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Let’s not stifle AirAsia X

13 February, 2008

TOMORROW, AirAsia X, Malaysia's only long-haul low-cost carrier, will add two new foreign investors who will pay a total of US$75mil for each to take a 10% stake in the company after the much-publicised entry of Sir Richard Branson last year.

Japan's Orix Group and Bahrain's Perigon Capital entry into AirAsia X should be lauded as it goes to show the confidence foreign investors have in the AirAsia X model even though the airline only flies to two destinations now.

Its maiden flight was to Gold Coast, Australia, in November and recently it flew to Hangzhou, China.

The airline wants to fly to more long-haul destinations; it has several on its radar screens, mostly secondary airports. But what it also needs are some key routes so that it can become a leading long-haul low-cost player and develop the low-cost carrier terminal (LCCT) into a major hub.

But would AirAsia X be ever allowed access to some key long-haul routes such as London, Amsterdam, Sydney, Perth, Melbourne, New Delhi, Bombay, Tokyo and even Beijing?

That is a question only the Government can answer. For now, most of the key long-haul routes are serviced by Malaysia Airlines (MAS). But giving AirAsia X a chance to fly some key routes would mean giving travellers an option to fly straight from LCCT to London instead of Stansted or to Sydney instead of Newcastle.

It also means travellers have more carrier options. Competition will bring fares down and that could potentially increase passenger traffic at Malaysian airports.

The opening of the Kuala Lumpur-Singapore air sector to competition is a clear example of how budget carriers have been given access to a key route, even though each only gets two flights a day. That in itself is an option for passengers to fly KL-Singapore at cheap fares that begin at RM29.90.

Giving AirAsia X access to key routes is nothing new. It is something practised in other markets where full service carriers compete alongside low-cost carriers on key routes the way they compete with other full service airlines.

In Britain, British Airways competes with Virgin Atlantic on key routes; in Hong Kong, Cathay Pacific is a full service carrier competing with Oasis on the Hong Kong-London route; in Singapore, Singapore Airlines is against Jetstar on the Singapore-Australia routes. In Australia, Qantas would be up against V Australia very soon on the Australia-US route.

Furthermore, MAS is already competing with major carriers such as Singapore Airlines, Cathay and Thai Airways on major routes such as London, Sydney, Hong Kong and even New Dehli. So AirAsia X would just be another rival. MAS is also competing with AirAsia on almost every single regional route.

Allowing access to some key routes should also not be seen as a threat for the incumbent since AirAsia X and AirAsia have in the past demonstrated the ability to create new markets for themselves and they do not cannibalise existing incumbent services.

And if Malaysia is keen to become a hub for long-haul low-cost carriers, it has to act fast to allow AirAsia X access to some key routes. In this way, the airline can establish its lead position ahead of rivals such as Jetstar and Tiger Airways, which are just waiting to get ahead of the game.

This article is a verbatim copy of the original article from The Star.

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