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AirAsia X to defer all new aircraft deliveries in 2011

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AirAsia X to defer all new aircraft deliveries in 2011

 

Malaysia-based AirAsia's long haul subsidiary AirAsia X has deferred all deliveries of new aircraft this year, as it builds up its balance sheet ahead of a possible public listing.

 

The carrier was supposed to receive three Airbus A330s this year but has deferred the deliveries, says AirAsia X CEO Azran Osman Rani. "We are consolidating and building up our balance sheet ahead of any prospective listing," he adds.

 

AirAsia has said it is eyeing a public listing for AirAsia X in the second half of 2011, but Azran says no decision has been made yet by the airline's shareholders. "We have to make sure that the balance sheet is ready in case shareholders decide," he adds, saying that the shareholders are waiting to see the carrier's full-year results in 2010.

 

AirAsia X operates 11 A330s currently and has 17 more on order. It expects these to arrive from 2012 to 2017. It also has an order for 10 A350s and these will be delivered from 2017. The carrier is eyeing flights to North America with the A350s, says Azran.

 

This year, it will begin services to Paris Orly and Christchurch. The airline is still awaiting approval from Malaysian authorities to begin flights to Sydney, he adds.

 

AirAsia X expects revenue to grow by 50% this year and passenger traffic to increase by 40%, says Azran. The airline also plans to grow its ancillary revenue to a 28% share of its total revenue from the current 24%.

 

Source: Flightglobal

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Yes, this news has just broken out to the media. The delay in the completion of KLIA2 and continued blocking of the SYD and JED routes leave them with little choice. D7's wings have been clipped for 2011...

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Some other possible reasons for the deferred delivery of the aircraft (beyond the critically confined and lacking space at the KLIA LCCT apron)

 

1. A320NEO - I believe that AirAsia would more than likely be in negotiations with Airbus regarding the conversion of a bulk of their outstanding orders to the new A320NEO.

 

2. A330 Increased MTOW - The delay in delivery of the A330's is not just for "balance sheet refinement" ahead of a public listing - but in tandem with the recent announcement of the go-ahead to increase the A330's MTOW that would see an increase in range capabilities - an issue close to the heart of AirAsiaX's expansion plans what with flights to NZ and Paris in the offing. Possibly also, a modification of the order to include up to 5 A330-200 aircraft for European/Trans Atlantic or East Asian/Trans Pacific ops. See this flightglobal article - interestingly, the article speculates the aircraft would be available from 1Q2012 - a date that would seem to coincide perfectly with the AirAsiaX deferal.

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Well A320NEO does not affect AirAsia X's plans unless they are planning to start up something in Australia or elsewhere to ply short haul routes.

 

They have a greater worry - the delays that are beginning to show up on the A350 programme. That may significantly affect their plans to start services to the US. Perhaps they will do a leasing deal with Airbus similar to what SQ did for their A333s to tie them over during the delay. This is where those A332s might come into the picture.

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yawn. blame SYD + JED + MAHB. a thousand other destinations possible and yet they sing this one like a broken record. my taxi company cannot operate KLIA bcos proprietary to KLIA LIMO, then i stfu leh! the city is big can still make money elsewhere.

 

and i don't quite get 'balance sheet refinement' really. while deferring the purchase of these a/c does provide some buffer to balancesheet, isnt operational activities also serves to make up the cash reserves? unless of course, youre bleeding horribly.

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yawn. blame SYD + JED + MAHB. a thousand other destinations possible and yet they sing this one like a broken record.

It is one thing being able to do a route, another being able to do it profitably with reasonable returns to shareholders. State owned airlines like MH are not too worried about profitability because they will always be bailed out if they don't do well. They also have fantastic connections to fellow GLCs like MAB!

 

As long as D7 has excuses like being blocked on certain routes and being limited to three A330 parking bays at LCCT, they will trumpet these as their operational limitations to their investors and sharehilders. So it is in everyone's interests that these negative points are removed from the equation. Otherwise, we will hear this broken record time and time again. Hopefully one of the excuses, KLIA2 delays, will no longer be around for much longer.

 

and i don't quite get 'balance sheet refinement' really. while deferring the purchase of these a/c does provide some buffer to balancesheet, isnt operational activities also serves to make up the cash reserves? unless of course, youre bleeding horribly.

Well new aircraft means new loans to finance them - that will increase the gearing if no new shares are issued. So the balance sheet will look better without all those additional borrowing.

 

By having no new aircraft in 2011, D7 can increase utilisation of existing aircraft. They have sufficient capacity to even sub lease the 9M-XAA plane for Haj charters. So it would appear that D7 are currently under utilising its fleet due to insufficient profitable routes and/or frequencies.

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It is one thing being able to do a route, another being able to do it profitably with reasonable returns to shareholders. State owned airlines like MH are not too worried about profitability because they will always be bailed out if they don't do well. They also have fantastic connections to fellow GLCs like MAB!

 

Are KUL-SYD & KUL-JED the only profitable routes for airlines operating in Malaysia? Obviously no. They should be a pioneer and find routes with pent-up demand and fly there. Surely there's a lot of other alternative routes for them to blaze their way through and make money.

 

And to be honest I don't really see the connection between MAB & MH. Anybody can enlighten me on this?

Edited by Mohd Suhaimi Fariz

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Are KUL-SYD & KUL-JED the only profitable routes for airlines operating in Malaysia? Obviously no. They should be a pioneer and find routes with pent-up demand and fly there. Surely there's a lot of other alternative routes for them to blaze their way through and make money.

Any good businessman would want to diversify risks. So, for every new pioneering route like KUL-HND, there should also be a lower risk route to balance up the business risks. KUL-SYD or KUL-JED are regarded as low hanging fruit for D7. That is why they are so sore about the non-approval of these routes after applying for them for such a long time. Other routes (those of little or no importance to MH) are quickly approved. Is it any wonder why they feel that they are being blocked from certain routes?

 

If the directors take inappropriate risks, it will not only jeopardise the profitability and viability of D7, it will do the IPO prospects no good at all. They need to be careful.

 

I don't really see the connection between MAB & MH. Anybody can enlighten me on this?

Politicians and GLCs work in "mysterious" ways. That is why so many of us do not understand why Tony Fernandes has a sudden change of heart about relocating the BKI hub to T1. He knows something which he cannot publicly disclose directly. So he has to make some noise to get attention on the issue. Reading between the lines helps because they are not very transparent.

 

This is Malaysia - and the public are mostly not so naive as to believe that there are no connections between GLCs and politicians... ;)

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If anyone is enjoying a good relationship with MAHB, surely its D7/AK. Not paying airport tax debts and having massing discounts on it WHILST registering profitability all the way is just.....awesome.

 

I don't think even my dad will want to write off my debt to him. Especially if he knows im making money.

 

And on MH, you'd have to be seriously naive to think they don't worry about profitability.

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This is Malaysia - and the public are mostly not so naive as to believe that there are no connections between GLCs and politicians... ;)

Safe to say the public are also mostly not so naive as to believe that there are no connections between AK/D7 entities and politicians ? ;)

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If anyone is enjoying a good relationship with MAHB, surely its D7/AK. Not paying airport tax debts and having massing discounts on it WHILST registering profitability all the way is just.....awesome.

That is because they already got their huge returns from the LCCT. Imagine, from zero pax to 17m pax in four years! MAHB's cash cow is the LCCT. That is why they protested to the govt. when Sime Darby/AirAsia wanted to build KLIA East @ Labu!

 

And on MH, you'd have to be seriously naive to think they don't worry about profitability.

Did I say that they don't worry? I said they worry less...

 

I remember reading some of the Tweets by the D7 CEO saying that every day is a battle for survival. They run such a tight ship there and every RM of profit is hard earned. They seem to have to fight for everything they want.

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Any good businessman would want to diversify risks. So, for every new pioneering route like KUL-HND, there should also be a lower risk route to balance up the business risks. KUL-SYD or KUL-JED are regarded as low hanging fruit for D7. That is why they are so sore about the non-approval of these routes after applying for them for such a long time. Other routes (those of little or no importance to MH) are quickly approved. Is it any wonder why they feel that they are being blocked from certain routes?

 

Yes risks needs to be diversified, but surely there's more low risk routes available than just SYD & JED. I'm sure due diligence would uncover other routes that's just as profitable & low risk as those two.

 

This is Malaysia - and the public are mostly not so naive as to believe that there are no connections between GLCs and politicians... ;)

 

In Malaysia, ALL businesses are connected! <_>

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Safe to say the public are also mostly not so naive as to believe that there are no connections between AK/D7 entities and politicians ? ;)

Of course there are - any big corporation in this country is subject to close scrutiny by politicians! Whether that has a positive or negative impact on them is another matter!

 

Yes risks needs to be diversified, but surely there's more low risk routes available than just SYD & JED. I'm sure due diligence would uncover other routes that's just as profitable & low risk as those two.

I am not sure if you are an aviation industry professional, I am glad I am not! :)

 

Obviously, D7 has a network plan and JED and SYD are reasonably important pieces in their jigsaw puzzle. It must tie in with their business strategy and now they appear to have hit a huge roadblock.

 

They have just inaugurated the KUL-ORY on 14 Feb, another pioneering route. In April they start KUL-CHC services. These are all routes that were approved way after JED and SYD were applied for. Lets see how long they last and if D7 will be ruthless in cutting them (like they did with AUH) should they fail to meet business expectations.

 

So you cannot say that they are not starting new pioneering routes. They are doing it, but they are also still banging on the door for the JED and SYD routes! :)

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not too worried, worry less, not worried, tomayto toMAto. these are semantics. If you're implying MH or any org (be it GLC or LLC or whatever) worry less about making money then maybe you're looking a bit to the past.

 

my only observation is that the picture often painted about AK/D7 is that they are the poor souls who had to fight everything and are honest listeners, bearers of the people's seals! And they are the only ones who have to fight day by day for survival.

 

well boo f-ing hoo.

 

Everyone else is fighting also and you only need to spend some time with KLM CX SQ RBA MH (all state-linked companies) to know how much fighting these guys have to do to stay alive (or in SQ CX's case, to maximise shareholder returns). not only that, they've had to deal with meddling from unscrupulous parties whilst AK/D7 can freely run their so called 'tight ship'. Look at how quickly they pulled in and out of routes. No other state-linked airlines have the luxury to do so.

 

And ORY is not a pioneering route btw. Neither is STN. Neither is HND. AUH is, but they muffed that one.

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not too worried, worry less, not worried, tomayto toMAto. these are semantics. If you're implying MH or any org (be it GLC or LLC or whatever) worry less about making money then maybe you're looking a bit to the past.

 

my only observation is that the picture often painted about AK/D7 is that they are the poor souls who had to fight everything and are honest listeners, bearers of the people's seals! And they are the only ones who have to fight day by day for survival.

 

well boo f-ing hoo.

 

Everyone else is fighting also and you only need to spend some time with KLM CX SQ RBA MH (all state-linked companies) to know how much fighting these guys have to do to stay alive (or in SQ CX's case, to maximise shareholder returns). not only that, they've had to deal with meddling from unscrupulous parties whilst AK/D7 can freely run their so called 'tight ship'. Look at how quickly they pulled in and out of routes. No other state-linked airlines have the luxury to do so.

 

And ORY is not a pioneering route btw. Neither is STN. Neither is HND. AUH is, but they muffed that one.

 

Whoa, calm down. No need to get so agitated.

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Whoa, calm down. No need to get so agitated.

Hahahaha! :) He is just very passionate about it!

 

Anyway we are way off topic. So, lets get back on topic before the moderator locks this thread!

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