AirAsia X suspends flights to Europe, not a surprise

SCEPTICS doubtful of the viability of the budget long haul will be quick to state that it is not surprising AirAsia X has announced suspension of its services to Europe. The budget carrier, which is a subsidiary of AirAsia, commenced operations from Kuala Lumpur to London in 2009 (at first to Stansted before switching to Gatwick) and to Paris (Orly) in 2011. Services to London and Paris will cease on Mar 31 and Apr 1 respectively.

There are echoes of the now defunct Hong Kong`s Oasis Airlines which commenced services to London`s Gatwick in 2006 followed by services to Vancouver in Canada in 2007 before collapsing in 2008. Mind you, Oasis Airlines was voted “World`s Leading New Airline” at the Annual World Travel awards in 2007.

So it was with impressive panache that AirAsia chief Tony Fernandes launched the AirAsia X long haul budget venture amidst doubts that the budget model was not really apt for the long haul especially after Oasis Airlines (and others such as Canada’s Harmony Airways which folded its wings in 2007) had failed only but too recently. Once again it raises the question as to whether airlines can replicate short-haul success flying the long haul.

But note that AirAsia is still flying to other destinations nearer home. In fact, that has been cited as one of the reasons for its decision, i.e. to focus on key markets in Australia and East Asia (namely China, Taiwan, South Korea and Japan) and development of new markets in the region. This suggests that Europe is not the market it should be after in its revised strategy, or rather, its failure to develop the market it had once set out to prove that the budget long haul could work.

Of course, there is the issue of cost – rising fuel prices and the new carbon emissions trading scheme being mentioned – that is adding pressure on the already low yield. The sluggish European economy has not helped, if not being contributory to the carrier’s woes.

Some analysts have questioned AirAsia X’s deployment of the Airbus A340-300 aircraft for its services to London and Paris, the way that they have wondered whether SIA’s transfer of the older Boeing 777-200s to its new budget subsidiary Scoot (which is expected to commence flying by mid-year) might not place it in good stead to compete with rivals that are operating with more efficient equipment. If cost is the main driver, then equipment efficiency which has an impact on costs should be a primary consideration.

But the long haul market also has different demands that may not be compensated by low costs. For example, AirAsia X’s choice of Stansted might not have been the best of decisions to begin with. In some way perhaps, all this came as a painful awakening for AirAsia X when it recognized the limited wiggle room allowed by the traditional budget model to accommodate these other considerations.

The decision to suspend operations to London and Paris was inevitable in order to “improve operating cost efficiencies” according to a statement issued by the carrier. Yet with this suspension of the truly long-haul flights, AirAsia X CEO Azran Osman-Rani said: “AirAsia X remains focussed on maintaining its global leadership position in the low cost, long haul segment.”

However, the crack for AirAsia X may be deeper than it appears. Besides suspending flights to Europe, the carrier will also be ceasing operations to Mumbai and Delhi in India – not quite the long haul by comparison. Mumbai will be off-line by Jan 31 while Delhi will see reduced flights until end-date Mar 22 although Mr Osman-Rani did not rule out the possibility of service resumption if certain issues such as visa restrictions that apparently had a negative impact on travel between Malaysia and India were resolved. Cost inefficiencies were again cited as reasons, and these according to Mr Osman-Rani had resulted in a “structure not conducive to the low-cost model.”

Yet again it raises the question of whether the low-cost model has been stretched to beyond its limits. Perhaps not in this case, noting the flight time between AirAsia X’s home base and Indian ports and if you consider the apparently successful operations by rivals Jetstar Asia and Tiger Airways as well as similar operations by these and other airlines including AirAsia X to other regional destinations. And as expectations run high in our anticipation of Scoot`s entry to prove otherwise, it is fair to conclude that AirAsia X is feeling more the pinch of the competition than the model it has adopted to shape its operations.

Advertisements

About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: