AirAsia X is expected to make its long-awaited debut on the Kuala Lumpur – Sydney route this summer but has announced the closure of its flights from the Malaysian capital to the Indian destinations of Mumbai and New Delhi and its only two routes into Europe, serving London Gatwick and Paris Orly. The low-cost, long-haul airline says the network re-alignment is part of a revised network strategy to focus on core markets.
The airline has been pushing for rights to serve the Kuala Lumpur – Sydney route since it was founded in 2007 but up until now its local rival Malaysia Airlines, which already serves the route, has campaigned to remain the sole Malaysian carrier with traffic rights on the route. However, following last year’s share-swap, the two airlines are now working more closely together and this is understood to be one of the opportunities the collaboration will bring to the low-cost venture.
AirAsia X remains tight-lipped about its network expansion, but it is expected to make a formal announcement in the coming weeks. Its Chief Executive Officer, Azran Osman-Rani simply states that the airline will “concentrate capacity” in the core markets of Australasia, China, Taiwan, Japan, and Korea where the carrier intends to “open up new routes” and “add frequencies” on existing routes. “AirAsia X remains focused on maintaining its global leadership position in the low cost, long-haul segment,” he added.
Senior management at AirAsia have been slightly more open to the expansion with Kathleen Tan, Regional Head of Commercial, AirAsia, putting the following message on twitter: “Best news in 2012 n congrats to AirAsiaX n @azranosmanrani 4 their persistence, vv soon, many can enjoy lowfares to Sydney down under!” Meanwhile, Group Chief Executive, Tony Fernandes has spread the rumour by retweeting messages about the airline’s proposed expansion to Sydney, but not actually making any comment himself.
The new strategy has come at a price for some of AirAsia X’s existing destinations with the closure of flights to Mumbai, New Delhi, London Gatwick and Paris Orly, due, according to the carrier to developments in global economy, soaring taxes and higher jet fuel prices. The airline has been studying the performance of the routes for the past year, with the European services particularly exposed to new Government legislation and the introduction of the new European Union (EU) Emissions Trading Scheme (ETS).
The airline confirms that it will suspend its four times weekly Kuala Lumpur – Mumbai service from January 31, 2012, while flights between the Malaysian capital and New Delhi will be reduced from a daily to four times weekly schedule from the start of March and suspended from March 22, 2012.
The services were only launched in 2010 but Air Asia X says structural issues in the Indian aviation market have made it difficult to operate economically viable flights. These relate to the Malaysian Government removing the Visa-on-Arrival facilities to Indian nationals shortly after the routes were started and the general airport and handling costs, particularly with the recent approval of a 280 per cent increase in fees from April this year.
“The continued visa restrictions for travel between India and Malaysia, and the increase in airport and handling charges have resulted in a structure not conducive to the low cost model,” explained Azran Osman-Rani, although he suggested the flights could resume in the future. “The airline is hopeful in reinstating services to India once these structural issues can be resolved,” he added.
The two European routes will close at the end of March, with the four times weekly link between Kuala Lumpur and Paris ending on March 30, 2012 and the last of the six weekly flights between the Malaysian capital and London departing on March 31, 2012.
According to AirAsia X the two routes have been really popular recording load factors of over 80 per cent last year, but yields have not been sufficient enough to support the routes with attempts to increase fares simply resulting in a fall in demand due to the price elasticity of low-cost travel. The confluence of macro-factors, including high fuel prices, depressed European economy and exorbitant taxes have made it economically impossible to sustain these flights, says the airline.
Moreover, the European situation is also compounded by a very weak economy and depressed consumer demand, according to the carrier. This has resulted in a reduction in the number of passengers from Europe on the flights over the past several months, a problem that has been further compelled by Air Passenger Duty in the UK market, which will be increased to £92 per departing economy passenger and £184 per departing Premium passenger from 1 April 2012.
“Together these have placed cost pressures on operating long-haul low cost flights between Asia and Europe, compromising our ability to offer the low fares AirAsia X is known for,” said Azran Osman-Rani, adding that the January 1, 2012 introduction of the EU ETS has further added to an already high cost and “forced our decision to withdraw our services to Europe.”
The announcement from AirAsia X comes at the same time that Malaysia Airlines is making adjustments to its own route network, but the budget carrier says the cancellations are not linked to its chnaging relationship with its former rival.
The national carrier is revising its own network strategy to return to profitability and after announcing plans to cuts some of its loss-making routes earlier this month, Malaysia Airlines has now revealed growth in frequencies to several ASEAN destinations for the Northern Summer schedule as well as changes to its flights to Beijing, Taipei and Los Angeles. The changes are part of the carrier’s revised Business Plan that was revealed in December 2011 to focus on the main growth markets across the world.
In the regional market a third daily flight will be introduced between Kuala Lumpur and Manila from March 25, 2012, while frequencies between Kuala Lumpur and Phnom Penh will increase from nine a week to eleven from March 25, 2012 and up to 14 from May 1, 2012. In the Indonesian market an additional two Kuala Lumpur – Jakarta rotations will operate during summer 2012, increasing overall frequencies between the two capitals to 42 a week, while Medan, the capital of the North Sumatra province in Indonesia, will see an additional Friday service, increasing its schedule to double daily. In Thailand an additional Sunday rotation between Kuala Lumpur and Bangkok will mean the route will be flown four times daily.
Further afield, a new evening Boeing 777-200 flight will operate from Kuala Lumpur to Beijing every day offering an additional 1,974 seats per week to the Chinese capital. This service will complement the existing morning departure providing additional travel options for passengers.
Malaysia Airlines will also revert back to serving Los Angeles via the Japanese capital Tokyo, a route it previously served until 2002. The carrier currently offers three weekly flights to the western US city from Kuala Lumpur via Taipei Tayouan, but from March 25, 2012 it will re-route the service via Tokyo Narita, at the same time introducing a fourth weekly rotation. Due to the changes, Malaysia Airlines will also increase its existing Kuala Lumpur – Taipei service from four times weekly to a daily schedule.
There is certainly a much stronger demand between Tokyo and Los Angeles than between Taipei and Los Angeles (24,000 versus 15,000 O&D passengers in the past year), but Malaysia Airlines will also face a lot more competition with All Nippon Airways (ANA), American Airlines, Delta Air Lines, Japan Airlines (JAL), Korean Air, Singapore Airlines and United Airlines already offering a daily link. However, despite the competition the yield between Tokyo and Los Angeles is stronger than between Taipei Taoyuan, particularly important when you bear in mind that Malaysia Airlines’ average air fares on the Transpacific flight from Taipei are around 24.0 per cent lower than the market average.
Meanwhile, Malaysia Airlines has announced it will operate an additional 32 flights into China over a two week period at the end of January to cater for the additional demand during the Chinese New Year holidays. Between January 17, 2012 and February 1, 2012 it will use 144-seat Boeing 737-400s to provide 14 frequencies between Kuala Lumpur and Sibu; seven between Kuala Lumpur and Kota Kinabalu; six between Kota Kinabalu and Taipei and three rotations between Kota Kinabalu and Hong Kong. A 294-seat Airbus A330 will also be used to operate two flights between Kuala Lumpur and Kunming.
The airline says the additional flights will enable more Malaysians to return home or to take the opportunity to go on a short holiday during the festive season. It says it will “continue to monitor the situation” and could add more capacity on sectors where there is further demand.
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