Asean market remains attractive for more routes, says AirAsia CEO


  • Corporate News
  • Wednesday, 08 Jun 2016

Ancillary revenue: AirAsia X aircraft operating lease income is boosted by additional aircraft subleased to Thai AirAsia and Indonesia AirAsia.

KUALA LUMPUR: AirAsia, which flies to almost all major destinations in Asean, says the market remains attractive for more routes and it is a matter of having the right platform and to create demand.

"There are potentials for more connectivity as well as frequencies," its Chief Executive Officer, Aireen Omar, said when asked if ASEAN is saturated.

AirAsia flies to almost all the major cities in the 10-member nation bloc and some second- and third-tier cities in the region, she said.

"There are potentials for expansion in second- as well as third-tier cities but it all depends on how the open sky policy will turn out to be and the implementation of ASEAN Economic Community," Aireen told Bernama recently.

Hence, the economic impact of such initiatives is important to create both demand for new routes in the region as well as frequencies, she said, citing the positive effect of open sky policy on aviation sector in Europe.

"A much-connected region will enable its people to tap its resources more efficiently and help them achieve economies of scale," she explained.

Among others, Aireen said, harmonisation of standards, for instance, licensing and safety, is among the key factors for the region's aviation sector, which is now considered as one of the most regulated markets despite its potentials.

"However, even without this (open sky policy), AirAsia went around the rules by having joint ventures and expanded in ASEAN," she said.

AirAsia has joint ventures in Indonesia, Thailand and the Philippines. 

Had open sky policy and liberalisation of the sector taken place much earlier, AirAsia would have expanded at a much faster pace, she said.

"It would have enabled us to mobilise our resources better, which means reduction of cost for the airline," said the chief of 15-year old airline.

The age-old regulations not only cripple expansion of airlines in the region but also led to capital disruption and under-investment in the sector, AirAsia's Group Chief Executive Officer, Tan Sri Tony Fernandes said.

"In some places we want to put more capital but our local shareholders are not ready to do so and it leads to inefficient use of capital as we are prevented from doing it (by ourselves) due to out-dated regulations," he cited.

Fernandes also vented out his frustations on how AirAsia's accounting methods which were extremely complicated due to archaic regulations in the region.

"We can't say we control the airline (in some countries in ASEAN), which results in associate kind of accounts that doesn't give the true picture ala RyanAir and EasyJet (in Europe)," he lamented.

On more low-cost carriers coming on board in the region, he reiterated that market liberalisation and openness are all about competition and it's always good.

There is no such thing as over-crowding, he said.

"There are about 400 aircraft in ASEAN, while in Europe there are about 3,000 and we are a much bigger (market)," he said. 

On Value Alliance, he said: "It's fantastic that a bunch of low-cost airlines has got together to create Value Alliance. We have to compete, just like we have been doing all these while. So, we will adapt and we will get better."

Fernandes said its strong partnership with AirAsia X will give AirAsia the much-needed edge, "for Value Alliance to go to Japan from Kuala Lumpur you may have to take three different airlines with AirAsia it's a direct route."

Value Alliance is an airline alliance formed recently by low-cost carriers as its members are Cebu Pacific of the Philippines, Jeju Air of South Korea, NokAir and NokScoot of Thailand, Scoot and Tigerair of Singapore, Tigerair Australia and Vanilla Air of Japan. - Bernama
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