AirAsia X may take off in November

[Naim 6]

 

The Edge

 

AirAsia X may take off in November

By Doreen Leong

 

Budget travellers hoping to fly to Australia on AirAsia X will have to wait for another one to three months as the long-haul budget carrier may not be able to take off on Sept 8, as anticipated, due to the regulatory compliance process.

While AirAsia X secured landing rights to fly to Gold Coast and Avalon in Australia some three weeks ago, the airline has yet to obtain regulatory approvals from the Malaysian and Australian governments.

"The governments need to ensure that the airline's aircraft and operations are in compliance and certified fit for air travel," says a source.

The source tells The Edge that the timeline for those approvals is still being negotiated and AirAsia X, which is operated by Fly Asian Xpress Sdn Bhd (FAX), will probably be able to launch its services by late September or early November.

The regulatory compliance includes checks on security, airport facilities, immigration, flight operations and engineering capabilities, the source adds.

AirAsia X was launched in January this year in a glitzy affair. At the time, Datuk Tony Fernandes, who is a major shareholder and founder of AirAsia X, announced plans to start the first flight in July. However, it did not materialise because there were no aircraft available. The company then said the maiden flight could be delayed by a year. This meant that AirAsia X could be up in the air in June 2008.

However, reports in the last two months stated that AirAsia X could start operations by September, something which the company did not deny.

Nevertheless, this time round, AirAsia X has already secured a plane to start operations. It has leased an Airbus A330 from US-based AWAS that is due for delivery early next month. Also, the airline has obtained rights to fly to the two destinations in Australia and Stansted in London. But it still has to sort out the regulatory problems before it can start selling tickets.

AirAsia X fares to Australia are expected to be 30% to 50% cheaper than that of full-service carriers. But the low fares do not necessarily mean it will be plain flying for AirAsia X. This is because it has competition from other low-cost carriers (LCC).

Jetstar, a LCC of Qantas, has started selling tickets for the Kuala Lumpur-to-Sydney trip with fares as low as RM88 for one-way travel. A round trip inclusive of taxes and surcharges comes up to RM996.27. AirAsia X fares will be lower than those offered by Jetstar. However, the latter will fly to Sydney, which is a preferred destination for tourists, especially from Malaysia.

Considering that AirAsia X is not likely to begin its flight until early November, will this mean it has to incur additional cost as the leased plane will not be utilised yet?

The source says this will not pose a problem for AirAsia X as it will negotiate for some flexibility with the leasing company. "AirAsia X probably need not pay until it starts flying."

The flexibility will definitely help AirAsia X as the last thing it needs is to be slapped with hefty lease payments before it even flies.

According to industry sources, in view of the current constraint in aircraft supply, a 1993 widebody A330-300 could command a lease rental of US$600,000 (about RM2.1 million) per month. Nonetheless, AirAsia X, riding on the reputation of its sister airline, AirAsia Bhd, is probably paying a much lower lease.

Despite the hiccups, AirAsia X is not short in terms of reputation and valuations. Even before it has started operations, the airline has attracted numerous investors, including eccentric billionaire Sir Richard Branson, founder of the Virgin Group, who has taken up a 20% stake at par value in AirAsia X. The Virgin Group has a director on board AirAsia X.

Besides financial capital, AirAsia X is expected to tap Virgin Group's brand presence, its networks in Australia and Europe and share resources in enhancing and improving fuel efficiency on planes.

FAX's other shareholders are Fernandes, Kamarudin Meranun, Raja Azmi Raja Razali, Datuk Seri Kalimullah Hassan, Lim Kian Onn and senior FAX employees, including Azran Osman-Rani. Fernandes, Kamarudin and Raja Azmi also hold stakes in AirAsia.

AirAsia has the option to take up a 20% stake at par value in AirAsia X and a further 10% at a later stage at market value. AirAsia's equity participation in FAX will likely be in the form of redeemable convertible preference shares, to ensure the former is protected against any start-up losses.

With the entry of the Virgin Group and AirAsia, the total paid-up capital of FAX will reach some US$40 million. AirAsia X is already raising more funds to partly finance the purchase of 15 Airbus A330, which it has ordered. The investors are expected to pay premium compared to the initial shareholders who got their blocks at par.

The fundraising exercise, involving the issuance of up to 20% new shares, is expected to be completed by year-end. Based on a Credit Suisse report that values FAX at about US$300 million to US$400 million, it could raise as much as US$80 million.

Like any other start-ups, AirAsia X will face some delays but this should not adversely affect the airline as long as it has the groundwork established. AirAsia X has its landing rights and aircraft. It just needs the green light from the governments to take off, which will come eventually.

 

http://www.theedgedaily.com/cms/content.js...8c6f30-b576adf5

[Ignatius 4]

Hehehe... makes me laugh considering the Airasia X (Fly extra long) also means (Delay Xtra long)

[Seng Lim 0]

I guess to get the Australia Air Operator’s Certificate (AOC) would be greatest challenge for AirAsia X first flight time line. They definitely do not wish to repeat Viva Macau mistakes on their MFM-SYD route which is a huge embarrassments + heavy losses -- transferring passengers into other full service carriers HKG flights + free return ticket compensation as well. All caused by their own mistakes of selling tickers too early and failed to obtain the Australia AOC on time.

[Mushrif A 3]

I like the emphasis on the word "may" ...

[Seng Lim 0]

I like the emphasis on the word "may" ...

Well the reporter and the press have to cover their butt in case they got it wrong.

[Naim 6]

Well the reporter and the press have to cover their butt in case they got it wrong.

 

It does not matter to me. I only believe it when I see it happening.

 

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[Louis L. 2]

..and it's first flight seems keep on delaying and delaying....i am not sure whether airasiax can fly her first on november,,,...

[Mushrif A 3]

Well the reporter and the press have to cover their butt in case they got it wrong.

 

It's not so much the reporters, but the management of AK-X, where the hype preceeds reality...

 

In fact, in one of the interviews given by AK-X ceo in one of the local business dailies, he was quoted as saying that AK-X has a secret weapon, i.e. it got a good deal on the planes from Airbus that it could make money on those assets by selling it at mkt prices and then leasing it back.

 

In my mind, for a company that has yet to start operations and then the CEO making such statements on generating income from asset sales (AS OPPOSED TO making money from the intended operations of long haul low fare service), is worrying. Maybe they should just then do aircraft leasing business.

 

This is also similar to many smaller listed companies in M'sia where the snr mngt cum shareholders are more concerned in dabbling in their own shares as opposed to focussing on enhancing opeartions, which would have created genuine income, fundamentally supporting share prices.

 

(This is akin to MH of yesteryears where a lot of income was made from sale of aircraft, engines etc but not from the actual operations, which were inefficiently run.)

 

[Naim 6]

...

 

In my mind, for a company that has yet to start operations and then the CEO making such statements on generating income from asset sales (AS OPPOSED TO making money from the intended operations of long haul low fare service), is worrying. Maybe they should just then do aircraft leasing business.

 

...

 

Good one, mushrif. I think they also talked about building and operating LCC terminals in the region.

 

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