AirAsia X

As AirAsia X switches from Tianjin to Beijing, Asian alternative airports face uncertain future

AirAsia X has received final clearance to move its five weekly flights from Tianjin to more centrally located Beijing Capital International Airport, only 30km from the city compared to 80km at Tianjin. The move from Tianjin, considered an alternative airport to Beijing Capital, leaves Scoot as the sole foreign LCC at Tianjin. When the move is made on 22-Jun-2012, AirAsia X will join fellow low-cost, long-haul competitor Jetstar at Beijing.

The move raises the matter if it is in a carrier's financial interest to serve a cheaper yet less convenient airport but possibly forgo revenue by alienating some passengers and reducing options for connectivity, which is increasingly becoming common as carriers pursue hybrid paths. Demand in the region is still relatively strong, eliminating the need to incentivise the market by passing on savings from alternative airports. What the region's LCCs do want are low-cost terminals, which Tokyo Narita and Melbourne Tullamarine will soon offer, while Kuala Lumpur and Singapore Changi will construct new ones.

With Bangkok, Scoot breaks medium/long-haul focus; Thai/Nok could be next to establish long-haul LCC

Scoot, the low-cost long-haul subsidiary of Singapore Airlines (SIA), has not yet commenced commercial services but by announcing plans to launch Singapore-Bangkok it has already broken its self-proclaimed focus to only serve medium-haul and long-haul routes and not to overlap with short-haul sister carrier Tiger Airways. But rules are typically only guidelines when it comes to the evolving models of low-cost, long-haul carriers.

In Scoot's case, deviating from its norm to open a daily Singapore-Bangkok service from 05-Jul-2012 allows it to boost aircraft utilisation and enter the gigantic Singapore-Bangkok market, the 26th largest route in the world based on available seats. It also allows Scoot to enter the lucrative Bangkok-Australia market with a connection product. Competitor AirAsia X already sees large transfer traffic from Australia to Bangkok via its Kuala Lumpur hub. Scoot's move into Bangkok could prompt a move from Thai Airways, which is already studying its own options for entering the low-cost long-haul market. Using partially owned subsidiary Nok Air to launch Boeing 777 flights to Australia is the most likely solution for Thai.

AirAsia X and Scoot help make Sydney Australia's hub for low-cost long-haul carriers

The inaugural AirAsia X flight arriving into Sydney on 02-Apr-2012 is ushering in the era of low-cost, long-haul carriers at Australia's largest airport, which is poised to take the title of offering the most service from low-cost long-haul carriers between Australia and Asia. While Jetstar already links Sydney to long-haul destinations and previous carriers like Viva Macau tried, this new wave is of carriers going beyond point-to-point traffic to offer connections out of large Asian hubs.

AirAsia X will be followed by Scoot, and the presence of a Singapore low-cost long-haul carrier in Sydney makes it likely that Jetstar too will enter the Sydney-Singapore market, although parent company Qantas will have to accept that corporate routes previously in its exclusive domain must now be shared if it wants to remain relevant in a market with increasingly diversifying traffic.

The sudden influx of long-haul LCCs can be attributed to competitive responses but also the new government in New South Wales that is eager to better promote Sydney Airport.

AirAsia X CEO Azran Osman-Rani talks connectivity and through-pricing on LCC services

AirAsia X CEO Azran Osman-Rani is one of 25+ CEOs from low cost and full service airlines from around the world who will be talking at CAPA’s Airline Leader Summit 2012, “Airlines in Transition” on 19/20 April, at Istanbul’s spectacular Ciragan Kempinski Hotel.

In this video Azran talks of the many challenges in evolving the low cost model to support connectivity – including how to manage revenues when an LCC adopts multiple sector pricing on point to point sales; the issues involved in handling self-connecting passengers through an airport; and many others.

The Airlines in Transition Summit will be the largest gathering of low cost and full service airline CEOs ever held – and they will be talking about how the airline industry can connect more effectively. Topics include:

• Evolution (“hybridisation”) of the low-cost airline model;
• Bridging the gap between full service airlines, low-cost carriers and hybrid airlines;

AirAsia X continues concentration theme with Christchurch withdrawal as ultra-long-haul loses favour

AirAsia X is continuing to act on its concentration plan to build scale in key markets rather than spread itself out. The Kuala Lumpur-based low-cost long-haul carrier is withdrawing services to Christchurch and increasing capacity to Perth and Taipei. The withdrawal from Christchurch is despite high load factors, indicating – as with the carrier's withdrawals from London and Paris – the problem is of yield on ultra-long-haul sectors where an LCC's lower cost base has less advantage as fuel comprises a greater share of costs than on shorter sectors.

The withdrawal of four-weekly services to Christchurch, effective at the end of May-2012, will remove AirAsia X's longest flight, leaving all other services – primarily to Australia and North Asia – in a five-to-eight hour range. Previously the carrier's longest flights were to Paris and London, although operated with A340s instead of A330s to Christchurch, but AirAsia X announced in Jan-2012 that Paris and London would be suspended by the end of Mar-2012.

Video: Azran Osman-Rani, CEO of AirAsia X, discusses growth plans

In this video interview with CAPA, AirAsia X CEO Azran Osman-Rani discusses what is next for the low-cost long-haul carrier after finally securing a Kuala Lumpur-Sydney route and withdrawing services from Europe and India.

Mr Osman-Rani outlined the carrier's plans to focus on developing its existing network, with future expansion to centre around increasing frequency to existing Asian destinations with an ultimate aim of double daily frequencies across its network.

Ruling out plans to enter any new countries in the near-future with the potential exception of through partnerships like charter operations, Mr Osman-Rani noted the appeal of operating to destinations with a large catchment area, saying that the benefits of a large catchment outweigh the cost disadvantage of operating to such airports.