AFTER a strong showing in earnings in the second quarter, AirAsia group boss Tan Sri Tony Fernandes says the airline can grow by 10% every year despite operating in a competitive environment.
He is looking at a 10% growth in available seat kilometre (ASK) every year for the next few years.
ASK is a measure of an airline flight’s passenger carrying capacity, basically the number of seats available multiplied by the number of miles or kilometres flown.
The airline is taking delivery of several aircraft over the next few years and it will be able to add capacity to grow. As it is, group wide, it has 180 aircraft in operation.
“We will start growing aggressively in the next few years and will add 10% ASK. If we add 10% capacity, the growth will be 10%,” he says.
Group wide, he expects the airline to carry 60 million passengers this year.
AirAsia reported a 41% rise in net profit in the second quarter, up to RM342mil from RM243mil in the previous period, and this was led by increase in aircraft operating lease income and reduction in fuel cost. Fuel cost averaged US$59 (RM236) per barrel in the quarter versus US$78 (RM312) a year earlier. Revenue increased to RM1.62bil from RM1.32bil previously.
For a long time, the group’s units in Indonesia and the Philippines were a drag, but Fernandes says they are coming along well now.
“I am super excited about these units. AirAsia Indonesia has been our problem child and also AirAsia Philippines but it looks good (now).
“When you see the results in the third quarter, we want all of them to be profitable. We want AirAsia Indonesia and AirAsia Philippines to be profitable, and there is also a little jewel in the group, which is AirAsia India.
“Our team there has the lowest cost in the world and this airline (AirAsia India) could be very, very large. I am excited about the prospects of AirAsia India but like in any business, we have to work hard at it,” he adds.
AirAsia Indonesia reported revenue of 887.38 billion rupiah in the second quarter of 2016, down 30% year-on-year, which AirAsia said was in line with the planned 37% decrease in capacity. AirAsia Philippines posted an 11% rise in revenue at 2.57 billion pesos and achieved strong growth in the number of passengers carried.
“We can really grow fast if the airport operator, Malaysia Airports Holdings Bhd , thinks like us. We need airports and also private airport operators to come and re-think on the airport side. They must know that one airport does not fit all, so we should not be doing all that policies to suit full-service carriers.
“We are a people’s airline and we are about making airfares cheap for the people of Malaysia and Asean. If I am an airport operator, and there is an airline that wants to grow 10 million to 20 million passengers but wants simpler facilities, I would say, why not? I will do it for them so that they can grow and bring in the passengers,” he adds.
On competition, he says, “AirAsia is in the best possible place for competition. Competition will always be there and competition keeps us on our toes, makes us better. I think the whole airline industry is in the best competitive environment it has been in for a long time.
“Why? Because we don’t have governments throwing money at loss-making airlines and we don’t see crazy billionaires who want to own airlines,” he says.
He believes the competitive space in Asia is similar to that in Europe and the UK.
“That does not mean MAS will not get better, and that does not mean Malindo Air is not good. They are all good competitors and there is a big enough space for all of us. I think each of us have to understand where our strength lies and find our own niche. At AirAsia, we are ready to grow again, the horizon looks good,” he says.
He adds that in Malaysia, now is best time for competition because it is rational competition. “I compete any day with people who are rationale but for the past 15 years, AirAsia has been competing irrationally. Malaysia and other countries have lost a good amount of money that could have gone into schools and etc,” he says.
“So I have no issue with the competitive environment. I love a challenge and I think it is the best time for AirAsia and any other airline because the crazy competition has gone out.”
He adds that “now every airline has to be competitive to make money ... and that is good.”