ASIA'S LOW-COST BELIEVER
24 August 2008
The man behind a new budget airline to service Melbourne, AirAsia, is an advocate of cheap holiday airfares, as Greg Hackett and Chris Pritchard report
MALAYSIAN tycoon Tony Fernandes, the colourful head of AirAsia, believes cheap holiday airfares are here to stay despite rising fuel prices and other challenges faced by the industry.
AirAsia will start with four return flights each week between Melbourne and Kuala Lumpur, with daily flights expected later in November.
AirAsia's plans to deliver passengers to its Kuala Lumpur hub from where they'll be fed into the carrier's regional and domestic routes.
An ebullient character, Fernandes works in blue jeans, T-shirt and baseball cap emblazoned with the AirAsia logo.
Sitting at his desk in the airline's open-plan head office at Kuala Lumpur's Low Cost Carrier Terminal -- even he doesn't have a private office -- Mr Fernandes says his strategy is ``totally different'' to that of the major airlines.
``They're reacting to high fuel prices by furiously cutting routes, shedding staff and mothballing aircraft,'' he says. ``We, on the other hand, are expanding -- adding new routes and frequencies, trying to win even more passengers and not planning to cut back on orders for more aircraft.''
The airline, a familiar sight at Asian airports, operates 73 jets -- with more than 100 on order -- and flies to roughly the same number of destinations.
Even his enemies regard Mr Fernandes, 44, as a canny operator. He bought a wobbly start-up airline 15 years ago for a nominal 35 cents.
He staunched its heavy losses, turned it around through heavy promotion and low fares, creating one of Asia's best-known no-frills airlines.
``Make no mistake -- airlines are going to go to the wall in these tough times,'' he says. ``They'll close -- as some have already done -- or merge.''
But he argues competitors have only themselves to blame.
``Their costs are too high, they focus on business-class passengers and deliver poor service to economy-class travellers,'' he says.
On AirAsia, passengers pay for what they use. From Australia, for instance, it costs $8 per checked bag (with excess changes kicking in after 15kg). Blankets, pillows, food and drink are sold, as are discounted bus tickets to city centres.
The airline no longer operates from Kuala Lumpur's glitzy international airport, instead using a purpose-built low-cost carrier terminal (LCCT) 15km away.
The terminal is basic and functional, but has shops, duty-free outlets, restaurants and a food court.
While AirAsia X, as the long-haul operation is called, has designated seating, on AirAsia's domestic and regional routes passengers sit wherever they find a seat.
For an extra charge, passengers can jump to the front of the queue to bag the best seats.
The airline departs from a destination 30 minutes after arriving.
``Cabin crew and pilots help prepare the aircraft, enabling it to leave quickly -- even down to cleaning seat pockets,'' says Fernandes.
With a good punctuality record, the airline recently introduced an ``on-time guarantee'', offering payments to passengers for delays not caused by bad weather or airport management decisions.
This follows the successful European low-cost model of often selecting cheaper, secondary airports within easy reach of major centres.
AirAsia X uses wide-body aircraft, while AirAsia's fleet is mainly narrow-body Airbus A320s. Seating is no more crowded than on other airlines in the region.
Fernandes is critical of his rivals' strategies.
For instance, Singapore-based Tiger Airways, smaller than AirAsia, now operates domestically in Australia -- yet Mr Fernandes believes that is a bad move.
``Why, rather than expand faster in a market of 600 million people in South-East Asia -- and that excludes the huge markets of China and India -- would they set up a domestic operation in Australia which has only 20 million people?'' he asks.
Another gripe is that airlines ``mostly do nothing'' to build tourism to a destination.
``Emirates is the only exception I can think of, other than us,'' he says.
``We pick places with strong growth potential, but which no one has bothered with before -- and we offer cheap flights there. We grow the market.''
Departure boards at the LCCT show a multitude of destinations -- particularly in Indonesia -- that are attracting big numbers of tourists. AirAsia has subsidiaries based in Indonesia and Thailand.
Mr Fernandes admits fuel prices are ``the great unknown'', but doesn't expect to raise fares, ``at least, not significantly''.
``All our planning is for continued growth,'' he says. ``Even if the conventional wisdom is to cut back and hike fares. When we started, critics said we'd last three years at most, but people want to fly affordably, so we're still here and growing.''
MORE: AirAsia, 1300 760 330, www.airasia.com
Copyright 2008 News Ltd.
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