AirAsia Xs A340 curve ball
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Southeast Asia,
AirAsia
(CAPA) AirAsia X has commanded major attention again in recent weeks. Some of the newsworthy statements the carriers management has made include its plans for a 2009 MYR1 billion IPO, the likely sale of another 20% tranche to local and international investors, its forecast of break-even operation in its first year and robust profits in its second year, and even that founder Tony Fernandes has an imminent trip to Seattle to discuss a possible B787 order.
Given the volume of breaking news coming out of Kuala Lumpur, it is perhaps understandable that a sidenote to one of Mr Fernandes’ comments escaped greater examination. Discussing the carrier’s fleet plans, he stated that by its third year of operations, AirAsia X would have “at least seven aircraft”, the long-established A330s, “and two A340s for the European destinations.”
In all previous announcements, the carrier had trumpeted the low costs it would generate using the A330-300, into which it plans to insert 100 more seats than the aircraft normally transports. The four-engine A340 is a notable divergence from this programme, which originally planned to use a technical stop in the Middle East to serve European cities.
The carrier’s decision to acquire the out-of-vogue, expensive-to-operate A340s – which will join the fleet via lease in mid-2008 – has thus far not been explained, but one wonders if it could be related to competitive reasons.
The carrier determined that it could offer – inferior – one-stop services to Europe competing with considerably more expensive Malaysian Airlines. But with Jetstar announcing that its B787s – which have the range capabilities to reach Europe non-stop from Asia – might be based in Kuala Lumpur, perhaps the stakes were racheted up and a new service platform was necessary.
The incremental costs of operating the A340 subfleet are minimised by it having a common flight deck with the A330, but the two types use different engines – complicating the maintenance function – and the direct operating costs of the longer-range aircraft are considerably higher.
This is not to say that AirAsia X won’t still enjoy a considerable cost advantage to its domestic rival. It surely will. However, it is an unusual event to see the industry’s lowest cost operator intentionally add a layer of expenditure and complexity to its system for reasons likely determined by service standard competition with another low cost airline.
Date posted: 24-Sep-07
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AirAsia Xs A340 curve ball 
