Thursday, May 19, 2011

AirAsia CEO 'Keen' On Operating New AirAsia Singapore Brand

AirAsia's chief executive is "keen" to operate in Singapore, and the Malaysian airline will soon base some aircraft there in a move that may presage an AirAsia Singapore unit launch.
Recent advertisements for cabin crew positions at AirAsia Singapore are hoped to be the first step, Tony Fernandes told Dow Jones Newswires in an interview. AirAsia will be "night-stopping" aircraft there, in order to make morning flights out of the Southeast Asian island nation.
There have been rumors that Australia's Qantas is interested in its low-cost unit, Jetstar, making a similar move into Singapore to save on costs by hiring locally.
Fernandes also said that its two, 49% owned units, AirAsia Thailand and AirAsia Indonesia, remain on track for separate initial public offerings later this year. The pair may go public simultaneously, or Thailand may go first and Indonesia second, depending on a number of factors.
The IPOs come at a good time for AirAsia, he said, as the moves will free up the balance sheet and allow the low-cost airline to launch new AirAsia units in Vietnam and the Philippines in the near term. The CEO said Vietnam's new government is "much more receptive" to the company's ideas on branding and its websites, and Vietnam's tourism industry is growing quickly, so Fernandes doesn't anticipate the problems that caused its first foray into that country to fail.
Fernandes said he was pleased by remarks made earlier Tuesday by the Malaysian prime minister at the Invest Malaysia conference at the New York Stock Exchange, in which the prime minister expressed a desire to make Malaysia the economic center of Southeast Asia.
AirAsia doesn't believe it can beat the market, so it doesn't do much hedging against rising oil prices, he said, and it is currently about 10% hedged at a cost of about $120 a barrel. Similarly, it doesn't hedge much against currencies, and noted that many forecasts call for the Malaysian ringgit, which has risen sharply, to hover in the MYR2.90 to MYR2.95 range to the dollar, near current levels.
Its long-haul international unit, AirAsia X, is slated to announce a pact with General Electric Co.'s (GE) aviation unit on Wednesday. Fernandes didn't want to steal the unit's thunder, but hinted that the pact could involve aircraft engines, a new type of Airbus aircraft AirAsia X hasn't purchased before and new routes for AirAsia X to Europe.
GE lost out on a previous contract to supply AirAsia X airplane engines, and has been aggressively courting AirAsia for new business, he said. GE CEO Jeff Immelt has been "a fantastic friend" of AirAsia.
In U.S. dollars, AirAsia has about $3 billion market capitalization, and posted annual revenue of about $2 billion and earnings of about $400 million, which excludes the contributions of the Thailand and Indonesia units, Fernandes said.
"We've proven the model," he said of the airline that has grown from 2 two planes to around 100 planes, and there is "great upside" for AirAsia, even after the marked increase in its share price, as it continues to extract even more "ancillary" revenue from passengers for things like food and insurance. AirAsia now extracts $16 of such revenue per passenger, up from $5 in the past.

Source : Dow Jones
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