AirAsia X strikes Gold: First route for long-haul carrier likely to be Australias Gold Coast, Virgin Group on board as strategic investor
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(CAPA) Low cost-long haul travel to Australia received another boost last week with reports that Malaysian start-up carrier, AirAsia X, an offshoot of the wildly successful short-haul airline AirAsia, is set to launch services to the Gold Coast as early as the end of next month.
For a few lucky passengers, promotional fares could start from $30 for a one-way trip to Kuala Lumpur, with average return fares to be priced from around $650 (which implies many fares below that level). From there, passengers would be able to access a further 33 destinations in Southeast Asia, including AirAsia hubs at Bangkok, Johor Bahru (near Singapore), Jakarta, Kuching and Kota Kinabalu.
Such has been AirAsia’s growth that the Malaysian Government recently announced plans to transform Kuala Lumpur International Airport (KLIA) into the biggest low cost carrier (LCC) hub in the world.
Formerly positioned as a marble-and-glass premium transit hub, the airport will soon be the site of a second budget terminal, with capacity to handle 30 million passengers per annum. The T-shirt and thongs brigade is set to take over KLIA by 2011, as the budget facility will account for 55% of the airport’s total capacity, up from around 30% at present. (The existing budget terminal – Asia’s first – will be expanded, then replaced when the new one is built).
News of the KLIA budget terminal expansion coincides with the launch of the highly anticipated AirAsia X next month – a carrier that promises to pack close to 400 seats in its 15 A330-300s – up to 34% more seats than some airlines using the same aircraft.
This will deliver what AirAsia targets as the world’s lowest operating costs at US 1.9 cents per seat kilometre – about one fifth that of the Qantas Group – which will help it sustain very low fares in the market.
But less space for significantly cheaper fares is a trade-off AirAsia X is expecting passengers will accept in droves, especially when further destinations come on line, including London Stansted, in about a year from now, as well as destinations in China, India, and possibly Japan and Korea.
Another “unashamedly leisure focused” player in the market is Queensland Airports Ltd-controlled Gold Coast Airport, which is fast becoming Australia’s pre-eminent LCC hub. It looks likely to secure a coveted non-stop link to Southeast Asia, which would be a major coup for the airport (AirAsia was previously widely tipped to fly to Avalon near Melbourne first) and would fit nicely with the airport’s extensive domestic and trans-Tasman LCC networks.
The airport is currently served by Virgin Blue (131 domestic flights per week), Jetstar (104), Qantas (14), Freedom Air and Pacific Blue, with 16 and two flights per week to New Zealand, respectively. It handled 3.7 million passengers in the year to June – almost double the level in the Ansett-Qantas duopoly days.
The Gold Coast is also scheduled to receive Tiger Airways' inaugural Australian service (from Melbourne) in late November, with the carrier set to launch 21 flights per week initially, which, along with AirAsia X, is set to unleash the next phase of rapid growth at the airport.
To keep up with demand, Gold Coast Airport has initiated several ambitious development plans. Phase I of the airport’s $100 million passenger terminal project, which will deliver a 26,000 sqm common-user facility, is expected to commence in early 2008 and is scheduled to be completed by mid 2009. A tender for the project will be launched shortly and follows the recent extension of the runway to 2,500 m.
AirAsia X’s reported choice of the Gold Coast as its first Australian airport would also significant be in that Virgin Blue is the airport’s largest carrier.
Richard Branson’s Virgin Group last week acquired a 20% stake in Malaysian company Fly Asian Xpress (FAX), the operator of AirAsia X. Since Virgin Group currently has a 26% stake in Virgin Blue (possibly more in coming months if Toll Holdings decides to sell-down its stake), there would "almost definitely" be formal links between AirAsia X and Virgin Blue in the future, according to Sir Richard.
Branson now has his much longed for role in the fast-growing Asian LCC scene for a small initial outlay. (It is rumoured the FAX stake was acquired for less than US$7 million). Branson will progressively build on this position and will also make sure that AirAsia X is a success at the European end.
Meanwhile, Virgin Blue is set to launch its own long-haul operation in the third quarter of next year. V Australia will initially target trans-Pacific services to the US (and later to Asia), but neither an origin in Australia or a destination in the US have yet been disclosed.
With its newly extended, B777-capable runway, Gold Coast Airport will no doubt be keen to give V Australia a shake, although Virgin Blue’s home base, Brisbane, will have something to say about that.
But competition between Australia’s airports will be intense, not only for V Australia, but the steadily increasing number of airlines entering this market. Other Australian airports being targeted by AirAsia X in Australia include Avalon (possibly from Mar-08 when more aircraft arrive), as well as Adelaide and Newcastle.
Airlines – including LCCs - mean big business for airports and their communities. The three times weekly AirAsia operation alone is expected to inject up to $50 million in direct visitor expenditure into the Gold Coast economy – certainly nothing to be “ashamed” about!
Date posted: 17-Aug-07
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AirAsia X strikes Gold: First route for long-haul carrier likely to be Australias Gold Coast, Virgin Group on board as strategic investor 
