AirAsia X gets approval for new key routes

KUALA LUMPUR: Long-haul low-cost carrier AirAsia X Sdn Bhd has received the green light from the Transport Ministry to fly to Istanbul, Beijing, Shanghai, Osaka and Jeddah, sources close to the ministry said.

“A number of these flights may start as early as August this year,” said the source.

At the moment, full-service carriers, namely Malaysian Airline System Bhd (MAS), Singapore Airlines (SIA) and Qantas Airways Ltd, dominate these routes.

“This increase in routes is what AirAsia X has been seeking. New routes lead to new traffic, an increase in revenue and potentially better profits depending on the yields achieved... it’s an avenue for growth,” said the source.

“Also, the government approved the new routes to increase tourism revenue for the country,” said the source.

However, AirAsia X’s application for the Sydney route is still pending. Currently, Sydney is serviced by MAS.

Sources said the new routes were approved by the National Economic Council recently and the decision was relayed to the ministry.

AirAsia Bhd holds a 16% stake in AirAsia X.

The addition of new routes will bode well for AirAsia X’s IPO, speculated to take place by year-end, and raising a potential RM900 million to RM1 billion in new capital.
AirAsia X is set to fly to Istanbul, Beijing, Shanghai, Osaka and Jeddah after receiving government approval for the new destinations.

Furthermore, the new routes may better prepare AirAsia X against the new low-cost airline to be launched by SIA within 12 months.

Last month, SIA had announced that it would launch a long-haul low-cost airline in 12 months following an “extensive review and analysis”. The new airline is expected to fly medium to long-haul routes to China, India, Africa, the Middle East and the Americas.

The new unit will be owned by SIA but will be operated and managed separately. SIA’s move into long-haul low cost is an extension of its venture into Tiger Airways. SIA owns 32% of Tiger Airways, which is a low-cost carrier and competitor to AirAsia.

AirAsia X’s has been seeking new routes to expand its market share for several months now.

Its CEO Azran Osman-Rani reiterated his call for more routes recently as he saw the threat from SIA as formidable with its vast resources. He stressed that the company needed to continually expand its routes and maintain market share.

“We need to quickly grow to the major cities that we have not yet been allowed to serve, such as Sydney, Jeddah and Osaka. If these route approvals are not forthcoming, then our competitive lead will dissipate,” he was reported to have said.

The Ministry of Transport has been reviewing applications for new routes. The government is keen to develop air services in the country in an effort to grow the local tourism industry to benefit the economy.

It was reported that between 2007 and 2011, the government had approved AirAsia X’s request to operate in 32 international destinations. Among these routes, AirAsiaX has so far undertaken 15.

The ministry had previously said the approval of new routes relied on the availability of traffic rights and the receiving country’s rules and regulations, which may include restrictions on low-cost carriers, slot constraints and airspace control.

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