February 25, 2015

AirAsia an early casualty of highly competitive Southeast Asia market

Southeast Asia’s burgeoning airways businesses are now suffering from the level of competition in a now crowded market place. One of those to suffer most has been AirAsia, who has made a trading loss during each of the last five fiscal quarters and is now looking to cut flights on unprofitable routes, reallocation of staff resources and deferring the delivery of some aircraft. Benyamin Ismail, acting Chief Executive of AirAsia X said “Capacity reduction and cost-cutting within the organisation would be two strategies this year.” Ismail became acting CEO for the foreseeable future after the former chief, Azran Osman Rani, resigned last month after a management reshuffle. AirAsia has been hit by the consequences of a weakening ringgit and fuel contract charges that saw shares plummet to an all-time low, while Ismail indicated that travel numbers had fallen as a consequence of three regional airline disasters within such a short period of time.
Ismail anticipates that business will pick up again this year as AirAsia unveils new promotions and competitive fares to attract more passengers. Though no figure was given, Ismail seemed confident that AirAsia will return to profit very soon, saying that “In low-cost airlines, as long as you offer good fares, people will travel. For AirAsia X there was slowness in January because we did not go out with marketing promotions or aggressive advertising out of respect for the families of those involved in the QZ8501 crash.” He also indicated that AirAsia may defer the delivery of some aircraft and also consider selling some slots to potential buyers, confirming “If there are reasonable and keen buyers for those aircraft, we may sell the slots.” The airline will additionally assess capacity requirements in relation to aircraft orders expected in the forthcoming years, including re-examining orders for Airbus A350s and A330neos, Benyamin also confirmed. Currently AirAsia has 10 A350s on order, having also ordered 50 A330neo aircraft last year



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