AirAsia India launch seen in Q4; may order 50 more jets

27 May, 2013

AirAsia, which smashed order records for Airbus jets to become Asia’s largest budget carrier, could buy another 50 planes as it targets aggressive expansion in India, Chief Executive Tony Fernandes said.

Discussion of an order for another 50 A320-family jets, worth $5 billion at list prices, comes weeks ahead of the Paris air show and five months after the Malaysian carrier added 100 jets to its order book to lift total purchases to 475 planes.

AirAsia plans to launch an airline in India in partnership with the Tata Group to cash in on rising demand for domestic air travel among India’s expanding middle class. It would start with planes already on order but potentially trigger new orders.

“We’re looking at putting in almost a plane every month. We decided that sometimes when we pussyfoot around it takes too long to catch up so we decided just to go for it,” Fernandes told Reuters in an interview.

“We’ve bought a lot of planes but we’re still short, we’re still leasing planes at the moment, so I was right buying these planes, and we may have to put in another order…(for) 50 or something like that,” Fernandes said.

Fernandes said the affiliate, AirAsia India, was recruiting to be ready to launch in the fourth quarter, subject to final clearances. He denied a report the launch had been delayed from September, saying he had always planned the final quarter.

Fernandes was speaking ahead of Sunday’s Formula One Monaco Grand Prix, where his Caterham racing team is trailing behind a field that includes cars of Indian drinks tycoon Vijay Mallya – whose Kingfisher Airlines has been grounded by cash shortages.

“I think we run a better airline and he’s run a better Formula One team,” Fernandes said, asked how his airline would make money in a market known for losses and bureaucracy.

“My point is, we’re two very different models. Two very different leaders and you can’t compare one with the other.”

Japan partnership talks

Fernandes said the sector’s boom and bust cycle, which prompted India to open up the sector to foreign airline investors, had given way to a healthier business climate.

“I said that I will come into India when all these guys have paved the way and made their mistakes.”

Although Fernandes still wants to buy planes, analysts say AirAsia is mostly shifting from a period of rapid expansion into new markets and placing huge orders, to taking delivery of those planes and focusing on making its routes profitable.

While Fernandes calls business in Indonesia, home of rival Lion Air, “very good,” a Japanese venture has disappointed.

AirAsia posted a 39.23 per cent fall in first-quarter profits on Wednesday, hurt partly by loss-making AirAsia Japan.

Fernandes said AirAsia hoped to resolve differences with its partner All Nippon Airways in the next few weeks but did not exclude a break-up of the venture, which allows each partner to pull out with its investment protected by the other.

“The model will work. But I’m not sure our partnership and the way we will run it would necessarily work. We’ve got to be aligned on that and we’re hoping to be aligned. I’m moderately optimistic that we can make it work,” he said.

“If we agree in a couple of weeks time then we just go do it. All our other affiliates have made money, Japan should be no different.” AirAsia Japan started operations last year.

Asked what would happen if the two sides failed to reach an agreement, he said, “Then we’ll have to part ways, I think”.


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AirAsia India launch seen in Q4; may order 50 more jets

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