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JULY 2019

Week 28


AirAsia group’s Fernandes will use A330neo to Czech out Europe

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July 12th 2019

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Prague a contender as AirAsia favours Eastern Europe over competitive Western Europe. Read More »

AirAsia X is likely to re-enter Europe but with a substantially different strategy than its previous foray to the continent, AirAsia founder Tony Fernandes told the Rise technology conference in Hong Kong on July 9.

The group will likely use its Thai AirAsia X unit to serve Eastern Europe and Russia with A330neos. The group’s first A330neo is allocated to Thai AirAsia X and is expected to be delivered this month.

“My team has gone to Hungary and Czech [Republic] and I would imagine that would be our first plane to Europe,” Fernandes said. “Eastern Europe excites me.”

In 2012, AirAsia X withdrew A340-300 flights to London and Paris. The aircraft were second-hand but retrofitted into a high-density nine abreast configuration. The dynamics and costs of Western European cities like London and Paris are substantially more challenging for airlines. There is more competition and greater one-stop options.

“There’s so much capacity in [Western] Europe right now it’s hard to justify an AirAsia product,” Fernandes said. “If we’re going to go in, we have to be substantially cheaper and it’s pretty cheap now with the Middle East airlines.”

AirAsia has long mooted a return to Europe and the public often thought this meant resuming Kuala Lumpur-London. Instead, AirAsia is changing most variables: departure and origin city, aircraft and connections.

Thai AirAsia X’s Bangkok base is an hour closer to Europe than Kuala Lumpur in flying time. Eastern Europe is substantially closer to Asia than London or Paris. Combined, flight times will be in the sweet spot of around 10 hours. Return trips can be accomplished in 24-hour blocks, efficient for aircraft utilisation. This was not possible when AirAsia X last flew to Europe.

Kuala Lumpur to London or Paris pushes 14 hours, at which point fuel takes a dominating share of trip cost, leaving little room for the competitive variable costs LCCs try to excel on.

Using the Bangkok base would generate expanded inbound demand from Europe given Thailand’s tourism profile. AirAsia X wanted to tap London’s Malaysian community, but many were students with highly seasonal travel patterns.

It is reasonable to suggest the faster growing market of Eastern Europe will be more willing to try AirAsia X than the more mature Western European market. Eastern Europe will be cheaper than Western Europe for Thais. A similar rationale could prevail with Vietnam’s Bamboo Airways as it explores options to serve Europe.

Since exiting Europe, the AirAsia group has matured intra-group connecting itineraries, allowing it to sell more city pair combinations.

Fernandes said he had friends in the Czech Republic, Hungary and Romania. “That would be the first part of Europe we would go to, and Russia,” he explained. London has been a second home for Fernandes and he has often single-handedly pushed for London flights but faced cost pressures. He hoped to one day have the AirAsia brand return to London but be profitable doing so.

“It’s a dream of mine to go back to London,” Fernandes said. “We can’t make money right now.”

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