AirAsia wants to delay delivery of eight A320s in 2010

[Naim 6]

Reality bites!

 

===

 

AirAsia wants to delay delivery of eight A320s in 2010

By Leithen Francis

 

Malaysian headquartered low-cost airline group AirAsia plans to delay the delivery of eight of the 24 Airbus A320s it is due to receive next year.

 

An AirAsia spokesman in Kuala Lumpur confirms this in an email to ATI, but he fails to say if AirAsia has reached an agreement with Airbus or for how long the A320s will be deferred for.

 

According to Flight's ACAS database, the group has 115 A320s on order. The spokesman says that it operates 76 aircraft, mostly A320s. It will phase out its last Boeing 737-300s next year, he adds.

 

He says that AirAsia wants to delay the eight aircraft because of airport terminal space limitations, which arise from the delay in getting a new low-cost carrier terminal at Kuala Lumpur International Airport.

 

AirAsia has complained that the current low-cost carrier terminal is too small. The government has announced that a new one will be built, but it is unclear when it will be completed.

 

The group's move to delay aircraft comes as other carriers in the region are struggling to gain financing for aircraft, and are cutting air services in response to the global downturn in air traffic.

 

AirAsia CEO Tony Fernandes told ATI earlier this month the group would sell a 20% equity in the business through the issuance of new shares. This is being done in an effort to cut the group's debt, he added.

 

http://www.flightglobal.com/articles/2009/07/16/329710/airasia-wants-to-delay-delivery-of-eight-a320s-in-2010.html

[flee 5]

I think AK has no option but to slow down deliveries because LCCT is too small not only to park the planes but also in pax handling. Other hubs may not be so viable and carry more business risk.

[Azri 0]

I think AK has no option but to slow down deliveries because LCCT is too small not only to park the planes but also in pax handling. Other hubs may not be so viable and carry more business risk.

 

As argued by Tun Dr. Mahathir in his blog (which I tend to agree):

 

"By 2014 Air Asia will have 77 aircrafts. LCCT capacity will still be for 33 aircrafts. Does Air Asia expect all its aircrafts to be on the ground in LCCT all the time? Usually some would be in the air and many would be at other airports. Expanding the parking area would not be too difficult. There would still be enough land at KLIA".

 

I reckon the delay in delivery is inevitable due to over-expansion of AK and the current condition/saturation in the market. But blaming the parking space.. hemm.. nice PR..

 

Anyone has the latest on the new LCCT?

[Naim 6]

 

I reckon the delay in delivery is inevitable due to over-expansion of AK and the current condition/saturation in the market. But blaming the parking space.. hemm.. nice PR..

 

 

I agree, convenient excuse lah. And there's a hint in this last para of the story - debt? I wonder what AirAsia's gearing is like.

 

"AirAsia CEO Tony Fernandes told ATI earlier this month the group would sell a 20% equity in the business through the issuance of new shares. This is being done in an effort to cut the group's debt, he added."

Edited July 16, 2009 by Naim

[Cheng Long 0]

Tony Fernandez can talk like politicians sometimes, so have to read between the lines..

 

But it's a smart move by Air Asia, otherwise they might overstretch themselves..

[Mulyadir Fitri 0]

As argued by Tun Dr. Mahathir in his blog (which I tend to agree):

 

"By 2014 Air Asia will have 77 aircrafts. LCCT capacity will still be for 33 aircrafts. Does Air Asia expect all its aircrafts to be on the ground in LCCT all the time? Usually some would be in the air and many would be at other airports. Expanding the parking area would not be too difficult. There would still be enough land at KLIA".

 

I reckon the delay in delivery is inevitable due to over-expansion of AK and the current condition/saturation in the market. But blaming the parking space.. hemm.. nice PR..

 

Anyone has the latest on the new LCCT?

Yes, but most AK's birds come back for the night. Only a few, and also D7's birds do red-eye flights. So Tony's argument is somewhat valid.

[flee 5]

AirAsia Berhad is a public company - it has to face analysts, some of whom do not have a very good understanding of how the low cost carrier business model works. These analysts did not like AK's "no fuel hedging" policy last year and marked down their shares. Guess what, AK had to kow tow to them and start to do fuel hedging - this resulted in massive Q4 losses as the oil market crashed. Had AK continued their no hedging policy, they would probably not suffer such high losses.

 

This year, the analysts are crying "AK gearing too high"... So is it any wonder AK decided to kow tow to the analysts again? If they don't, share price might fall below 70 sen again!

Edited July 16, 2009 by flee

[Sri Ramani K. 0]

Dr M also can talk like any other MP. all he knows is the plane is only going to fly and never come back to base. so with 77 A320's based in KUL, where do we park them during nightstops? also during transits, you can expect a lot of aircrafts too. they can't be flying all the while, can they? or probably he would build a few parking lots in mines for us.

[BC Tam 2]

If parking space during nightstops is the problem major, why not just place them birds like they do at those graveyard sites in the deserts ? You know, sort of nose facing wingtips of two adjacent birds configuration. Will work like a charm too since almost the whole fleet is now uniformly 320's. Those oddball 333's and 733's can be banished to some remote location till their services are required once again at day break

 

Alternatively, call out Sime Darby CEO for teh tarek session nearby the previously proposed Labu International Airport and ........

[Kenneth Chong WT 0]

Im sure they can park a few in KCH...HEHEHEHE!

[mohd sukri abd hamid 0]

airasia no more money to pay the new aircraft..hehe

[Ja Singh 2]

It is mentioned that Air asia will have a fleet of 77 a/c and parking slots are 33. Also the argument is that will all the planes be on ground at the same time. Possibly because Ak has very short flights and transit of planes could create a jammed up situation because of LCCT size.

Also Dr M forgot that thaere are other Low cost carriers too who wnat to use the LCCT has he taken that into account?

 

I hope that the new LCCT terminal will be made into a long one (like Main terminal building in KLIA) or like changi. then based on your flight number or destination you will be dropped off at gate 1 or gate 77, depending on your destination. From there it will be a short walk to your aircraft.After all there is a lot of land around and why not use it to our advantage?

 

Desert like parking? Imagine walking miles to board your plane!! even now it is becoming challanging if it is raining or the sun is blaring.

Edited July 16, 2009 by jadivindra

[BC Tam 2]

Desert like parking? Imagine walking miles to board your plane!! even now it is becoming challanging if it is raining or the sun is blaring.

No, my suggestion only for during the overnight hibernation period

Birds can be towed to their assigned gates at dawn

Presumably not all 77 aircrafts will board and depart simultaneously

[Tony 1]

If parking space during nightstops is the problem major, why not just place them birds like they do at those graveyard sites in the deserts ? You know, sort of nose facing wingtips of two adjacent birds configuration. Will work like a charm too since almost the whole fleet is now uniformly 320's. Those oddball 333's and 733's can be banished to some remote location till their services are required once again at day break

 

Alternatively, call out Sime Darby CEO for teh tarek session nearby the previously proposed Labu International Airport and ........

 

MAB will most likely say "no space!". LOL.

[Aaron Goh 1]

Just convert the MTB to LCCT, plenty of spaces at MTB.

Edited July 17, 2009 by Aaron Goh

[flee 5]

AirAsia plans to sell three B737 aircraft

 

The Star Report is here: http://biz.thestar.com.my/news/story.asp?file=/2009/7/17/business/4317682&sec=business

 

AirAsia is really facing space constraint problems - they do not have much of a problem raising finance overseas. It is only Malaysian banks who are afraid to give them loans because their analysts do not understand the nature of the aviation industry, especially low cost carriers. Remember until today, they only had to deal with GLCs like MAS.

 

Operationally, AirAsia have no choice but to announce starting a hub in PEN. It is not just parking spaces for night stops that is the problem. Terminal pax handling is another issue. If there are insufficient transit parking spaces, or if the LCCT infrastructure cannot cope with the 25 mins turnaround time, AK will have serious problems.

 

People (esp politicians and civil servants) seem to think that running a LCC is a walk in the park. If that is the case, they should try working at AirAsia!

[Nick C 0]

An utter cloud of illusion. It has nothing to do with the LCCT or MAB. The financing firms know how much debt AK is in.

[LeeTZ 1]

Im sure they can park a few in KCH...HEHEHEHE!

 

I don't mind... come come come welcome!

[Mushrif A 3]

No, my suggestion only for during the overnight hibernation period

Birds can be towed to their assigned gates at dawn

Presumably not all 77 aircrafts will board and depart simultaneously

 

Just like how MH 734s and 735s were parked overnight around T2, T3, (especially) Hangar 1, Cargo areas at KUL (now SZB) before the move to KLIA.

[flee 5]

Don't remember MH ever having B735's in their fleet...

 

An utter cloud of illusion. It has nothing to do with the LCCT or MAB. The financing firms know how much debt AK is in.

Debt is not necessarily a bad thing. The ability to service debt is more important. The older planes delivered since 2006 are almost paid off - with old planes coming off financing, the cash released can go to pay for new planes. If I remember correctly, all of AirAsia's deliveries that are scheduled for 2009 has already been financed - I remember them signing a deal with Barclays Bank of the UK.

 

AirAsia is not like other Malaysian airlines or businesses. Its corporate culture is not the same either. Its employees will die for it and they are all highly motivated to make it a success. So we cannot judge them based on old Malaysian business and airline industry benchmarks.

[Mulyadir Fitri 0]

Don't remember MH ever having B735's in their fleet...

 

 

http://www.airliners.net/photo/Malaysia-Airlines/Boeing-737-5H6/1207499/L/

[Naim 6]

... Its employees will die for it and they are all highly motivated to make it a success.

 

I'll take note of this, and will 'interview' every AK employee I meet. I know in the early days their staff had to attend motivational camps to boost morale. I know one of the trainers.

Edited July 22, 2009 by Naim

[Radzi 2]

Just like how MH 734s and 735s were parked overnight around T2, T3, (especially) Hangar 1, Cargo areas at KUL (now SZB) before the move to KLIA.

 

I remember those time well. In fact one good morning I brought a Sungai Siput minister from IPH and dropped him at the cargo terminal, where Transmile is now parking. That is also one of the reason we have nightstop at almost every airport in the peninsular except TGG.

 

 

Don't remember MH ever having B735's in their fleet...

 

We did. MFA thru MFI, 9 of them. In fact I still flew them in 2000. We also had 2 B733F, MZA and MZB.

[flee 5]

We did. MFA thru MFI, 9 of them. In fact I still flew them in 2000. We also had 2 B733F, MZA and MZB.

Hmmm, I wonder why I could not remember! Do you know why the 735's were phased out?

[flee 5]

An update on this story from Business Times: http://www.btimes.com.my/Current_News/BTIMES/articles/20090806213558/Article/index_html

 

AirAsia to defer 8 Airbus deliveries to 2014

 

AirAsia Bhd, Southeast Asia’s biggest discount carrier, said it will defer the delivery of eight Airbus SAS A320 aircraft to 2014 from 2010 because of “infrastructural constraints” at an existing airport.

 

The airline may also defer the delivery of another eight such planes to 2014 from 2011, and will make a decision on the delay by Oct 31, it said in a statement to the stock exchange in Kuala Lumpur today. AirAsia won’t incur any penalties in revising the delivery schedules, it said.

 

“AirAsia foresees infrastructural constraints with the current airport facilities and until the new low-cost carrier terminal is constructed,” the company said. “The present infrastructure at the low-cost terminal is not able to accommodate AirAsia’s fleet expansion in the number of aircraft originally scheduled to be delivered in 2010 and 2011 under the purchase agreement.”

 

AirAsia had its 2010 and 2011 net income estimates cut by 12 per cent and 18 per cent, respectively, at RHB Research Institute Sdn Bhd last month, after the Star newspaper reported that the airline planned to delay some plane deliveries.

 

The carrier will now receive 16 aircraft next year, from the original 24, it said. Should it decide to defer the delivery of the eight planes in 2011, that will reduce the number for that year to 15, it added.

 

“The rationale to scale down on the delivery of aircraft in 2010 and possibly 2011 is to enable AirAsia to optimize its fleet and avoid the costs associated with leaving idle or under- utilized aircraft due to infrastructural limitations, avoiding having to incur depreciation, interest expense and other costs without earning revenue,” the company said. - Bloomberg