November 13, 2008 14:22 PM
From Salbiah Said
TOULOUSE (France), Nov 13 (Bernama) -- Long-haul budget carrier AirAsia X Sdn Bhd, which has well over RM300 million cash in hand, is set to turn in profits next year, says its chief executive officer Azran Osman-Rani.
"Probably within three to four months from operating our new planes, we will be profitable. With new planes, more passengers will fly," Azran said.
"Most important is cash flow and this is how we convince our financiers. We have been cash positive since April 2008," he said on board AirAsia Xs brand new Airbus A330 aircraft on its ferry (first) flight from Toulouse to Kuala Lumpur recently.
On Oct 31, AirAsia X took delivery of its first new A330-300 costing US$200 million (RM704 million), which is for its long-haul operation, linking Kuala Lumpur with destinations in Australia, North Asia, the Middle East and Europe, complementing the existing AirAsia network.
Launched in January 2007, the affiliate of low-cost AirAsia Bhd earlier this year placed an order for 25 Airbus A330 aircraft.
Powered by Rolls Royce Trent 700 engines, the carriers new A330 offers accommodation for 383 passengers in a two-class layout, with 355 seats in economy and 28 in the airlines new XL premium class. It is also equipped with the latest in-flight entertainment systems by Thales of UK.
Azran said the airline was also looking at local and foreign funds to finance the purchase of its 25 A330 planes, estimated at US$5 billion (RM17.6 billion). So far, financing for the first few planes had been secured.
In addition to its positive cash flow, he said AirAsia's branding helped the long-haul airline to seek funds in markets which were already badly hit by the credit crunch.
"When we presented to financial institutions in August, we were very fortunate because financiers in Europe had confidence in our brand. We had AirAsia," he said.
"End of August I was still in London. I was trying to convince the financiers. So much details you have to work through. Normally with aircraft financing you have to settle everything at least six weeks before delivery. We settled everything three and a half hours before take-off," he said.
"October 2008 will always be remembered when the (stock) market crashed. The timing couldn't have been worse. Nobody was supposed to lend. Nature of banks is that they only make money when they lend at higher rates. If you (banks) dont lend, you don't make money."
Despite reports of a global decline in passenger traffic, he said the carrier was still experiencing a strong forward bookings from November to March.
Azran said the second A330 will be delivered in mid-December, followed by three each in 2009 and 2010. The remaining planes are slotted for delivery up to 2013.
"With three planes next year, we can add five new destinations. We hope to fly to Japan, Korea, China, India and at least one more somewhere else," he said.
Azran said the carrier was on track to start its new flights to London in March. For its London flights, AirAsia X is in talks with three airports -- Stansted, Manchester and East Midlands.
"We have made all applications and everything looks positive. Hope to announce our sales launch in a months time.
"UK will be exciting as so many people are waiting for it... students, families, friends. To me, whats exciting is not just UK, I am interested in getting new markets," he said.
On its marketing efforts, Azran said unlike traditional airlines which had to wait for passengers to plan their holiday destinations, the low-cost long-haul carrier had to go the extra mile to woo people to travel to places where they never dreamt of going.
"It involves a lot of pull marketing. You've got to pull passengers in. For instance we have to collaborate more with tourism bodies, concert or sports organisers. We have to do a lot more marketing. Have to scratch our heads to find reasons for people to travel. We cannot wait for people to come to us. Thats why we use the media, celebrities to promote our airline.
"We have to keep finding new ways. I am particularly excited about our in-flight entertainment, a collaboration with Virgin Group of UK," he said.
"This is completely new for AirAsia. Nobody in AirAsia has experience in in-flight entertainment and this is the benefit for our collaboration with Virgin Group. Virgin Group installed this interactive in-flight system in its newly launched airline, Virgin America."
AirAsia X is 48 percent-owned by Aero Ventures (a venture of Tony Fernandes and several of his business associates), followed by 16 percent Virgin Group and 16 percent owned by AirAsia.
Bahrain-based Manara Consortium and Japan-based Orix Corp have taken a total 20 percent stake in the long-haul low-cost carrier.
"Instead of trying to figure out for ourselves and taking an existing model, we decided to invest in the latest state-of-the-art system," Azran said.
"Yet we did a few changes as we didnt want to have the CPU (central processing unit), but instead had the touch screen system which is easier to maintain. You can chat with anyone on board or charge your BlackBerry or your iPod by plugging to the USB (universal serial board) port. In future, you can even download content with some different applications," he said.
"We let people be engaged. The system also helps cost management. Even the simple act of service -- you just key in your order, say nasi lemak, and that order gets sent up to the cabin. The cabin crew gets a printout of the amount and comes back to you faster."
The new aircraft helps reduce costs from 4.0 cents per available seat kilometre (ASK) to 3.5 cents per ASK, which, he said, is significantly lower than the cost of 7.5 to 8.0 cents per ASK on traditional carriers.
"An all-new aircraft fleet gives us a strong differentiation against airlines that operate aged aircraft. The new aircraft will lower our fuel consumption and maintenance costs and enable us to raise our efficiency level by up to 30 percent. The new aircraft is the main factor in changing the global aviation industry," he said.
According to Azran, AirAsia X does not need the complexity of traditional airlines.
"There are many ways to save costs. Every single thing to goes into an airline operation, that is how much other airlines spend, all these things add. People, crew overnight in hotels, weight. Thats why you dont see us with big trolleys of newspapers, which carry a lot of weight," he said.
"People are not going to say I am not going to fly AirAsia X as there are no newspapers. But interesting thing is you can get them through the in-flight system. Just key in your order."
AirAsia X has said earlier that its cost savings that it passed on to passengers through low fares, are derived from maintaining a simple aircraft fleet and a route network based on low-cost airports, without complex code-sharing and other legacy overheads that weigh down traditional airlines.
A key principle of the AirAsia X business model is high frequency, point-to-point medium to long-haul services.
Covering destinations between four and eight hours in flight duration from Kuala Lumpur, AirAsia X complements AirAsia's current extensive route network.
Applying the point-to-point network, it says, also kept its operations simple and costs low.
"Code sharing with another airline involves massive amount of capex (capital expenditure), costs are high. Traditional legacy airlines invest hundreds of millions on computer systems, baggage clearing systems and payment systems. But you still lose your bags," Azran said.
"That system (code sharing) is not perfect. In today's age, people are more price-sensitive and Internet-savvy. They can build their own itinerary. They can buy three different tickets for example, Sydney-Gold Coast, they can fly Virgin; Gold Coast to KL they can fly AirAsia X and KL to Macau they can take AirAsia," he said.
"They can check in and out. Most people think Internet penetration in Asia is still low. But the reality is when you offer a good fare, people will find their own connection. If you don't have Internet connection, you can still book online. If they don't have credit cards, they can call their relatives to help. Because they buy their own, check in and out themselves, our operating costs are significantly lower. That's a huge advantage."
Meanwhile, the first A330 was used in AirAsia X's inaugural flight between Kuala Lumpur and Perth on Nov 2.
Since launching its commercial services in November last year, AirAsia X has operated its long-haul services to Hangzhou, China and Gold Coast, Australia with one leased A330.
The airline has since experienced surging passenger demand, recording sales of over 345,000 seats after almost a year in operation.
AirAsia X, which has flown over 200,000 people across Asia and Australia, now serves the Kuala Lumpur-Perth route with six direct return flights per week.
It plans to upgrade this schedule to a daily service by mid-December.
The long-haul budget carrier will also commence services between Kuala Lumpur and Melbourne on Nov 12 this year.
Source: BERNAMA
