AirAsia X plans huge fleet expansion with US$418m IPO

Malaysian long-haul carrier AirAsia X said on Monday it plans to use funds of up to US$418 million from a public listing to more than triple its Airbus fleet and expand routes to meet demand in Asia-Pacific.

The budget carrier founded by aviation tycoon Tony Fernandes hopes to raise the proceeds in an initial public offering (IPO) ahead of its July 10 debut on the Malaysian bourse.

"The estimated amount based on the 1.45 ringgit (US$0.47) per issue share is between 1.1 billion ringgit and 1.3 billion ringgit," Nazir Razak, head of banking group CIMB which is running the IPO, told reporters after the prospectus launch.

AirAsia X had earlier cited a conservative amount saying the IPO could raise RM859 million (US$277 million) from the sale of 592.6 million new shares for between 1.15 to 1.45 ringgit each.

Analysts have said with last month's general election over, investors are looking for a wide range of stocks in Southeast Asia's third largest economy, sparking a fundraising fever in Malaysia.

AirAsia X chief executive Azran Osman Rani said the proceeds from the IPO would finance fleet and route expansion to cement its position in its core markets in Australia and Asia.

The carrier will take delivery of 23 Airbus A330-300 planes over the next four years beginning in July, while it has also placed a firm order for 10 A350-900s.

Detailing the airline's strategy, Azran said it will bolster its position in lucrative markets like Australia, China, Taiwan, Korea and Japan.

It would be followed by adding frequencies to current routes, opening new destinations including to Adelaide in Australia, Nagoya and Fukuoka in Japan and Busan in South Korea.

AirAsia X previously scrapped London flights because of the European debt crisis and focused on serving routes within Asia-Pacific, where sustained economic growth has swelled the middle class.

AirAsia X currently has 10 Airbus A330-300 planes and serves 14 routes across the region, including destinations in Australia, China, Japan and Saudi Arabia.

Azran also said with the arrival of more aircraft it would allow the airline to set up hubs in Thailand and Indonesia.

A hub in Thailand will allow AirAsia X to operate regular services from Bangkok to lucrative markets such as Australia, Japan and South Korea.

A third of the funds raised in the listing will be used to repay debt while another third is slated for capital expenditure, with the balance going to working capital and listing expenses.

Shukor Yusof, an aviation analyst with Standard & Poor's Equity Research in Singapore, has predicted the AirAsia X listing will be a success and the cash raised was "a good start to fund their fleet expansion".

The International Air Transport Association (IATA) has described Asia-Pacific as the world's fastest growing market, with passenger traffic more than doubling since 1998, despite fuel costs surging 55 percent since 2006.

Meanwhile Fernandes dismissed the threat posed by Malindo Airways, an affiliate of Indonesia's budget carrier Lion Air, citing AirAsia's position as Asia's largest budget carrier with a strong balance sheet.

"We are in a very strong position. It will be tough for new airlines or future entrants into the market," he said.

Malindo Airways, however, has already sparked a price war by offering competitive fares with free snacks and luggage allowance. It currently serves domestic routes.

Profit-making AirAsia was Asia's first low-cost carrier to complete an IPO in 2004.

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AirAsia X survives and is ready to fight all competition in its ways. Fleet expansion with A330 and A350 will mean more ambitious plans ahead but one will also have to see how many of the old fleet are they de-registering upon receiving the new orders gradually. This big order will more or less put them on par with Scoot in terms of fleet size when Scoot starts receiving its order of 20 B787 starting 2014. The days ahead will mean better and more comfortable flights in big aircraft but not pay a premium price for it. The mainstream consumers will gain the most out of it.

Indonesia passenger plane crash-lands, two injured

An Indonesian passenger plane carrying 52 people crash-landed at an eastern airport, injuring two, officials said, the latest accident to hit the country's fast-growing aviation sector.

The MA-60 aircraft, operated by state-owned Merpati Nusantara airlines, was coming in to land at an airport in East Nusa Tenggara province when the accident happened, said transport ministry spokesman Bambang Ervan.

Pictures showed the Chinese-made turbo-prop plane lying on its belly on the runway with its engines jammed facedown into the tarmac and its wings bent forward.

An increasing number of planes are taking to Indonesia's skies to feed growing demand from a booming middle class, but the vast archipelago has one of Asia's worst aviation safety records.

In April a Lion Air passenger jet carrying 108 people missed the runway as it came into land on the resort island of Bali, crashing into the sea and splitting in two. Dozens of people were injured but no one died.

Monday's accident happened as the plane, which was on a domestic flight from the central island of Flores, came into land at El Tari airport in Kupang city at 9:40 am (0140 GMT), Ervan said.

There were 52 people on board, 46 passengers and six crew, said Merpati spokesman Herry Saptanto.

"Two passengers sustained minor injuries from pieces of glass but they have left hospital and are now fine," he told AFP.

"The plane is badly damaged, I don't think it can be used anymore."

In May 2011 an MA-60 operated by Merpati crashed in West Papua province, killing 25 people.

Following that accident, authorities banned the plane -- manufactured by Xi'an Aircraft Industrial Corporation -- from landing at three airports with difficult approaches.

However, Saptanto said Monday the ban had been lifted six months earlier. El Tari was not one of the airports affected by the ban.

Merpati has been banned from flying in European Union airspace since 2007.

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Another crash in Indonesia and who can blame the EU for banning these Indonesian airlines from their airspace? Their safety record is in tatters. It is very fortunate that no casualties were reported.

Week 31: ATPL Ground School Week 31

Yes I know, I've been MIA for 2 weeks since the last post. This delay is due to me waiting for all the results to return for my remaining papers before I conclude ground school altogether.

Yes, it has ended. Perf A was 80, Radio Aids 91 and Air Law 80. Receiving such results lifted a massively huge burden off my shoulders. I can finally tell myself I did it, I survived the rigors of ATPL; the crazily packed syllabus shoved down my throat relentlessly everyday for the past half year. I'm still alive, and how glad am I.

The result of Perf A came on the very next Monday, which was quite a shock to everyone as we didn't expect it to come so soon. Most of us cleared this time and you can almost hear a huge sigh of relief from everyone unlike the first paper when the mood was totally sombre upon the release of results. This gave us the all needed boost to handle the remaining ATPL papers later in the week.

It was Radio Aids and Air Law for me, and I did not really touch them at all since a month ago when I was studying for the first attempt. Quite worrying for me I must say. Thankfully the revision was pretty swift since Radio Aids is actually my strong subject. I shouldn't have failed in the first place, I probably underestimated it last time round. Lesson learned. I studied much more thoroughly this time round, covering every detail possible leaving nothing out. The result proved itself, but it was an easier paper than the first I must say.

After Radio Aids on Thursday, I had less than 24hours of revision for Air Law. Such a risk taker I am, a very bad trait for an aviator. But then, I knew where I stand and studied much better this time, sorting out all the confusion I had in the previous attempt. Luck was on my side I guess. I had expected myself to fail it again when I realised I had a lot of mistakes when comparing the answers with my mates. 8 incorrects was all I got, phew~~ The maximum is 10.

Looking forward to flight school in Australia currently but unsure of when is the departure date, I shall take this free period of time to recharge and recuperate the body. The weather over there is very cold now which is a worry for a person like me who has never experienced winter climate. It won't be easy fighting the weather, the learning, the independence to cook/clean myself. I'm glad I have my great course mates with me and I'm not alone. We will stick together and get through this as one.

Air Law, it is so thick and so sleep-inducing

All the study materials from the very first day. 31 weeks, THE END!!

Rolls-Royce wins US$$4b Singapore Airlines engines deal

British aircraft engine manufacturer Rolls-Royce said on Friday that it has won a US$4.0-billion (3.0-billion-euro) engines deal from Singapore Airlines.

"Rolls-Royce has been selected by Singapore Airlines Group to power 50 Boeing 787 Dreamliner aircraft with Trent 1000 engines," it revealed in a statement.

"The announcement, which includes long-term TotalCare service support, is worth $4.0 billion at current list prices."

Rolls-Royce added that 30 Boeing 787-10X aircraft will be operated by Singapore Airlines.

The airline's subsidiary, Scoot, will operate 10 Boeing 787-8 and 10 Boeing 787-9 aircraft.

Singapore Airlines and Scoot currently operate a total of 88 Rolls-Royce powered aircraft, with 88 more on the order books.

"We are very proud that Singapore Airlines, one of the most respected carriers in the world, and its subsidiary Scoot have placed their trust in our Trent 1000 and our ability to deliver superior product and service performance," said Eric Schulz, President - Civil Large Engines at Rolls-Royce.

"This decision is a tremendous reflection of the deep relationship that Rolls-Royce and Singapore Airlines enjoy, and allows us to continue to develop our strategic alignment."

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A no-brainer decision for SIA considering the huge Rolls Royce plant sitting at Seletar. It will save them costs, time and manpower now that the RR engines can be made right here in Singapore. Maintenance will also be much more convenient for the airline. More jobs for the people then I guess.

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.

US security agency scraps plan to allow small knives on planes

The top United States transportation security official said yesterday (June 6) that he had decided not to permit passengers to carry small knives on airplanes, after receiving a drumbeat of criticism from flight attendants and the public that easing restrictions would increase flight dangers.

Transportation Security Administration head John Pistole, who had proposed to loosen rules put in place in the wake of the Sept 11 hijackings, told Reuters he had decided to scrap the changes.

“After extensive engagement with the Aviation Security Advisory Committee, law enforcement officials, passenger advocates, and other important stakeholders, TSA will continue to enforce the current prohibited items list,” Mr Pistole said.

Hijackers in the Sept 11 attacks used small knives to attack crew members and gain control of aircraft. Cockpits on commercial planes have since been required to have locked doors during flights.

In March, the TSA said that effective April 25, it would allow knives with blades that are 2.36 inches or less to be carried onto airplanes. The proposed rules would also have allowed passengers to carry on hockey sticks, golf clubs or billiard cues.

Just days before the rules were due to go into effect, the TSA delayed the change. Now, six weeks later, Mr Pistole announced he would scrap the proposed rules altogether.

Flight attendants, who had mobilised a massive campaign and started a legal battle to keep the knives off airplanes, applauded Mr Pistole for reversing course and for taking time to hear their concerns.

“Terrorists armed only with knives killed thousands of Americans on 9/11/2001. As the women and men on the front lines in the air, we vowed to do everything in our power to protect passengers and flight crews from harm and prevent that type of atrocity from happening ever again,” the 90,000-member Flight Attendants Union Coalition said in a statement.

“The TSA was created because of small blades and blades have no place on the airplane. Now we’ll make sure that those weapons are never allowed on our airplanes,” said Ms Sara Nelson, international vice president of the Association of Flight Attendants.

During a congressional hearing in March, Mr Pistole had defended the rule changes, saying the TSA was facing budget cuts and needed to prioritize threats. He said the agency finds about 2,000 small pocket knives at checkpoints each day and each one takes about two to three minutes to find and confiscate - time that could be used looking for more lethal weapons like non-metallic explosives devices.

But lawmakers expressed outrage at the plan to ease up on the rules, saying small knives and items like hockey sticks and golf clubs could cause serious harm in confined areas like airplane cabins.

The House of Representatives will vote on an amendment to the 2014 Homeland Security spending bill that would prohibit the TSA from using its funds to implement the proposed knives rule.

The amendment, which will still be voted on in spite of the TSA’s decision to scrap the rule, had strong bipartisan support and was not to pass, a congressional aide said.

One of the lawmakers who sponsored the amendment, Democratic Representative Ed Markey of Massachusetts, praised Mr Pistole for listening to the dissent and “for having the courage to change course”.

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So, it's a U-turn for TSA, a good move by Mr Pistole. Safety and security is what passengers hope for when they board the aircraft. Having these intimidating "weapons" onboard isn't very assuring. But worry no more, they will not be brought up into the skies.

Shun Tak Holdings buys a third of Jetstar Hong Kong

A firm founded by Macau casino tycoon Stanley Ho has paid US$66 million for a third of new budget airline Jetstar Hong Kong, Australia's Qantas said Thursday.

Shipping and property giant Shun Tak Holdings will hold an equal share in the low-cost carrier, a joint venture involving Qantas and China Eastern Airlines that plans launch this year flying to China, Japan, South Korea and Southeast Asia.

Qantas chief Alan Joyce said the transaction would see his airline reduce its investment from US$99 million so that all three entities had a third share, with Jetstar Hong Kong's market value unchanged at US$198 million.

"This adds to the strategic partnerships we have across Asia with companies that have chosen to invest in the Jetstar brand," said Joyce in a statement to the Australian stock market.

"There is clear potential for a local low-cost carrier in Hong Kong to stimulate new travel demand, particularly given the proximity to mainland China and the ability to connect with existing parts of the Jetstar network," he added. Qantas owns the Jetstar brand and has other joint ventures in Japan, Singapore and Vietnam.

The move will help Jetstar Hong Kong in its application for regulatory approval in the city, which has tough rules for foreign-owned firms looking to set up locally.

Hong Kong-listed Shun Tak Holdings is run by managing director Pansy Ho, daughter of Macau casino mogul Stanley.

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This can only mean good news to the young branch of the Jetstar group. With the airline now partly owned by the local, it can now get permit to fly to different cities within China much easily. The Jetstar network is expanding very vastly, competition in the skies will be very strong.