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100 planes join fleet as AirAsia pushes ahead with expansion plans

Tony Fernandes and Fabrice Bregier facing the press after the signing ceremony. Looking on are (from left) Datuk Kamarudin Meranun, Cameron, State Secretary of Wales David Jones and Airbus COO (customer) John Leahy.

Publication Date : 14-12-2012

 

AirAsia Group is buying another 100 Airbus planes as it steps up its expansion in the core markets of Malaysia, Thailand and Indonesia and pushes ahead into the new markets of Japan and the Philippines.

The 100 consist of 36 A320s with the current engine option and 64 A320s with the new engine option. The total value of the planes are US$9.4 billion.

With the latest orders, the low-cost carrier has ordered 475 single aisle aircraft from Airbus, comprising 264 A320 with the new engine option and 211 A320 with the current engine option.

AirAsia group chief executive officer Tony Fernandes described Malaysia, Thailand and Indonesia as its “three gold mines” while the Philippines and Japan have enormous potential growth.

“With these added aircraft, it goes in line with our strategy to further build our already extensive network through new routes and added frequencies and allow AirAsia to maintain its market leadership and dominance, especially in Malaysia and Thailand,” he said yesterday at the signing ceremony held at Airbus' British wing manufacturing plant in Broughton.

The order was announced during a visit by British Prime Minister David Cameron where he witnessed the signing of documents by Fernandes and Airbus president and chief executive officer Fabrice Brgier.

AirAsia said over 100 aircraft had already been delivered to the airline and this additional purchase would see AirAsia's aircraft deliveries continue until 2021.

Fernandes said AirAsia remained the most profitable low-cost carrier in Asia.

He said over the past decade, AirAsia witnessed competitors come and go while AirAsia maintained its growth trajectory together with increased margins, load factor and revenue per available seat kilometre.

“The key success is due our focus and discipline in terms of cost and our business model which allows the operations in Malaysia to remain the lowest in terms of cost against other airlines in the world and enables the company to maximise revenues through increase load factors, ancillary income and a stronger balance sheet.

“With this key ingredient, AirAsia remains in position to defend its margins which remain the highest in the industry,” he said.

AirAsia had displayed strong growth, recording net profit of 157.81 million ringgit ($51.58 million) for its third quarter ended September 30, which was 3.6 per cent higher than the 152.29 million ringgit profit a year ago, riding on the higher passenger traffic.

The company posted record revenue of 1.24 billion ringgit, up 14.4 per cent from 1.081 billion ringgit. Earnings per share were 5.7 sen compared with 5.5 sen previously.

Net operating profit was 205.04 million ringgit, up 18 per cent from 173.45 million ringgit a year ago. AirAsia's cash position remained strong with 2.2 billion ringgit in cash and bank balances with net gearing reduced to 1.03 times this quarter (net gearing was reported at 1.10 times in second quarter 2012).

Meanwhile, Airbus' Brgier described AirAsia as “one of the great success stories of recent years in the airline business.”

“The repeated confidence the airline places in the A320 is a clear endorsement of the reliability, efficiency and unbeatable operating economics offered by the world's most modern single aisle product line,” he said.

Brgier said the additional 36 newly-purchased Airbus A320 current engine option would be up to year 2016, with two to be delivered in 2013; four in 2014; 22 in 2015 and eight more in 2016.

FIn line with its growth plans in 2013 through the combination of firm Airbus deliveries and leases, Fernandes said Malaysia would take delivery of 10 aircraft, Thailand eight, Indonesia nine, the Philippines three and Japan four.

On Thailand, Fernandes said the country recorded the fastest growth in terms of passengers and was on course to be as profitable as the Malaysian operations.

“The added aircraft will for sure catapult them to grow its dominance domestically and internationally into new big markets such as China and India. With the recent move to the dedicated low-cost carrier terminal in Don Mueang and AirAsia being the anchor airline in operation, AirAsia sees our growth to catapult many folds in the short term.

“This ties with our vision to secure more secondary in the region in order to support our rapid growth and not be hampered by overcapacity in any main airports,” he said.

As for Indonesia, he said AirAsia was already best in class internationally and with the additional aircraft, it had set on penetrating the vast underserved domestic market, where its population of over 230 million people was a key catalyst to boost revenue.

“As Japan and the Philippines are new in the AirAsia family, our focus is to grow profitably, maintain lower cost and ensure we position ourselves as the No. 1 brand in these markets,” he said.

Meanwhile, Airbus' Brgier described AirAsia as “one of the great success stories of recent years in the airline business.”

“The repeated confidence the airline places in the A320 is a clear endorsement of the reliability, efficiency and unbeatable operating economics offered by the world's most modern single aisle product line,” he said.

Brgier said the additional 36 newly-purchased Airbus A320 current engine option would be up to year 2016, with two to be delivered in 2013; four in 2014; 22 in 2015 and eight more in 2016.

The remaining 64 Airbus A320 new engine options will be delivered beginning 2017 with eight deliveries; 14 in 2018, 15 in 2019; 14 in 2020 and 13 more in 2021.

Brgier said the deliveries for the existing 200 Airbus A320neos purchased last year would still be from 2016 up to 2026. As part of the purchase agreement, AirAsia will also have the option for another 100 aircraft consisting of 50 Airbus A320 new engine options and 50 A321 new engine options.

AirAsia chief executive officer Aireen Omar said demand had been on a continuous upward trend, from 200,000 passengers when it was launched in 2001 to an estimated 32 million this year.

“The new order will facilitate our expansion plans in which AirAsia Malaysia will add connectivity to other parts of Asia as well as increase frequency to existing routes.

Aireen said as part of its continuous cost initiatives, the addition of the Airbus A320neos sharklet wingtips would reduce fuel consumption by about 15 per cent per aircraft per annum.

Reuters reported from Broughton, Wales: AirAsia confirmed a $9.4 billion order for 100 more Airbus jets yesterday, making it the European planemaker's largest airline customer by number of planes ordered.

The deal for 64 revamped, fuel-efficient A320neo jets and 36 current-generation A320s comes on top of 375 similar planes already ordered by Asia's largest low-cost carrier.

"We have just bought 100 planes which makes a total of 475. To meet the amazing demand in Asia," AirAsia owner Tony Fernandes wrote on Twitter.

The deal is worth $9.4 billion at list prices but in practice aircraft are sold at significant discounts.

Britain, which co-operates in building Airbus planes together with France, Germany and Spain, said the deal would safeguard 9,000 British jobs including 1,500 at Airbus itself.

"This is excellent news and a tremendous boost for the workforce and for UK manufacturing," British Prime Minister David Cameron's office said in a statement.

Cameron, who eyes manufacturing as crucial to a rebalancing the British economy away from sectors like financial services, was at the Airbus wings factory in Wales when the announcement was made.

Together, Cameron and Fernandes toured the Broughton plant, which employs over 5,000 people out of 60,000 employed by Airbus globally.

The order had already been included in the Airbus books without the name of the buyer being identified, meaning Thursday's event was mainly a ceremonial one to promote the airline and the impact of aerospace on the British economy.

Its announcement comes a day after data showed that the number of people in work in Britain hit a record high in November, offering some relief to a government struggling with unpopular austerity measures and a sluggish economy.

Bombardier jet considered

Economic growth, urbanisation and rising disposable incomes are spurring rapid passenger growth among Asian low-cost carriers, helping to shield Airbus and its rival Boeing from the malaise gripping developed economies.

Despite the new order, Airbus is expected to fall behind rival Boeing in the race for new business this year.

The contract reaffirms AirAsia, Asia's largest low-cost carrier, as the world's largest A320 customer and second only to leasing giants in the number of Airbus planes ordered.

Wearing a jaunty red baseball cap, Fernandes set out even more ambitious dreams for AirAsia, which was struggling when he bought it just over a decade ago.

"One day, Air Asia would be as well known as Coca Cola. That would be cool. That is a massive ask," he said.

AirAsia placed a record 200-plane Airbus order in 2011 and fresh talks between the groups, initially for 50 jets, were first reported by Reuters in May.

But the European planemaker's chances for a deal were thrown into doubt when Fernandes held surprise talks with Canadian planemaker Bombardier in July.

The talks, noticed by a Reuters sports correspondent, were held at Silverstone on the eve of the British Grand Prix. Fernandes owns a race team and a soccer club.

By September, industry sources said AirAsia and Airbus were closing in on an expanded deal for 100 aircraft.

"It's a huge ask for anyone to come in to AirAsia. We have to be responsible to our shareholders and be open to it," Fernandes said yesterday.

Airbus and Boeing dominate the jet market but face a growing challenge from Canada's Bombardier as well as China and Russia.

Bombardier's CSeries aims to compete directly with the world's best-selling aircraft, the 150-seat Airbus A320 and Boeing's 737, and a deal with AirAsia would have been a coup.

Airbus Chief Executive Fabrice Bregier denied the Canadian group's model had ever seriously threatened the AirAsia deal.

Bombardier says its 130-seat jet is more modern and predicts sales will increase after a maiden flight due next year.

Fernandes said that he was buying the new Airbus planes mainly to grow his fleet, rather than to replace old aircraft.

He added that the company has no plans to look at a rights issue, saying that the transaction could be funded through cash. He also said the company is in a position to offer a dividend but gave no more detail.

 

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