News

Will Air Asia X continue to serve Europe?

21 Dec 2011 by BusinessTraveller

Mystery surrounds the future plans of Malaysian long-haul budget carrier Air Asia X. 

Reports in the Malaysian media suggest that the budget airline might axe its services between Kuala Lumpur, Paris Orly and London Gatwick because of concerns over profitability and the imminent introduction of the EU’s Emissions Trading Scheme (ETS).

According to the Business Times Air Asia X has written to the Malaysian Ministry of Transport requesting permission to withdraw services from four cities: London, Paris, Mumbai and Delhi.

Various reasons are being given for the withdrawal ranging from visa restrictions on the Indian routes to extra surcharges required to cover carbon offset fees in the case of EU services.

But the London route is said to be unprofitable. The Malaysian Insider believes that this one service is losing Air Asia X RM 20 million (£4 million) a year.

To date the carrier’s CEO Azran Osman-Rani will neither confirm nor deny these developments. Quoted in the Business Times, Mr Azran-Rani says “I hereby confirm that Air Asia X has not made any decisions on our routes, whether to add new routes or cancel existing routes.”

The carrier quotes the same response to the many questions posed by tweeters on its Twitter page. And by anxious passengers on its Facebook page.

However as Business Traveller noted in October (see In Focus), the low-cost airline business model is not proven for long distance routes. To date, every long-haul budget carrier has failed, witness People Express of the US in the 1980s and more recently Hong Kong’s Oasis and Canada’s Zoom.

Air Asia X’s fares on the London route are not as competitive as they once were. Rising fuel costs have pushed up the operating costs of its thirsty four-engined A340s while the rise in the UK’s APD (Air Passenger Duty is currently £85 for economy and £170 for premium class) means that its lead-in prices are no longer eye-catching.

In addition, the carrier faces ever fiercer competition from Gulf airlines like Emirates, Etihad and Qatar which have all boosted their Kuala Lumpur services in recent years. Granted the Gulf airlines fly indirectly but they can offer flights to SE Asia from cities the length and breadth of Europe and Scandinavia, whereas Air Asia X departs only from London and Paris.

Indeed, Emirates has wooed so many passengers that it now rosters an A380 for one of its three daily Dubai-Kuala Lumpur flights.

Another factor could be the new cross-ownership between Air Asia X and its country’s national, but loss-making, carrier Malaysian Airline System (MAS). If Air Asia X were to pull out of Europe it would boost MAS’ revenue on the two routes in question.

It is only two months ago that Air Asia X switched its London flights from Stansted to Gatwick to boost its popularity. So this development, if confirmed, will come as a surprise. 

It must be stressed that it is business as usual on Air Asia X’s website. Flights on these four routes remain bookable throughout 2012. We await developments with interest.

For more information visit airasia.com.

Report by Alex McWhirter

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