AirAsia X flies into greater turbulence

[flee 5]

KUALA LUMPUR: AirAsia X Bhd, the long-haul, low-cost affiliate of AirAsia Bhd, appears to be encountering greater turbulence. It is said to be facing payment problems relating to staff salaries and their fixed and variable allowances, sources close to the company said.

In view of the financial problems, according to the sources, AirAsia co-founder and group chief executive officer (CEO) Tan Sri Tony Fernandes will take on a “more prominent role” in the management of AirAsia X to revive the airline.

In a circular seen by The Edge Financial Daily, AirAsia X staff were informed that payment of their wages and allowances would be on a staggered basis for the month of October.

More here: http://www.theedgemarkets.com/en/article/airasia-x-flies-greater-turbulence

[Kee Hooi Yen 0]

Low cost airline bussiness model is still not suitable for long haul ?

[Y. J. Foo 0]

Didn't take long for them to issue denial:

 

BUSINESS PUBLISHED: 21 mins ago

 

AirAsia X denies operational turbulence

 

SOURCE: TRP

 

KUALA LUMPUR, Nov 18:

 

AirAsia X Bhd, the long-haul low-cost affiliate of AirAsia Bhd, has denied news reports that it is facing financial turbulence with its operations.

 

A source close to AirAsia co-founder and group chief executive officer Tan Sri Tony Fernandes said news reports of the carrier facing payment problems relating to staff salaries and their fixed and variable allowances are inaccurate.

 

The Rakyat Post: bit.ly/1uBgkHX

 

p/s I give up trying to make the URL hotlink work...

Edited November 18, 2014 by Y. J. Foo

[leon t 0]

well Air Asia X has positioned itself more of a regional haul airline rather than a long haul one as its flights are below 7.5 hours at the max - which TF have said before that it makes sense to not fly its aircraft for than 7 hours per flight. But then of course TF does changes his mind every now and then depending on scenario and he at the same time also mentioned abt AK X will look into flying back to Europe and even the US in the future. At this present time AK X does seems to be in some financial short comings but in the immediate future it is likely stand to gain when travels picked up as the world economy improves and it has the resources. But believed one main issue is that AK X went ahead too early to order more planes than it needed for its immediate future and that's is where it now have to pay for its decision. It has already 20 A330s and it probably need abt another few like 8 or so for the next 2 to 3 years but it went ahead to order 25 new planes at one go.

[Mushrif A 3]

D7 didn't issue a flat denial..it just said that the news reports were inaccurate...(which means, there were elements of truth in the news report)

[Geoff R. 0]

I think this just another case of bad reporting - writing a damaging article with no actual evidence other than hearsay of unnamed sources supposedly close to the company.

 

The so called denial isn't from TF or the company but yet another unnamed "source close to" TF.

 

Geoff

[flee 5]

When they did not respond to reporters' enquiries, and there is a hint of trouble, the article was published hoping to draw them out into the open.

 

There is no smoke without fire...

well Air Asia X has positioned itself more of a regional haul airline rather than a long haul one as its flights are below 7.5 hours at the max - which TF have said before that it makes sense to not fly its aircraft for than 7 hours per flight. But then of course TF does changes his mind every now and then depending on scenario and he at the same time also mentioned abt AK X will look into flying back to Europe and even the US in the future. At this present time AK X does seems to be in some financial short comings but in the immediate future it is likely stand to gain when travels picked up as the world economy improves and it has the resources. But believed one main issue is that AK X went ahead too early to order more planes than it needed for its immediate future and that's is where it now have to pay for its decision. It has already 20 A330s and it probably need abt another few like 8 or so for the next 2 to 3 years but it went ahead to order 25 new planes at one go.

I think D7 were screwed by MAHB and also MAS. They were also over-confident in their expansion plans post IPO.

 

MAHB's delayed (by almost 3 years) opening of klia2 stunted D7's plans to grow and as a result, they are weaker than they should be.

 

Also the klia2 delays meant that D7 had to delay its aircraft deliveries. This backlog unloaded itself this year and will continue to do so next year. Fortunately D7 took action to open up Thai and Indonesia Airasia X. They will take some deliveries from D7 next year and ease the over capacity.

 

At the end of this year, D7 will return the two A340s and one A330-200 to the lessors. That should cut its costs significantly and it can use its excess A330s for any charters and short term leases.

 

MH370 caused the China market to slow down for D7 - it should have been more profitable by now. Instead, the MH incident caused a softening of demand from the Chinese tourists. D7's yields did not increase as expected. It may have even decreased...

 

Overcapacity in the Australian market caused D7 to bleed. In part, MH is also to be blamed as it competed with D7 aggressively (and irrationally, according to D7). As a result, both MH and D7 are bleeding... D7 expanded into Australia too aggressively and should cut back on the non performing routes.

 

Finally, the persistent high oil prices and weakening RM is making finance very difficult. D7 really needs some short term finance to tie them over.

 

With oil prices now falling, D7 has a bit more time to sort itself out. But it needs to realign with market realities and be ready for the upturn once they cut their airfares to match the lower costs of operations.

Edited November 18, 2014 by flee

[flee 5]

D7 CEO clarifies: http://www.therakyatpost.com/business/2014/11/18/airline-staff-salaries-paid-time/

[geoff.leo 0]

Even if AirAsiaX indeed isn't making money at the moment, it's long-term prospects remain bright.

 

Scoot/Tigerair/NokScoot, Lion Air and Cebu Pacific would very much prefer to be in AAX's position. Any day.

 

However, it's important that they continue to take advantage of their first-mover position (TAAX and IAAX are good moves), their strong existing brand name and a massive feeder network from the AirAsia family.

 

Scoot should be closely watched with a wave of new B787s and as ever, Lion Air.

 

However, at least in the short to medium term, it's hard to see any of these guys catching up with AAX.

[leon t 0]

yes agreed with flee - and MAS is very aggressive in their low fares as recently managed to snap a ticket on MH from SIN to MEL near CNY next year on 14 feb and the fare was ridiculously low at S$495 net return !! which is the cheapest than even the likes of emirates or jetstar and even D7 was quoting at S$900. But it may not work in MH favour as such low fares and competing with D7 is not going to help itself out of its debt as MH is still essentially a maybe 2nd tier carrier if not as a 1st tier in KUL. Imagine MH even offer a flight from SIN-LHR at S$980 or from KUL at rm2,560!

and if D7 currently and even next year do not do well and have losses, then Scoot and Tiger will be fare no less better and even be worse than D7 and AK respectively.

[Geoff R. 0]

D7 CEO clarifies: http://www.therakyatpost.com/business/2014/11/18/airline-staff-salaries-paid-time/

So the original article's claim regarding wages was wrong.

 

Geoff

[BC Tam 2]

At back of my mind is question as to whether the Ponzi scheme fairy tale success story of the red empire is being unravelled

I hope not, for they have afforded me some great value travel over the years - either as a 'guest' or benefitting from their competitors' response

[flee 5]

AirAsia X to brake capacity expansion, cut flights after Q3 loss -

 

See more at: http://www.themalaysianinsider.com/business/article/airasia-x-posts-fourth-quarterly-loss-on-higher-costs#sthash.ICminAgW.dpuf

[leon t 0]

The main issue is that they tend to order too many planes at one time perhaps in order to get a better price - but then a plane is a very expensive thing and hence they should be more prudent in their assessment and not too bullish on their growth - as even for Air Asia - after ordering large order of aircrafts, they will begin deferring deliveries.

[flee 5]

I think it is happening with all airlines with large orders. The market is pretty unpredictable and cyclical at the same time. Airlines hate to be caught short of aircraft during boom time. So having a large order pool will allow them to call upon the order book to satisfy customer demand.

 

In some ways, the long waiting lists at both Boeing and Airbus can be blamed for this predicament. In the old days, airlines tend to make up the shortfall thru leasing. But these days, even the leasing market is tight too, especially for aircraft like the A330/A350 and B777/787.

[BC Tam 2]

Tony Fernandes denies AirAsia X’s salary problem – Bernama

http://www.bernama.com/bernama/v7/newsindex.php?id=1086881

 

Interesting

Title is about paying staff salary, content is about loan repayments for aircraft

Shifting attention perhaps ?

[Kee Hooi Yen 0]

Pay aircraft load repayments first, staff salary later ?

[BC Tam 2]

Pay aircraft load repayments first, staff salary later ?

Reasonable priority I suppose

If creditors grab your revenue generating machinery, it will not be available to you to generate revenue with. Revenue which is required to pay your staff with, staff who will still need to be paid even if left idling about because there is no machinery to operate on

Probably sad reality, but ......

[Waiping 12]

In this line of business you really need to forecast much further than other businesses. It's not like you can go buy a plane tomorrow and get it deliver immediately. Too fast and you may suffer burn out, too slow and the opportunity is gone.

[leon t 0]

yes ordering a new plane and actualluy getting one takes a leeway of between 12 months to 20 months depending on the model and type of aircraft. However whenever AK or AK X makes an order, it does seems too large an order or they have over projected on their demand. Leasing of aircrafts is still an option and nowadays its not that bad as leasing are easier now - like for even newer A320s there are at least 2 LCCs that have aircraft surpluses and have planes sitting idle on the ground. Even for the A330s.

[KK Lee 5]

 

On a320/b738, LCC (e.g ak) benefited from short turn around that add frequency but not on larger aircraft like a333/772 (e.g d7)

 

On a333/772, LCC is depending on higher density to achieve lower cask provided seats could be filled.

 

Fsc achieved maximum yield by matching demand with capacity i.e different aircraft type.

 

Lcc achieved maximum yield by filling the aircraft.

 

To achieve better yield, instead of a330/a350, d7 need to acquire smaller 787.

 

Unless d7 could drump up demand to fill a333, expect it will continue to bleed.

[flee 5]

To achieve better yield, instead of a330/a350, d7 need to acquire smaller 787.

I am not so sure, B788s cost more when compared to the A338s - I think that they are better served by retaining the current A333s over a longer period. Once the finance leases are paid for, the aircraft has almost zero fixed costs. Those on operating leases will still bear fixed costs in monthly lease payments.

 

Acquiring B788s will mean that they cannot have a common pilot pool and will add operational complexity. If D7 needs smaller aircraft, they should instead look at the A338s. The A359 might be too big for them, if what you say is true.

Edited November 21, 2014 by flee

[flee 5]

No management shake-up at AirAsia X

 

KUALA LUMPUR: AirAsia Bhd group chief executive officer (CEO) Tan Sri Tony Fernandes has affirmed that no upper management shake-up is on the cards for loss-making AirAsia X Bhd (AAX) and is confident that with its revamp plan, the low-cost, long-haul carrier can turn around in the next financial year ending Dec 31, 2015 (FY15).

He does not rule out the possibility of AAX returning to profitability in the fourth quarter of this year.

“We are still confident about the business model, and will support the current management,” he told reporters after launching a new product called the Asean Pass yesterday. The pass enables travellers to utilise pre-purchased credits to book flights at a fixed rate across selected routes throughout Asean.

“They are unlucky in terms of timing, where 2014 is a challenging year for the whole industry, not only them [AAX],” he said.

Full report: http://www.theedgemarkets.com/en/node/170894

[JuliusWong 0]

I do not think AirAsia X is having issue paying their staff as they place employees on high priority. Much as paying their banks and lessor. I think the issue crops up due the many charter flights that they did for many airlines. Perhaps the payroll team needed more time to sort out the allowance + basic of the crews deployed on these charter flights.

[flee 5]

AirAsia X joins AirAsia in slowing expansion in challenging Malaysia market; cuts Australia capacity

 

AirAsia X has joined sister low-cost group AirAsia in slowing its expansion in the Malaysian market by selling aircraft, deferring deliveries and wet-leasing excess capacity. The two Malaysian subsidiaries of the AirAsia/AirAsia X groups combined now only plan to add one aircraft, an A320, in 2015.

The adjustments should help drive improvements in yields and profitability. AirAsia X incurred a loss for the fourth consecutive quarter in the 3Q2014 while AirAsia saw its profits slip again - although remaining among the most profitable in the region.

AirAsia and AirAsia X are wisely not holding out for a restructuring at rival Malaysia Airlines (MAS), which at least for the time being is not pursuing any significant reductions to capacity. AirAsia X, which recorded 42% ASK growth in the first three quarters of 2014, will now only increase ASKs in the Malaysian market by 5% in 2015.

Malaysia AirAsia profits drop in 3Q2014 despite flat capacity

Short-haul LCC Malaysia AirAsia (MAA) on 19-Nov-2014 reported a 14% drop in operating profit for 3Q2014 to MYR227 million (USD71 million). Net profit was down 85% to MYR4 million (USD1.3 million) but pre-tax net profit was up 5% to MYR26 million (USD8 million). Revenues were up only 3% to MYR1.317 billion (USD413 million).

AirAsia started pursuing in early 2014 a conservative – and rational – approach to short-haul capacity in the Malaysian market. Seat capacity in 3Q2014 was flat compared to 3Q2013 levels while ASKs were up only 1%.

Yields (RASK) were up 2% for the second consecutive quarter, an encouraging sign that capacity constraints are bearing some fruit. But yields and average fares are still below historic levels and competition remains intense.

AirAsia X incurs large loss in 3Q2014

Full analysis here: http://centreforaviation.com/analysis/airasia-x-joins-airasia-in-slowing-expansion-in-challenging-malaysia-market-cuts-australia-capacity-197766