AirAsia to move regional office to Jakarta

[flee 5]

 

KUALA LUMPUR, May 19 — Malaysia’s most-recognised brand, AirAsia, will move its regional headquarters to Jakarta this year as the low-cost carrier is eyeing a major slice of the vast Indonesian market, where some 230 million people stay in 17,000 islands — nearly 10 times the population here.

 

The Malaysian Insider understands the relocation will not have an impact on operations here but is seen as a blow to Malaysia’s aim of being a regional aviation hub. The Najib administration had already agreed to build a new low-cost carrier terminal for AirAsia by April 2012.

 

“AirAsia is moving its regional headquarters to Jakarta this year. Communications chief NV Raman is already there to set up the office,” a source told The Malaysian Insider.

 

AirAsia officials confirmed the move, saying key staff were told about the latest development in internal briefings that began this month.

 

Raman, a former journalist, was key in securing an endorsement as a regional carrier from the Association of South East Asian Nations (Asean) secretary-general Surin Pitsuwan nearly two years ago.

 

Sources said the move came just before no-frills airline’s chief executive Datuk Seri Tony Fernandes said AirAsia will be “night-stopping” aircraft in Singapore to make morning flights out of the island republic.

 

“We had a town hall meeting and were told about the move which will be done quickly,” another source revealed.

 

It has already placed advertisements for cabin crew positions at AirAsia Singapore, Fernandes added in a dispatch from New York yesterday where he is attending a two-day investment seminar for Malaysia launched by Prime Minister Datuk Seri Najib Razak.

 

AirAsia, which was relaunched in 1993, has been battling the Najib administration for air rights to some regional and international destinations, which are operated by sister company AirAsia X.

 

The budget carrier also owns 49 per cent in its subsidiaries in both Thailand and Indonesia, and remains on track for separate initial public offerings (IPOs) later this year. The units may go public simultaneously or Thailand may go first, depending on several factors.

 

The company has also gone into joint-ventures for its VieJjet AirAsia and AirAsia Philippines.

 

It now has 105 aircraft in its entire fleet with another 122 on order and 63 options. But it has been giving focus to Indonesia, the Group of 20 (G20) country which has undergone dazzling economic expansion in the past decade.

 

The airline reported an eight-fold increase in quarterly profit driven by growth in passenger volumes, saying it filled 82 per cent of the space available for passengers in the fourth quarter, up three percentage points from a year ago.

 

“Based on the current forward booking trend, the underlying passenger demand in the first and second quarters for the Malaysian, Thai and Indonesian operations remains positive,” AirAsia, Asia’s largest budget carrier by fleet size, said in a statement last January.

 

Net profit for October-December was at RM316.6 million, compared with a profit of RM33.8 million a year ago.

 

Full-year net profit came in at RM1.1 billion against RM506 million a year ago, exceeding the RM822 million net profit forecasts of 19 analysts tracked by Thomson Reuters I/B/E/S.

 

The budget carrier, which competes with Jetstar Asia Airways and Tiger Airways in the region, said it will take delivery of three A320 aircraft in the first quarter of the year, one of which will be operated in Thailand and two in Indonesia.

 

Source: http://www.themalaysianinsider.com/business/article/as-indonesia-booms-airasia-to-move-regional-office-to-jakarta/

[Mohd Suhaimi Fariz 2]

AirAsia, which was relaunched in 1993

 

Typical media hack.

Edited May 19, 2011 by Mohd Suhaimi Fariz

[JuliusWong 0]

Oh my.....will Malaysia Government allows them to do so? Since its too 'Malaysian' to do such a move?? lolx....

 

Has Malaysia slipped off the world's competitiveness ranking again?......

[KK Lee 5]

Given QZ room for growth is much greater than AK and has almost none glass restriction from the authority, it made strategic sense to focus on Indonesia.

 

The world is flat

[flee 5]

Typical media hack.

Isn't that factually correct? The AirAsia we know today was not the same AirAsia when it was a DRB-HICOM subsidiary. Back then, it was not a LCC.

[Naim 6]

Works well -- TF has a holiday home in Bali.

[V Wong 0]

We all know how this innovative entity will go all out in the name of business and profit. I admire AirAsia for tapping this large market and for such a move. Killing two birds with one stone, also pressurizing the Malaysian govt to yield even more to its requests. This will also benefit passengers - bring it on!

[Mohd Suhaimi Fariz 2]

Isn't that factually correct? The AirAsia we know today was not the same AirAsia when it was a DRB-HICOM subsidiary. Back then, it was not a LCC.

 

No flee, AK was not relaunched in 1993. They were launched in 1993, and relaunched by TF in the 2000s

 

It's just me being pedantic.

Edited May 19, 2011 by Mohd Suhaimi Fariz

[flee 5]

You are absolutely correct - I did not read carefully!

[JuliusWong 0]

Given QZ room for growth is much greater than AK and has almost none glass restriction from the authority, it made strategic sense to focus on Indonesia.

 

The world is flat

Agree. Indonesia is vast country that is largely untapped even though it has numerous airlines. However, QZ is focusing more on international route than domestic since the latter seems to be dominated by Lion Air. Lion Air is a pretty strong competitors. Indonesia aviation seems to be very interesting since its liberalisation, it is becoming more interesting with AK regional office.

 

Isn't that factually correct? The AirAsia we know today was not the same AirAsia when it was a DRB-HICOM subsidiary. Back then, it was not a LCC.

No flee, AK was not relaunched in 1993. They were launched in 1993, and relaunched by TF in the 2000s

 

It's just me being pedantic.

Both of you are correct. Originally launched in 1993 with flights to Penang, Kuching, KK and Kaoshiung only. Bought by TF in 2001 when the aviation world was in post 9/11 trauma..massive layoff, cheap aircraft lease...the rest is history.

 

We all know how this innovative entity will go all out in the name of business and profit. I admire AirAsia for tapping this large market and for such a move. Killing two birds with one stone, also pressurizing the Malaysian govt to yield even more to its requests. This will also benefit passengers - bring it on!

Agree. AK just cannot afford to sit and wait for the ever sleeping-comatose government to grant them rights and business opportunity. They need to seek both on their own. In terms of business competitiveness ranking, Indonesia has improved a lot (last known, she climbed ten spots)(The Jakarta Post, 2010); while Malaysia is on downward spiral (TheStar, 2010). Power to consumer!!

Edited May 19, 2011 by JuliusWong

[Naim 6]

Yes, AirAsia started life under the Hicom Group (before got messed by 'DRB-Hicom'), together with KLAS. Mahathir wanted the name 'Pacific Eagle' but not available (note that first logo of AirAsia was an eagle). A senior Hicom guy then coined 'AirAsia', and it was adopted. This guy is now living in Singapore, he's the original founder.

[Isaac 0]

The Malaysian born Air Asia is becoming Indonesian. Who would have thought ... But seriously, with all the problems they face here, if i were Air Asia, i would emigrate too.

[JuliusWong 0]

The Malaysian born Air Asia is becoming Indonesian. Who would have thought ... But seriously, with all the problems they face here, if i were Air Asia, i would emigrate too.

 

Brain drain.....at its best. not only human moves, business also moved.

[flee 5]

Well AirAsia has given the Malaysian govt. and MAHB plenty of time to get their acts together. Some people even consider their legitimate complaints as whining.

 

However, patience has its limits and the situation has come to a point where waiting for the govt and MAHB to act on their concerns will seriously affect their growth plans.

 

Business opportunities don't wait for you and if you miss them, they might be gone forever. AirAsia must position itself to exploit those business opportunities and it would appear that Indonesia is a better place to be for AirAsia to do that.

 

The Malaysian govt. might see this as a betrayal. However, if AirAsia grows unhindered by govt. and MAHB shackles, it will be good for the country in the long run.

 

But then, since when is the Malaysian govt. so far sighted?

[BC Tam 2]

The Malaysian govt. might see this as a betrayal

Heh heh, especially so after the manner in which Dato TF and Dato PM were massaging each other's ego in New York just a few days ago (the way it was reported anyway)

[Mohd Azizul Ramli 2]

Sharing my thoughts on this issue:

 

- Moving out regional HQ means there will be a group of middle/low level management staff that will be losing their jobs.

- AK can not relocate everyone to Jakarta and not everyone chose to relocate can easily make it - family stuff and all.

- Then there is the overseas/hardship allowance matter in the new payroll structure for those chosen. Chances are, to get rid of this, only a handful of selected positions will get it, the bulk of the other positions will be filled in by the local - Indonesians.

- Wages in Indonesia is relatively lower than in Malaysia, so AK can save a lot for payroll.

- AK will maintain an office to oversee the Malaysian operation. I am not sure how big the office will be.

- Current operation will not be effected in size, the worst case scenario is AK remains static at its current size even after moving into KLIA2.

- It is impossible to think that AK will downsize or withdraw from the Malaysian market, given the fact that it is THE cash and profit generating unit for the group.

- The impact of this relocation to KLIA2 and the Malaysian aviation scene in general is still too premature to be determined. AK is already too big in size to cause KLIA2 to be a twin white elephant to KLIA MTB.

- AK's current size is almost 4 times larger than QZ (by RPK, ASK and passengers carried). Although QZ is the entity that will benefit the most from this relocation, it will takes years for them to eventually reach the size of AK.

- FY might see this development as something positive to them but then again, AK's current operation will remain just the way it is. FY's current size is only like 5% the size of AK.

- The business scene in Indonesia is nothing much better than in Malaysia. As someone who lived and worked there for 3 years previously, the corruption level is so much worse in Indonesia, interference by government from central to provincial to district to even kampung level and other opportunistic organisations (PEMDA and all) is more prevailing, harsh and anarchic in Indonesia, tax regime is no better than in Malaysia and some of it are in very vague state of definition. However, Indonesia offers massive untap market, very promising economic growth, liberalised sky for domestic segment, healthy competition between the local aviation players, lower cost in everything.

- I suppose AK has studied the pros and cons in great depth before making the decision. Some of the challenges that I mentioned above might be industry-specific (I was in the palm oil industry when I worked there before) and might not applicable to the aviation sector. And I left Indonesia in 2008, things might have changed for the better since then.

- It is sad that a Malaysian company can not find a home in Malaysia, but then again AK is not 'Malaysia Airlines' LOL. We are in a globalised world and the government has no one to be blamed for this major upset other than themselves, their policies and the slow responses of their related agencies which involved AK's operation.

[Ikman Ikreza 0]

One word for AirAsia before they really move.. "Hujan emas di negeri orang, hujan batu di negeri sendiri, lebih baik negeri sendiri."

[Mohd Azizul Ramli 2]

Not applicable anymore. Only idiots will choose hujan batu over hujan emas. This old Malay proverb is something that is very dear to me because I personally embracing it. I left the country 6 years ago to pursue hujan emas di negeri orang. And so far no turning back.

[Ikman Ikreza 0]

Not applicable anymore. Only idiots will choose hujan batu over hujan emas. This old Malay proverb is something that is very dear to me because I personally embracing it. I left the country 6 years ago to pursue hujan emas di negeri orang. And so far no turning back.

 

It's still applicable and please don't be embrace. As u said before in your statement..

 

"The business scene in Indonesia is nothing much better than in Malaysia. As someone who lived and worked there for 3 years previously, the corruption level is so much worse in Indonesia, interference by government from central to provincial to district to even kampung level and other opportunistic organisations (PEMDA and all) is more prevailing, harsh and anarchic in Indonesia, tax regime is no better than in Malaysia and some of it are in very vague state of definition. However, Indonesia offers massive untap market, very promising economic growth, liberalised sky for domestic segment, healthy competition between the local aviation players, lower cost in everything."

 

How you can guarantee AK will no turning back later? Just look what they turning back on fuel surcharge. If they choose SIN for regional office it's brilliant for me.

[flee 5]

Does it matter where your regional office is in this globalised world?

 

As long as it gets the job done, it will be OK.

 

Do note that AirAsia does not have a chip on its shoulder like most Malaysian GLCs have - they do not need to be 51% shareholders when they are in partnership.

 

As such, they are usually able to be able to work with local partners. Their strategy is to diversify risk. But having partnerships in Indonesia, Thailand, Philippines, Vietnam and, perhaps soon in Singapore, they have a win-win situation. They are planning to be an ASEAN company, not just Malaysian.

 

Good luck to them!

[Mohd Azizul Ramli 2]

It's still applicable and please don't be embrace. As u said before in your statement.

 

How you can guarantee AK will no turning back later? Just look what they turning back on fuel surcharge. If they choose SIN for regional office it's brilliant for me.

I think I have presented a very neutral point of view over this matter yet still my personal opinion is misquoted for argument. You have to read it all in full context. This:

 

The business scene in Indonesia is nothing much better than in Malaysia. As someone who lived and worked there for 3 years previously, the corruption level is so much worse in Indonesia, interference by government from central to provincial to district to even kampung level and other opportunistic organisations (PEMDA and all) is more prevailing, harsh and anarchic in Indonesia, tax regime is no better than in Malaysia and some of it are in very vague state of definition. However, Indonesia offers massive untap market, very promising economic growth, liberalised sky for domestic segment, healthy competition between the local aviation players, lower cost in everything.

...is just a personal opinion based on what I experienced before. Kan dah bagitau:

 

I suppose AK has studied the pros and cons in great depth before making the decision. Some of the challenges that I mentioned above might be industry-specific (I was in the palm oil industry when I worked there before) and might not applicable to the aviation sector. And I left Indonesia in 2008, things might have changed for the better since then.

 

People and organisation especially business entities make decisions based on what will benefit them the most based on their priorities be it bottomline, growth plan, targeted profit, business environment, incentives and what they think the best for them in a specific time frame. I guess there should be no issue about reverting to or go against past decisions because business is something that is not stagnant, it changes and business entities make decision based on what will benefit them the most based on their priorities be it bottomline, growth plan, targeted profit, business environment, incentives and what they think the best for them in a specific time frame although it may lead to reverting to or go against its past business decisions as per your fuel surcharge argument.

 

If AK thinks it makes more business sense to relocate back its regional office to Kuala Lumpur after maybe 10 years since this relocation to Jakarta, it will certainly do so in a heartbeat.

[BC Tam 2]

Does it matter where your regional office is in this globalised world?

I believe the general concensus nowadays is, no

However, may be important issue in places/circumstances where maruah (=dignity/pride), whether real or perceived has a premium

 

By reasoning that it's largely immaterial where 'home' is nowadays, the anticipated expanding Indonesian operations too can be 'controlled' from KL as now, no need to relocate to be nearer to this slice of cake

Which in turn would fuel MAR's contention that it's payroll savings that is driving this episode

Perhaps the new host (Indonesia) has also some other incentives thrown in ? Though I doubt they will go to extent of building a spanking new airport

And it remains to be seen whether traffic rights ex-CGK will be readily dished out too

 

But, and I stress it's a very speculative 'but', in event this relocation matter is reversed anytime soon, then I think it's quite safe to assume it's another choreographed sandiwara (=play acting) in the making

The MoT has not deemed it necessary to say anything, our PM has not commented (wonder if he know about this when in NY earlier in the week with AK's CEO) and wouldn't a formal announcement to KLSE be necessary ?

And what are the Indonesians take on this ? I can't seem to find anything from the press there on this matter

Edited May 20, 2011 by BC Tam

[flee 5]

Yes there is always and element of "sandiwara" between the govt and private sector in Malaysia. However I believe that this play acting has been conducted over a period of time already and this time, they may have made the final decision as the business case for moving to JKT is now much clearer. And as you said, the final push may be due to their ability to extract more incentives from the Indonesian authorities as well.

 

Bursa Malaysia announcement might be done next week, when they report the Q1 2011 results.

[V Wong 0]

Sandiwara ala LCCT@Labu, the sequel...

[Lock SH 0]

The sequel of P. Ramlee's 'Labu-Labi II' in the making ..........

 

Can't wait to see how many 'Indon Jockeys' would be under AK's payroll in Wikileaks ........