Date
25 September 2017
AirAsia chief executive Tony Fernandes believes the commercial aviation industry will strive to further improve its safety standards. Photo: Bloomberg
AirAsia chief executive Tony Fernandes believes the commercial aviation industry will strive to further improve its safety standards. Photo: Bloomberg

Things will get better after MH370, AirAsia says

AirAsia Berhad, a Malaysian low-cost carrier based in Kuala Lumpur, believes the disappearance of Malaysia Airlines’ Flight MH370 will push the commercial aviation industry to strive to further improve its safety standards, including the flight tracking technology, to boost the confidence of passengers.

“Things will get better after the disaster. Ultimately the industry will have to come out with something,” chief executive Tony Fernandes told EJ Insight in an interview.

Flight MH370 lost contact less than an hour after taking off from the Kuala Lumpur International Airport on March 8 and failed to arrive in Beijing, its destination. No distress signal or message was sent.

The plane crashed in the southern Indian Ocean, Malaysian Prime Minister Najib Razak told a press conference on March 24, following an analysis of data by British satellite operator Inmarsat. However, its precise whereabouts and the chain of events that led to its disappearance remain a mystery.

Fernandes, who was in Hong Kong last week for the 17th Credit Suisse Asian Investment Conference, said his airline plans to adopt new cabin solutions to improve flight safety.

He said carriers cannot stop a pilot manually switching off a plane’s communication and tracking systems but AirAsia is nevertheless considering linking the video consoles in front of each passenger’s seat to satellites as an extra flight-tracking system. 

“I wonder why the black-box information is not being sent to the cloud system … you can have the flight record sent every minute straight to the cloud and make it in such a way that the connection cannot be cut off,” Fernandes said.

AirAsia still considers Malaysia Airlines its biggest rival in the domestic market, Fernandes said, although the flag carrier suffered a setback because of the MH370 incident.

“Malaysia Airlines remains our biggest competitor in the country. [As for the low-cost carrier sector in Asia,] Indonesia’s Lion Air is also doing quite well while Jetstar [Asia Airways] is covering many destinations,” he said. “We have 60 percent market share in Malaysia”.

China expansion

Regardless of the potential damage that the MH370 incident might bring to the reputation of the Malaysian aviation industry, Air Asia will continue to expand in the Greater China region, Fernandes said.

The company plans to start direct flights from Kuala Lumpur to Haikou and Xiamen this year, following the latest moves to launch routes from the Malaysian capital to Xi’an and Kunming.

“In fact, we expect more Southeast Asian tourists to travel to Haikou than the other way round because of the ‘Hainanese’ connection,” he said. “A lot of Malaysians and Thais of Chinese origin are from Hainan.”

The airline plans to add 24 more Airbus planes and sell six units this year, out of its current fleet of 150 aircraft.

“The planned capital expenditure is about US$800 million and it is mainly for buying planes,” Fernandes said. “We plan to finance the expenditure from the European debt market and Islamic finance, with a little from the domestic [Malaysian] debt market.”

The AirAsia Group and its affiliate AirAsia X fly to Chinese cities including Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Kunming, Nanning, Xi’an, Hangzhou, Chongqing, Changsha, Guilin and Wuhan, according to the group website.

“Chinese people like to travel, and the country’s middle class is rising. Southeast Asian countries are the right place for them due to the similar culture,” he said.

Chinese tourists contribute 19 percent to the airline’s overall revenue, he said.

Emirates model

Besides China, the airline is also going to add more destinations in India and Indonesia. AirAsia Bhd is set to announce a joint venture in Japan in early April while AirAsia X is in the process of setting up Indonesia AirAsia X, which will add direct flights to popular destinations such as Bali.

“The synergy we can achieve is the brand and we are moving more and more towards an Emirates style model: a massive hub, just we are two separate companies,” Fernandes said, referring to the Dubai-based Emirates Airline. “We’re a point-to-point airline, but now with AirAsia X, we are doing a lot more hubbing – the hub and spoke model.”

Under this setup, travelers can take AirAsia X to Kuala Lumpur and change to AirAsia Bhd to Bali, or Hong Kong people can fly to Kuala Lumpur then change to another flight to reach Bandung in Indonesia. “We are going to put a lot of these pairs up and start selling them so that we can compete with SIA [Singapore Airlines],” he said.

AirAsia has partnership arrangements in several Southeast Asian countries including Thailand, Philippines, Indonesia and India, and will set up a joint venture with a Japan partner this month.

– Contact the reporter at [email protected]

CG

Ayishah Ma is a financial reporter on Greater China issues.

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