Airbus fleet will cut cost in long-run: AirAsia

Airbus fleet will cut cost in long-run: AirAsia

Asoociated Press, Kuala Lumpur

The purchase of 100 fuel-efficient Airbus A320s will help cut costs of AirAsia, Southeast Asia's largest budget carrier, as it strives to keep fares low amid soaring oil prices, the company's chief said on Wednesday.

AirAsia chief executive Tony Fernandes said it is more cost- effective for the company to buy, rather than lease, its planes. The financial strain is minimum because it has hedged against increases in interest rates for the next 15 years, he said.

The Malaysian-based AirAsia, which plans to phase out its current Boeing 737-300 fleet, signed an order in March to buy 60 Airbus A320-200 aircraft for 14.4 billion ringgit (US$3.8 billion), and the right to buy another 40 of the same aircraft.

"Buying Airbus is actually a huge advantage for us ... it uses a lot less fuel. We have huge cost savings with this new technology," he said in a speech at a global leadership conference here.

Soaring fuel costs and tight supply of Boeing 737-300 planes available for lease had dragged down earnings in AirAsia, which last month released its first full-year results as a publicly listed company.

The carrier posted a net profit of 111.6 million ringgit, 30 percent below the 160 million ringgit that it predicted during its initial share offer last year.

Fernandes said that by buying planes, the airline's cash-flow will increase. He said the company has an "amazing financial scheme, plus we have taken interest rate swaps for the next 15 years."

"Even though the swap rate is higher than the borrowing rates at the moment, we'd rather pay a premium and know that our risk is dealt with," he said.

Fernandes said the airline remains focused on the Southeast Asian market and regional expansion is on track, although Singapore remains difficult to enter.

"The goal of AirAsia is to create an ASEAN brand ... if we get it right, we got a market of 500 million people," he added.

AirAsia currently serves routes in Malaysia, Indonesia, Thailand, the Philippines and Macau. Its joint venture with Thailand's Shin Corp., Thai AirAsia, began flying between Bangkok and Xiamen, China, last year, making it the first foreign low- cost carrier to fly to mainland China.

It is planning flights to Laos, Vietnam and Cambodia by mid- 2006.