ow Yeang, who helps manage the equivalent of US$240 million at TA Asset Management Sdn. in Kuala Lumpur. "The speed of their plan isn't surprising given that they've said they want to start flights" to China.
Shares of AirAsia, which flies to Thailand and Indonesia in addition to its Malaysian routes, started trading on Malaysia's stock exchange on Nov. 22. The stock has gained 15 percent since its debut, trading at 1.44 ringgit at 12:57 p.m. local time.
Demand for AirAsia flights to China "will be good," Fernandes said today.
China is opening its market to low-cost airlines to meet booming demand for air travel in the world's fastest-growing major economy. The aviation regulator said in July it may relax regulations to encourage domestic budget carriers to set up.
About 2 percent of China's 1.3 billion people travel internationally, with the number forecast to increase by between 15 percent and 20 percent a year, Abacus International, Asia's biggest airline ticket sales agent, said in September.
Jetstar Asia, Qantas' international budget unit, will fly to cities in China, Indonesia and the Philippines after it starts services from its base in Singapore next month.
AirAsia's Bangkok-based Thai AirAsia Co. unit has filled up 90 percent of its available seats to Macau, Fernandes said. Thai AirAsia, a venture with Shin Corp., is the first low-fare carrier to fly to Macau. AirAsia will start flights to the former Portuguese colony next month.
Singapore Airline's regional unit SilkAir will halt flights to Macau in January as low-cost carriers prepare to start services to the city.
AirAsia is "very, very bullish on Indonesia," where it may offer as many as 14 daily flights after starting service on Dec. 8, Fernandes said.
Fernandes, a former Warner Brothers Inc. executive, said AirAsia may decide "after Christmas" on the purchase of as many as 80 new aircraft from either Boeing Co. or Airbus.
AirAsia operates 24 Boeing 737-300s from its Malaysian and Thai hubs. In addition to the talks for the 80 planes, it will take delivery of 12 Boeing Co. jets by June.
"The main consideration is cost," Fernandes said. "The aircraft deal will enhance our cost base, not reduce it."
The carrier, based in Sepang outside Kuala Lumpur, last month raised 863 million ringgit (US$227 million) in an initial share sale.
High fuel costs and increased competition may crimp growth for AirAsia and its low-cost rivals next year, TA Asset Management's Ying said. She didn't buy stock in AirAsia's sale, citing the carrier's vulnerability to oil price fluctuations. Fuel makes up about a third of AirAsia's operating expenses.
"Growth going forward may not be as high as they predicted," Ying said in a telephone interview. "The competition is rife, and they won't find it as easy now."