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."