AirAsia profit jumps despite 'challenging' climate

Malaysia-based AirAsia on Wednesday (Aug 20) announced a sixfold increase in second-quarter net profit as Asia's budget travel leader increased revenue despite what it called a "challenging" aviation environment.

Net profit was 367.2 million ringgit (S$145 million,US$115 million), up from 58.3 million ringgit in the same quarter of 2013. AirAsia said the jump was mainly due to foreign exchange gains on borrowings. But it said revenue also grew five per cent to 1.31 billion ringgit as passenger numbers increased slightly.

AirAsia is led by flamboyant boss Tony Fernandes, a former record industry executive who acquired the then-failing airline in 2001. It has seen spectacular success and aggressive growth under his low-cost, low-overhead model. While its rival Malaysia Airlines faces potential collapse after two disasters this year, AirAsia last month signed an agreement to buy 50 long-haul A330-900neo passenger planes from Europe's Airbus. The deal is worth US$13.75 billion at catalogue prices.

AirAsia CEO Aireen Omar attributed the second-quarter performance in part to moves to cut down on less profitable flights. She said the airline also held firm on pricing in the face of "irrational" price competition from rivals. "AirAsia continues to be disciplined in an industry where irrational competition exists," she said in a statement.

AirAsia's success has inspired a host of regional imitators. Fernandes said in a statement the outlook should improve in the second half of the year, predicting that competitors would move to more "realistic" pricing.

AirAsia said overall results in the quarter would have been better if not for losses suffered by its Thai, Indonesian, and Philippine subsidiary airlines.

Such struggles have not halted Fernandes's expansionist ways. The company announced last month it would re-enter the Japanese market in a tie-up with e-commerce giant Rakuten, jumping back into the country following its bitter split last year with All Nippon Airways over a budget carrier joint venture.

AirAsia's success over the years has come at the expense of national flag carrier Malaysia Airlines. The company has been hammered by the double disasters of MH370 and MH17 this year, compounding years of financial losses. Earlier this month a state investment fund announced it would take over Malaysia Airlines and de-list it from the stock market before a "complete overhaul" aimed at rescuing it from oblivion.

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Japan's Skymark Airlines surges on AirAsia takeover report

Skymark Airlines shares soared Tuesday (Aug 19) after a report said Malaysia's AirAsia was eyeing the struggling Japanese carrier, but both firms dismissed the story, with AirAsia's chief executive saying he had "never seen such rubbish". The Tokyo-listed stock jumped 27.77 per cent to finish at 230 yen, its maximum allowable single-day gain, on the report in Japan's leading Nikkei business daily.

The report, which cited unnamed sources, said AirAsia was in talks with its lenders over a possible takeover bid for money-losing Skymark. In a statement, AirAsia dismissed the story as "speculation" and "just another industry rumour". "Never seen such rubbish. AirAsia has no interest in Skymark in Japan," AirAsia chief executive Tony Fernandes wrote on Twitter. "There have been no discussions with Skymark."

The putative takeover target also questioned the report. "We're not aware that there is any truth in what has been reported," Skymark said in a statement.

In the wake of its bitter split last year with All Nippon Airways (ANA) over a budget carrier joint venture, AirAsia has announced it would jump back into the Japanese market in a tie-up with e-commerce giant Rakuten. The Nikkei had said the low-cost carrier might create a new local subsidiary, backed by Rakuten, to launch the bid for Skymark to get around restrictions on foreign ownership in Japanese airlines.

Skymark was born out of deregulation measures in the 1990s which were aimed at challenging ANA and rival Japan Airlines' control of the market. But the carrier has been reporting ballooning losses as new entrants into the budget sector hurt its business.

The airline was sideswiped when Airbus last month said it had cancelled a US$2.2 billion jet order with the carrier, apparently over concerns about getting paid. Skymark shares had lost more than 40 per cent at one stage following the collapsed deal.

The company said the European aviation giant had threatened it with "overpriced" penalties and called on it to merge with a bigger airline, a proposal which Skymark's top executive flatly rejected. The Nikkei report also said AirAsia, a major Airbus customer, had approached the plane maker about reducing the cancellation penalties. Skymark has said it was mulling the cutting of unprofitable routes and borrowing more money from its banks to stay afloat.

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AirAsia named best low-cost airline by Skytrax

AirAsia was on Tuesday named the "World's Best Low Cost Airline" and "Asia's Best Low Cost Airline" for the sixth consecutive year by the Skytrax World Airlines Award. The airline received the awards on Tuesday at the Farnborough International Airshow in England.

AirAsia Group Chief Executive Officer Tony Fernandes said it was a great honour to be acknowledged as the world's best low-cost airline for the sixth consecutive year.

"It all started with a dream 12 years ago. From two aging aircraft and six routes back in 2002, we have grown to operate a proud fleet of over 160 aircraft, flying to 95 destinations and having carried over 250 million guests,” he said in a press release.

Fernandes said AirAsia was proud to announce a comeback in the low-cost carrier market in Japan this year with new partners and investors.

"We shall re-emerge with a greater strategy and business plan in our quest to revolutionise Japan's low-cost carrier segment," he added.

He said the airline was also ecstatic with the launch of AirAsia India, the latest affiliate committed to tap India's aviation market.

The Skytrax World Airline Awards is one of the most prestigious accolades for the airline industry.

The annual global survey is conducted over a 10-month period covering over 245 airlines from the largest international airlines to smaller domestic carriers.

18.9 million customers participated in a survey measuring standards across 41 key performance indicators of an airline's frontline product and services.

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AirAsia finally soars in India

 AirAsia India finally took off as the fourth low-cost carrier in the country on Thursday with its maiden flight from Bangalore to India’s smallest state, Goa.

Tickets for the airline's maiden flight were sold out within 10 minutes of opening for sale on May 30.

This development in itself has sent shock waves through the highly-competitive sector in India.

The 49:30:21 joint venture between AirAsia, Tata Sons and Telestra Tradeplace offered a fare as low as 990 rupees (US$16.70) for the flight.

Its 25,000 promotion seats were also taken up within 48 hours.

"Our motto has always been to make everyone fly. We have already begun to show that we are true to our promise," said Chief Executive Officer Mittu Chandilya in acknowledging the brisk sale of tickets.

To keep pace with the airline, others in the fray such as SpiceJet and IndiGo have come up with their own promotional fares.

In announcing the launch of four new flights on its domestic routes, Indigo also proclaimed fares of one rupee (two US cents) on the Bangalore, Chennai and Goa routes, taking on the competition from AirAsia India’s five-rupee fare (excluding airport tax and other applicable fees).

The other low cost carrier in India is GoAir.

Mittu had said the airline’s fare will be 35 per cent cheaper than others in the market.

According to the Director General of Civil Aviation, among the domestic carriers, including the full-services ones, IndiGo dominates the local market with a 31.6 per cent share, followed by Jet Airways-JetLite combined at 21.8 per cent in April.

Air India has an 18.3 per cent share, SpiceJet 17.9 per cent and GoAir 9.5 per cent.

Although no one has got the inside of AirAsia India’s game plan, it is an open secret that it won't be flying into crowded sectors, at least for now.

AirAsia India has placed its interest in second- and third-tier cities.

About 50 per cent of the traffic is in Mumbai and New Delhi combined, AirAsia’s Group Chief Executive Officer Tony Fernandes said when the airline was launched.

There are plenty of markets to be developed, he added, highlighting that AirAsia India’s presence will bring new connectivity, more frequency and redistribution of air traffic.

Other airlines furiously lobbied against AirAsia's entry, even after it secured the Air Operator Permit (AOP) last month. It also faced a court case filed by a political party leader objecting to the clearance given to the airline to start operations.

In his no-holds-barred style, Fernandes had lashed out many times over how vested interest was bogging down the Indian aviation industry.

The Indian aviation industry has a $12.6 billion debt and suffered $8.6 billion in cumulative losses.

Fernandes said he had never experienced a situation where an entire industry tried to block his airline.

"Some airlines are scared of us. We must be doing something right," he tweeted recently.

"Help us people of India. Don’t let cartels win and not let (the) ordinary man fly."

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AirAsia's profit up 33% despite flat revenue

AirAsia saw its net profit soar by a third in the first quarter after accounting for currency gains and tax credits despite flat revenue from ticket sales, it reported on Tuesday.

Net profit for the three months ended March rose 33 per cent from a year earlier to 139.7 million ringgit ($43.4 million), in large part due to forex gains on borrowings and deferred taxation despite net operating profit sliding by 23 per cent to 126.6 million.

Revenue was flat at 1.3 billion ringgit as average fares paid by customers dropped by nine per cent although passenger volume was up four per cent.

But the budget airline giant's boss Tony Fernandes insisted its average fare was on an upward trend.

"What we see is that the consumers now prefer short-haul travels as compared to long-haul which is beneficial for our business," he said in a statement.

Looking forward, he added that AirAsia had decided to defer aircraft deliveries to 2016 onwards to take advantage of new Airbus A320neos that are 16 per cent more fuel efficient.

The airline, which now has more than 120 A320s and is one of the biggest customers for the European aircraft maker Airbus, is expecting nearly 360 new aircraft to be delivered by 2026.

For 2013, profit fell 55 per cent to 364 million ringgit compared to a year earlier.

Fierce rival Malaysia Airlines announced last week its fifth straight quarterly loss in the first three months of 2013, reeling from the March 8 disappearance of one of its Boeing 777s.

AirAsia has expanded aggressively in recent years, setting up subsidiary budget carriers in Indonesia, the Philippines and Thailand and plans to launch a no-frills joint venture in India.

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Thai AirAsia X upbeat on prospects in Thai market

Thai AirAsia X Co Ltd is upbeat on prospects in the Thai aviation market and is looking to serve 200,000 travellers in the first year of its operation.

Its chief executive officer Nadda Buranasiri said the new low-cost budget airline would be flying into three Asian destinations from June 17, while planning to add China to its routes next year.

"You will see a spiderweb of AirAsia's expanding network once we start operations. That will make potential travellers in Asean have a greater choice of travel destinations," he added.

Thai AirAsia X started operations on April 22 and will commence direct flights at the Dong Mueang International Airport on June 17 to South Korea's Incheon International Airport.

The airline will also commence direct flights on its Japan routes a month later and it involves the Narita and Kansai International Airports.

Thai AirAsia X is a 48.9 per cent subsidiary of AirAsia Bhd.

Nadda said Thailand's consumer behaviour had changed following the entry of low-cost airlines such as Thai AirAsia into the country's travel market 10 years ago.

"Online bookings are normal in the life of younger travellers compared to a decade ago when people travelled to other destinations, even within the country, via packaged tours," he added.

He noted that Thai AirAsia X would be focusing on brand building in the first year of its operations before expanding its routes and fleet.

It will operate two leased A330-300 wide-body aircraft to the three destinations.

The aircraft are considered new with two ranging from about five to six years old.

Nadda said Thai AirAsia X is allocating between US$8 million and US$10 million as capital expenditure towards maintaining the aircraft.

Looking ahead, the airline is cautiously optimistic of the future and in respect of expansion plans, against the backdrop of the political, social and economic situation in Thailand.

"Right now, it looks very promising. It also depends very much on the situation in time.

But we are prepared to add more aircraft if the signs are good," said Nadda.

"We see a lot of people coming from China to Thailand. At the same time, Thai travellers like to explore more of China. So, we are looking to add the country to our routes," he said.

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Malaysia opens new budget airport on Friday

Malaysia this week opens what it calls the world's largest airport built specifically for low-cost airlines, a project driven by budget travel's phenomenal growth but which debuts under the shadow of missing flight MH370.

The $1.2 billion facility near the main Kuala Lumpur International Airport (KLIA) was originally targeted to open three years ago but has been hit by repeated delays, amid concerns over safety and subpar construction, even as costs have doubled.

But the new KLIA2 budget terminal will begin operations Friday with an initial 56 flights, increasing the load as airlines move full operations over from a nearby existing facility in coming days.

Analysts and the travelling public agree the opening of a new budget terminal is long overdue.

The current low-cost terminal is a cramped and bare-bones facility that resembles a bus station. Capacity is 15 million passengers, but about 22 million squeezed through last year.

The gleaming KLIA2 meanwhile covers an area equal to 24 football fields, authorities said, about four times the size of the facility it is replacing.

Its modern design features soaring ceilings, natural lighting, people-mover belts and improved connectivity with access to an existing express airport train to Kuala Lumpur 50 kilometres (31 miles) away.

Malaysia-based Malindo Air, the Philippines' Cebu Pacific Air, Singapore's Tiger Airways, and Indonesia's Lion Air and Mandala Airlines will begin initial operations there Friday.

Regional low-cost leader AirAsia plans to join them by May 9, when the old terminal is due to close.

About 24 million passengers are expected to pass through KLIA2 in the first 12 months, and annual capacity is 45 million. Current capacity at the main KLIA terminal is roughly 40 million, but expansion plans are in the works.

"KLIA2 will cement Kuala Lumpur's position as a thriving hub for both low-cost and full-service travel," said Bashir Ahmad, managing director of state-linked airport operator Malaysia Airport Holdings Berhad (MAHB) which built KLIA2.

Kuala Lumpur has been at the core of a regional budget-travel boom credited in large part to Malaysia-based AirAsia.

The once-failing airline was acquired in 2001 by outspoken Malaysian entrepreneur Tony Fernandes.

He quickly turned it into one of the aviation industry's biggest success stories, its rapid regional growth helping to broaden a market that has benefited a host of Asian competitors.

"AirAsia is the driving force behind this growth because of its size and its ability to attract travellers with its price-sensitive tickets," said Shukor Yusof, an aviation analyst with Malaysia-based Endau Analytics.

"KLIA2 will serve as a catalyst to propel air travel in Asia, which is experiencing robust growth."

But the still-unexplained March 8 disappearance of Malaysia Airlines flight MH370, which took off from the main KLIA, has raised worldwide concern over Malaysian aviation and focused attention on KLIA2's problems.

Its delays and rising costs triggered an ongoing inquiry by a parliamentary committee and accusations last month by impatient AirAsia officials of "many concerns, especially on functionality, safety and security."

These included depressions on runways and taxiways, said the airline, which threatened not to move in. MAHB has acknowledged KLIA2 is on unstable ground that will require years of upkeep.

Malaysia's government is accused of presiding over a crony capitalist system often blamed for frequent problems and unexplained cost overruns in big projects.

Fernandes has previously accused the government of favouring loss-making flag carrier Malaysia Airlines over profitable rivals like AirAsia.

But AirAsia agreed in mid-April it would move over to KLIA2 after the government said the International Civil Aviation Organisation (ICAO) would inspect the facility.

Malaysia said last week ICAO approval was given.

"I would like to confirm that KLIA2 is safe," Transport Minister Hishammuddin Hussein told reporters last week.

Fernandes declined comment.

Shukor said the Asian budget-travel segment had roughly tripled over the past decade to about 50-70 million passengers in 2013, or about 20 percent of regional air traffic.

The expanding Asian middle class means the market can expect further "robust growth of up to 10 percent annually, especially with the launch of KLIA2."

Pushing a baggage trolley, Agnes Tay, 33, a financial manager for Adidas who was among volunteers in a recent KLIA2 trial run, called the terminal "a breath of fresh air."

"It is clean and I feel safe. It will make me fly more often," Tay said.

Malaysia hopes KLIA2 will help increase and broaden the flow of tourists to the country. Nearly 26 million came in 2013, the vast majority driving over from neighbouring Singapore.

MH370 has cast a cloud over hopes of increasing fast-growing arrivals from China, Malaysia's third-largest source of tourists.

Two-thirds of the 239 people on MH370 were from China and tens of thousands of Chinese have cancelled plans to visit.

But analysts said long-term effects are not expected.

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AirAsia agrees to move to troubled new Malaysia airport

Malaysian budget airline AirAsia said on Tuesday it would move to a much-delayed new international terminal set to open next month despite recently criticising it as rife with safety issues and other problems.

The facility near Kuala Lumpur International Airport (KLIA) is being touted by Malaysian authorities as the world's largest low-cost airline terminal.

But the so-called "klia2" has been hit by repeated delays, construction problems and costly overruns that have sparked a parliamentary investigation and harsh criticism by AirAsia directed at the state-linked Malaysian airport operator building the terminal.

However, AirAsia, which has rapidly become one of the world's top budget airlines, said in a statement Tuesday it was now satisfied with the government's commitment to safety after authorities said the International Civil Aviation Organization (ICAO) would be brought in to evaluate klia2.

"This decision reflects the priority that the government is giving to the issue of safety, and assuring the public that klia2 is safe," it said in a statement, adding it would move into the facility for its May 9 opening.

AirAsia had said two weeks ago it would not move in unless "unresolved pressing issues" were addressed, including "depressions" on the runway it said were discovered by independent inspectors.

AirAsia has also complained that it was shut out of decision-making, despite being the facility's biggest and most important future tenant.

Its concerns raised further questions about aviation safety in the country as authorities struggle with the crisis of missing Malaysia Airlines flight MH370.

AFP was unable to reach AirAsia officials immediately for comment on the sudden about-face.

AirAsia group boss Tony Fernandes said on his Twitter feed that "some good progress" had been made on klia2.

The facility is being built by the country's airport operator, Malaysia Airports Holdings Bhd (MAHB).

MAHB has said carriers will have to move in by May 9, when it plans to close an existing low-cost terminal nearby which handled 22 million passengers last year.

The klia2 terminal was originally due to open in 2011 but has been repeatedly delayed, and its price tag has doubled to $1.2 billion.

MAHB has previously acknowledged klia2 is located on unstable ground that may settle, and that the facility could require years of resulting upkeep.

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AirAsia reports drop in profit

AirAsia on Wednesday reported a sharp fall in fourth quarter net profit, as the flamboyant boss of Asia's largest budget carrier by capacity called for "creative" ways to slash costs amid stiff competition.

Net profit for the three months ended December fell 19 per cent from a year earlier to 245 million ringgit ($74.6 million), in large part due to Malaysian currency fluctuations, while revenue remained flat at 1.35 billion ringgit.

For the full year, profit fell 55 per cent to 364 million ringgit compared to a year earlier.

AirAsia's 2013 results follow a highly profitable 2012, when the carrier -- growing from a struggling two-plane operation, which Fernandes bought in 2001 -- recorded a 238 percent jump in net profit despite high fuel prices.

AirAsia boss Tony Fernandes said the carrier would continue to focus on slashing costs by selling older aircraft and reducing staff, among other measures.

"The company needs to continue to be creative in driving margins up," Fernandes said in a statement.

"We have deferred seven aircrafts in 2014 and 12 in 2015 to later years with intention to swap those aircraft with the new fuel efficient A320 neo," he said.

Operating profit for the fourth quarter declined two percent to 315 million ringgit due to higher aircraft maintenance costs and lower fares, AirAsia said.

Fierce rival Malaysia Airlines announced last week its fourth straight quarterly loss in the last three months of 2013, accumulating a whopping 1.17 billion ringgit loss for the full year.

The airline, which now has more than 120 A320s and is one of the biggest customers for the European aircraft maker Airbus, is expecting nearly 360 new aircraft to be delivered up to 2026.

It has also set up subsidiary budget carriers in Indonesia, the Philippines and Thailand and plans to launch a no-frills joint venture in India.

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AirAsia boss lets rip at Malaysian Airlines, aviation authorities

Flamboyant AirAsia boss Tony Fernandes savaged state-backed flag carrier Malaysian Airlines (MAS) and the nation's aviation authorities on Wednesday, accusing them of mismanagement that was harming the travelling public.

The budget airline mogul posted the comments on his Twitter feed a day after fierce rival MAS announced it had lost a whopping 1.17 billion ringgit ($355 million) in 2013.

"AirAsia Allstars, take a bow. Malaysia Airlines lost over a billion," Fernandes tweeted.

"So much money wasted. If people were more efficient Malaysians would spend less on travel."

Fernandes bought ailing AirAsia in 2001, quickly turning it around with his no-frills, low-fare formula.

AirAsia has put severe pressure on inefficient MAS, which analysts say is hampered by poor management, bloated and demanding unions and government interference.

On Tuesday, MAS also reported its fourth straight quarterly loss and warned of a "challenging" year ahead.

The airline has bled money in recent years and announced a series of turnaround plans, but the poor earnings have continued.

"I wonder if it's fair that Malaysia Airlines can lose so much money and protect its market share. Can only do that with taxpayers money," Fernandes tweeted.

The outspoken Fernandes also took aim at Malaysian regulators, implying they were seeking to hinder MAS' competition.

"Imagine how many jobs AirAsia could have created if (there was) effective regulation. We have done amazing. Unbelievable. Despite all the roadblocks," he said.

The two airlines briefly buried the hatchet in 2011, when Fernandes agreed to a strategic tie-up aimed at helping to revive struggling MAS.

The deal was called off just months later, with Fernandes faulting "massive" MAS union resistance to reform and hinting at deep problems in the rival airline.

AirAsia is currently at odds with government-controlled airport operator Malaysian Airport Holdings Berhad (MAHB) over a two-year delay and cost overruns in the construction of a new budget terminal outside the capital Kuala Lumpur.

AirAsia is set to be the main presence at the facility. Its current opening date is May 2 but recent media reports have suggested it may yet be pushed back again.

Fernandes said MAHB "spends double what it could".

AirAsia, which has some of the lowest unit costs in the world, has raked in business awards and accolades over the years, while expanding aggressively.

AirAsia reported its net profit fell by $11 million in the third quarter of 2013, mostly on foreign-exchange movements. It will report full-year results at the end of February.

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AirAsia profit slumps for third quarter in row

AirAsia, Asia's largest low-cost carrier by fleet size, said on Wednesday its third-quarter net profit fell 77.5 per cent year-on-year due to foreign exchange losses despite an increase in passengers.

Net profit for the quarter ending September 30 stood at 35.48 million ringgit ($11.14 million) compared to 157.81 million in the same quarter last year.

Revenue increased 3.5 per cent to 1.28 billion ringgit from 1.24 billion ringgit the previous year, supported by a 11 per cent growth in passengers, it said.

Operating profit rose by 5.0 per cent to 291.06 million ringgit for the quarter. But the bottom line was hit by foreign exchange losses on borrowings.

Average fares also fell 12 per cent from the same quarter last year as AirAsia cuts prices to stay ahead of competitors, including struggling national flag carrier Malaysia Airlines and the recently set-up Malindo Airways, an affiliate of Indonesia's budget carrier Lion Air.

"The main thing to highlight is that despite irrational competition by competitors, AirAsia is able to post higher operating profit and margins," the company said in a statement.

AirAsia said the outlook was "strong" for the rest of the year.

"Passenger numbers are expected to be particularly strong in November and December during the year-end holiday period and remain strong for the rest of the quarter in line with the seasonal patterns," it said in the stock market filing.

The airline's profits slumped 62 per cent in the second quarter and 39 per cent in the first quarter year-on-year.

This follows a highly profitable 2012, when AirAsia recorded a 238 per cent jump in net profit for the full financial year despite a 1.0 per cent rise in the average fuel price.

AirAsia, run by flamboyant boss Tony Fernandes, has grown from a struggling two-plane operation in 2001 to a total fleet of more than 120 A320s.

The airline, one of the biggest customers for European aircraft maker Airbus, is expecting nearly 360 more aircraft to be delivered up to 2026.

It has also set up subsidiary budget carriers in Indonesia, the Philippines and Thailand and plans to launch a no-frills joint venture in India later this year.

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Japan's ANA and AirAsia to dissolve budget carrier

Japan's All Nippon Airways and AirAsia said on Tuesday they have agreed to terminate their budget carrier joint venture as business slumped amid management clashes, dealing a blow to the country's fledgling low-cost sector.

Malaysia-based AirAsia said AirAsia Japan would cut service by the end of October, just over a year after it started flying out of Tokyo's Narita airport in August.

"The joint venture... faced many challenges since its launch," AirAsia said in a statement.

It cited a "fundamental difference of opinion between its shareholders on how the business should be managed from cost management to where the domestic business operations should be based".

AirAsia chief executive and founder Tony Fernandes added that "it is time for us to part ways and focus our attention on what we do best, which is running a true LCC (low-cost carrier)".

Fernandes hinted AirAsia may return to Japan, saying its brand had "resonated with Japanese customers".

"I remain positive on the Japanese market and believe there is tremendous opportunity for an LCC to succeed," he added.

However, Shinzo Shimizu, senior vice president of ANA Holdings, told a press briefing in Tokyo on Tuesday that the venture dissolved because "its name didn't spread in Japan and it couldn't make profits".

The airline booked an operating loss of about 3.5 billion yen ($36 million), he said.

Another problem was that the carrier focused on online sales -- a key strategy for AirAsia -- but many Japanese travellers still book flights through travel agents, Shimizu said.

"We think that there is a limit to the strategy of simply bringing AirAsia's operation into the Japanese market," he added ANA would launch a new budget brand in November, he said, although the airplanes leased by AirAsia Japan would be returned to the Malaysian firm.

"We will announce details of which brand and aircraft to use, as well as routes, in July," Shimizu said.

News reports said a new airline could fly under ANA's other budget carrier joint venture, Peach Aviation, which flies out of Osaka.

AirAsia Japan was one of three budget airlines to come online in Japan over the past couple of years, promising to shake up a sector long controlled by ANA and rival Japan Airlines.

A key constraint for budget carriers is that they were shut out of Haneda airport, just a short train ride from downtown Tokyo and the staging point for the most profitable domestic routes.

Flying out of Narita requires a one-hour train ride from the city centre, a long-standing headache for travellers including passengers with AirAsia Japan and Jetstar Japan, a joint venture between JAL and Australia's Qantas.

The Japanese aviation industry has long been notorious for sky-high landing fees and fuel taxes.

Another no-frills carrier, Skymark Airlines, has struggled to offer the kind of heavily discounted fares seen in Europe and North America due to high operating costs.

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It seems that the collaboration came too quick and a market research wasn't done properly before Tony jumped at the opportunity of operating a low cost carrier in Japan. The aspect about Japanese consumer's "offline" practice shows that it is a market that you have to adapt to rather than the other way round.

It is sad that it didn't work out as well as another collaboration in Jetstar Japan. It still remains to be seen if the Japanese can accept this business model as such airlines are still struggling pretty significantly to make noticeable good progression.

AirAsia in US$8.6b engine deal to power Airbuses

Fast-growing budget carrier AirAsia said Thursday it had ordered 100 engines worth US$8.6 billion from manufacturer CFM International to power Airbus A320 airliners ordered last year.

The deal inked on Wednesday in France includes 64 new LEAP-1A engines for fuel-efficient A320neo jets, the Malaysia-based carrier said in a statement.

Asia's largest budget carrier by fleet size said the order also includes a 20-year service agreement.

CFM - a joint venture between GE Aviation of the United States, and France's Safran - said the LEAP engines provide up to 15 per cent better fuel efficiency.

AirAsia ordered 100 A320s for US$9.3 billion in December.

Airbus said at the time that the deal made AirAsia the biggest customer for single-aisle A320 airliners in the world, with a total of 475.

The airline serves about 70 destinations in 20 countries across Asia.

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A huge deal for the engine maker, one which will propel the company forward. With massive plane orders being made in recent months, the choice of engine used is a massive market for these engine makers. Clinching a deal of such size will be very beneficial for the company. Not only will they provide the initial power-up, they will also provide the maintenance service, which is another huge chunk of money involved.

Competition among budget airlines heats up

Southeast Asian low-cost airlines are looking at new ways to out-do one another.

In a market driven by rising wealth, it seems size does matter, so too does keeping faith with customers, as Singapore Airlines' budget offshoot Scoot has learned in its first year of operation.

Long-haul low-cost carrier Scoot is adding another destination to its small but growing fleet. Its inaugural flight to Seoul commences 12 June.

Scoot’s CEO Campbell Wilson said: “Our fifth aircraft does not operate between 11pm and 4am, which therefore provides some backup for when our key departures to Australia, Taipei and Japan and most of the China flights depart. So when you grow a little larger, you have a little bit more bandwidth to be able to counter the inevitable issues that crop up.”

Scoot has had to counter setbacks in its early days, but it said it has done what it can recapture passenger confidence.

Mr Wilson said: “We've certainly listened to the feedback that we've received in the early months of selling tickets.”

Shashank Nigam, CEO of SimpliFlying, said: “I believe their China focus has really paid off well, launching secondary Chinese cities that SIA doesnt fly to… for example, Nanjing.”

By 2015, Scoot will be the first low-cost carrier in ASEAN to operate the Boeing 787 Dreamliner aircraft, which will help the airline reduce costs.

But in the highly-competitive environment, analysts said low-cost carriers like Scoot and Tiger Airways could look to establish more partnerships with other airlines in order to grow their network.

Mr Nigam said: "Tiger needs to work closer with regional partners like Mandela and SeaAir in the Philippines which have been highly unprofitable of late. I think if they can leverage that better, it will help the group overall. For Tiger, I think the key is beating the trend of commoditisation. Everyone can fly now. Everyone can fly cheaply. You want to go beyond price as the product. "

Indonesia's biggest budget carrier Lion Air has an outstanding US$24-billion order for Airbus and also launched Malindo Airways in Malaysia to capture a share of the market from its competitor AirAsia.

AirAsia X, AirAsia's long-haul low-cost arm, is setting up its second hub in Bangkok.

Paul Ng, head of Aviation at SH Legal, said: "They have a huge fleet. And they have huge delivery orders. So they have economies of scale, which Scoot does not have. Each of these carriers has hinterlands to rely on. Lion Air (has) Indonesia, the world's largest archipelago, and AirAsia, Malaysia, which is the second largest, highest GDP country outside Singapore. These two are very rich sources of revenue.

“For Scoot itself, which is in Singapore, with very high passenger traffic, it's ultimately dependent on international trade lines and on how many trade routes that it can secure from governments to do its business. Lion Air and AirAsia can fly domestically with very few restrictions, subject to there being available slots in the airports that they want to fly into.”

Besides injecting more aircraft to boost yields, experts said budget airlines would also do well to boost ancilliary services, which make up almost 40 per cent of their income.

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Things are heating up. The low cost carriers are finding ways to out perform each other and gain a bigger market share. In order to stand out from the rest, the airline must prove itself to be different, in a good way. Easier said than done when this has to be done while keeping to the low cost model.

AirAsia's Philippine unit buys into rival

The Philippine unit of regional budget airline leader AirAsia announced on Monday it had acquired 49 percent of local carrier Zest Airways, allowing it to fly out of the nation's capital.

The deal will also see Zest Airways' owner, tycoon Alfredo Yao, take 15-percent stake of Philippines' AirAsia, a company statement said.

The alliance will allow Philippines' AirAsia, which has operated from an airport 90 minutes' drive north of Manila since launching in 2011, to fly out of the capital's main international airport.

"This will allow us to leverage on our respective strengths, which in the case of Zest Air, include its operations out of (Manila)," Philippines' AirAsia chief executive officer Marianne Hontiveros said in the statement.

Philippines' AirAsia chairman Antonio Cojuangco said the partnership would lift both companies, citing "the Philippines aviation market('s) tremendous upside potential".

The Philippines has recently seen a boom in air traffic with its largest airlines, local budget pioneer Cebu Pacific and flag-carrier Philippine Airlines implementing multi-billion-dollar fleet expansions.

The government is aiming for tourist arrivals to increase from 4.2 million last year to 10 million in 2016.

The two airlines will continue separate operations for now, but will be able to share facilities and resources, Philippines' AirAsia spokeswoman Genefer Bugarin-Tan said.

She would not disclose how much the deal had cost.

Philippines' AirAsia is 40 percent owned by Malaysia's AirAsia Berhad, the region's biggest budget carrier in terms of fleet size, while the balance is owned by prominent Filipino business leaders.

It currently flies from its base north of Manila to Singapore, Hong Kong, Taipei and Kuala Lumpur, as well as two popular local tourist destinations.

Zest Air operates from Manila and the central city of Cebu. It flies to 14 cities in the Philippines as well as 10 international destinations, including cities in South Korea, China, Taiwan and Malaysia.

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A big move by AirAsia to swallow more market share in the Filipino market and they should rightly do so. Massive air traffic is predicted coming out of this country as its affluence rises and more investors pour into the country.

AirAsia drops plan for new Singapore airline unit

AirAsia, Asia's largest low-cost carrier, has scrapped plans for a Singapore joint venture due to high operating costs and lack of domestic market potential in the island republic.

"We are concentrating on markets which have big domestic markets and big populations and markets that are more liberal and market-orientated," Tony Fernandes, group chief executive, was quoted as saying in Monday's Wall Street Journal.

Malaysia-based AirAsia flies throughout Asia and has set up subsidiary budget carriers in Indonesia, the Philippines, Thailand and Japan.

The carrier, one of the biggest customers for European aircraft maker Airbus, has a fleet of 112 A320s and is expecting 266 more aircraft to be delivered up to 2026.

Fernandes said it is "very clear that we are in the right markets and capital should go into those countries to maximise return".

An AirAsia official confirmed his comments to AFP.

The airline was initially keen to establish a unit in Singapore, which would have allowed it to compete with rivals including Jetstar and Tiger Airways and fly to more destinations from the city state, the Wall Street Journal said.

More than 50 million passengers travelled through Singapore's Changi Airport in 2012, according to the airport operator.

AirAsia has grown rapidly since Fernandes, a former record industry executive, bought the failing airline in 2001.

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Good news for operators, bad news for consumers? With the lack of competition, ticket prices and promotions will perhaps be less favourable to consumers, but it should be a huge sigh of relief for operators as they can enjoy higher load factor with less dilution of passenger load with AirAsia coming in to share the pie.

However, this also mean less jobs created for the local market. The air crew and ground crew would have created lots of jobs, but I guess the huge operating costs in Singapore is a huge turn off.

Low-cost carriers to continue to drive growth in aviation industry

Low-cost carriers are driving growth in the aviation industry this year, accounting for a billion-dollar increase in the profits forecast for airlines in 2012.

And Singapore Airlines (SIA) has latched on to the trend with its newly-minted low-cost carrier Scoot, in a bid to remain competitive.

Low-cost carriers have continued to enjoy healthy profits, with the number of economy passengers more than doubling that of premium travellers, according to the International Air Transport Association.

Besides Jetstar and AirAsia, SIA's Scoot started operations this year, with Cebu Pacific joining the ranks next year.

Siva Govindasamy, Asia managing editor of Flightglobal, said: "From virtually nothing four years ago, we will have four Southeast Asian long-haul low-cost carriers next year, and you are still in a market segment that is unproven.

"People do not know how much money you can make in this market segment. AirAsia X is likely to have its IPO (initial public offering) next year, and we will see how the market reacts to that long-haul low-cost business model."

Asia Pacific carriers account for more than half of the profits in the aviation industry this year, and low-cost carriers currently take up about 18 per cent of the market in Asia Pacific, compared to 24 per cent globally.

Some airlines are expecting deliveries of more aircraft in 2013, with the likes of LionAir and AirAsia both adding more than 30 new planes to their current fleet. And experts have said this could lead to a price war in Indonesia and Malaysia, which could result in consolidation for smaller players.

But full service carriers aren't resting on their laurels either. Besides ordering new aircraft, SIA is also spending S$95 million to upgrade existing cabins.

But Singapore's national carrier is also repositioning its focus from the premium to value segments.

Subhranshu Sekhar Das, director (aerospace & defense practice) at Frost & Sullivan, said: "The only way to survive in this market is to consolidate and position their strengths.

"We have been seeing multiple carriers creating multiple brands under one umbrella, either SIA creating SilkAir, Scoot; Thai Air with Thai Smile and their partnership with other low-cost carriers; MAS with MASwings, Firefly..."

Besides multiple offshoots, SIA is also starting to get embroiled in a competition in Australia. SIA recently bought a 10 per cent stake in Virgin Australia and sold off its loss-making unit in Tiger Australia.

This came after a recent tie-up between Qantas and Emirates. But Qantas Airways looks set to defend its turf.

Leithen Francis, editor of Aviation Week, said: "Qantas is going to be focusing on the domestic market. I think Alan Joyce's point of view is to invest in those bits of the business that are profitable.

"Their international long-haul business is not profitable but what is very profitable is their domestic 737 operation, and also their regional turbo prop and regional jet operation. So I can see them investing more in new equipment for their operations in Australia."

But with the recent fall of India's Kingfisher Airlines, some analysts also predict that competition might soon move to India's aviation market instead.

Mr Francis said Etihad is in active negotiations to take a stake in Jet Airways and India is a very important market for Middle Eastern carriers.

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Premium airlines no longer have the cutting edge? One thing for sure is the emergence of these low-cost carriers have battered on the profits of the big boys so much so that they're creating their own brand of low-cost carriers to complement their routes on the premium side of business. 

The tide has changed, the future belongs to the low cost carriers as they're virtually recession-proof.

AirAsia becomes first operator of Airbus’ Sharklet equipped A320

Airbus has delivered the first A320 equipped with Sharklets today to AirAsia, which becomes the first operator of the new fuel-saving large wing tip devices. Sharklets are an option on new-build A320 Family aircraft, and are standard on all members of the A320neo Family.

Sharklets are made from light-weight composites and are 2.4 metres tall. These newly designed wing-tip devices reduce fuel burn and emissions by improving the aerodynamics of the aircraft significantly. Cutting airlines’ fuel bills by around four percent, Sharklets will offer the flexibility to A320 Family operators of either adding around 100 nautical miles more range or allowing increased payload capability of up to 450 kilogrammes.

“We are extremely proud to be the first airline in the world to take delivery of an A320 fitted with Airbus’ new, fuel saving Sharklets,” said Tan Sri Tony Fernandes, Group Chief Executive Officer of AirAsia . “AirAsia has a long-standing, special relationship with Airbus and as we grow our network with our all A320 fleet, these new wing tip devices will contribute to fulfilling our goal of being the most efficient, innovative low cost airline in the world.”

“As our biggest A320 Family airline customer, it’s very fitting that AirAsia is the first carrier to benefit from the four percent fuel saving our new Sharklets deliver,” said John Leahy, Airbus Chief Operating Officer, Customers. “AirAsia’s vision is to make is possible for everyone to fly and now with their Sharklet-equipped A320s they can assure their passengers that they are also travelling on board the world’s most environmentally friendly single-aisle aircraft.”

Due to the very strong customer demand for Sharklets, all Airbus’ single-aisle final assembly lines (FALs) will be engaged in building A320 Family aircraft with Sharklets. These FALs are located in Toulouse (France), Hamburg (Germany) and Tianjin (China) and will soon be followed by an additional A320 FAL in Mobile (Alabama, USA).

AirAsia, the largest low cost airline in Asia is also Airbus’ largest A320 Family airline customer. The carrier recently placed a new order with Airbus on the 13th December 2012 for 100 more A320 Family aircraft including 36 A320ceo aircraft with Sharklets. Altogether, AirAsia has ordered 475 single aisle aircraft from Airbus, comprising 264 A320neo and 211 A320ceo. Over 100 aircraft have already been delivered to the airline and are flying out of its bases in Bangkok, Kuala Lumpur, Jakarta, Manila and Tokyo.

The A320 Family is the world’s best-selling and most modern single aisle aircraft Family. To date, close to 8,900 aircraft have been ordered and over 5,300 delivered to more than 380 customers and operators worldwide.

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New wing tip device resembling the fin of a shark called the Sharklet has finally made its appearance on an Airbus aircraft in the A320. With the new benefits, it makes the A320 more versatile. The airlines are now choose how to tap on the added advantages of the sharklets.

Fly further? Carry more cargo/passengers? Or simply remain status quo and burn less fuel. Local carriers in Singapore only Jetstar Asia has ordered one of it. SilkAir is switching to the B737 which already had the sharklets but Tiger Airways seems unmoved by it.

AirAsia places giant contract for A320 planes: Airbus

Malaysian low-cost airline AirAsia has ordered 100 Airbus A320 airliners with a catalogue value of US$9.3 billion (7.1 billion euros), including 64 future A320 fuel-efficient Neo models, Airbus said on Thursday.

The order means that AirAsia, the leading low-cost airline in Asia, is now the biggest customer for single-aisle A320 airliners in the world, Airbus said.

The A320 is popular with low-cost airlines because with its single aisle and flying range, it is suited to the short-to-medium distance routes on which low-cost operators tend to concentrate.

Airbus said that AirAsia had ordered in total 475 single-aisle aircraft from Airbus, comprising 264 A320neo and 211 A320ceo.

The airline was already operating more than 100 of these from its bases in Bangkok, Kuala Lumpur, Jakarta, Manila and Tokyo.

AirAsia group chief executive Tan Sri Tony Fernandes said at the signing ceremony alongside British Prime Minister David Cameron at Broughton, Wales, where Airbus has a factory, that the purchase "goes in-line with our strategy to further build our already extensive network through new routes and added frequencies and allow AirAsia to maintain its market leadership."

Airbus president Fabrice Bregier said: "AirAsia is one of the great success stories of recent years in the airline business."

AirAsia's all-A320 fleet services about 70 destinations in 20 countries across Asia.

The company has an affiliate AirAsia X which operates widebody A330-300s on longer services from Kuala Lumpur to Northern Asia and Australia.

Airbus said that so far, more than 8,800 A320 aircraft had been ordered and more than 5,300 delivered to more than 380 customers and operators worldwide.

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100 new A320 for AirAsia. This is some very fierce expansion plans by Tony Fernandes.

Route cuts put Malaysia Airlines back to black

Struggling flag carrier Malaysia Airlines said on Tuesday it has swung back to a profit after six straight quarterly losses as the slashing of unprofitable routes helped cut costs.

The airline recorded a 37.08 million ringgit ($12.25 million) net profit for its third quarter ending September 30, compared to a 477.6 million loss in the same period a year earlier, it said.

"We are very encouraged by the improved trend in our financial performance in this third quarter especially after six quarters of loss," chief executive Ahmad Jauhari Yahya said in a statement.

"Our focus remains to increase revenue and manage our costs... Although the journey ahead is long, with focus, we will succeed."

The improvement in the airline's bottom line "was mainly due to the route rationalisation programme", which resulted in a nine per cent decrease in fuel costs and a seven per cent drop in non-fuel costs, the carrier said.

Lower fuel costs also helped, it said.

The airline has battled for years to stay in the black, with analysts blaming a combination of stiff competition, poor management, change-resistant unions, government interference and other factors.

Earlier this year, it reported a full-year 2011 loss of 2.5 billion ringgit and in June announced it was pushing back a planned 2013 return to profitability after a tie-up with rival budget carrier AirAsia crumbled.

Amid the gloom, the airline embarked on a cost-cutting campaign centered on slashing routes, including to Rome, Johannesburg, Cape Town, Buenos Aires, Karachi and Dubai.

Malaysia Airlines said the cost-cutting moves caused revenue to shrink only two percent to 3.5 billion ringgit.

Ahmad Jauhari said the airline continued to face challenges including the global economic woes and their affect on air travel, increased competition and high fuel costs.

The airline was still in the red for the first nine months of the year, with a net loss of 484 million ringgit, down from 1.25 billion for the same period a year earlier, it said.

Earlier this year, a tie-up with profitable AirAsia fell apart due to resistance by unions representing Malaysia Airlines.

Analysts had predicted the venture would help the flag carrier by eliminating head-to-head competition on some routes.

Malaysia Airlines, which in February admitted it was "in crisis", has announced a series of turnaround plans over the years, the latest major refocusing coming last December.

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So are they finally recovering? Just like SIA, they resorted to cutting less popular routes to reduce on loss making flights. And also just like SIA, they're having having trouble fighting with the mainstream low cost carriers. All the budge airlines are killing the premium service airlines.