Is AirAsia facing partnership problems?

airasiaIs the Asian budget business overhyped as competition increases and demand matures? Or is it just a problem peculiar to AirAsia’s partnerships?

AirAsia Philippines, established in December 2010 between AirAsia (40%) and local investors (60%) but commenced operations only in 2012, has suspended all flights from its base at Clark International Airport. The reason was cited as one of cutting losses incurred by affiliate Zest Airways, which in August was suspended by the Civil Aviation Authority of the Philippines for safety violations.

However, AirAsia chief Tony Fernandes said it was because the airline was moving its flights to the main Ninoy Aquino International Airport in Manila. At the same time, Mr Fernandes vowed, “We will be going back to Clarke.”

It was ambiguous, to say the least. Is it going to be Manila or Clarke, or both? Know that Mr Fernandes has always been keen on secondary airports where it could dominate. Ever since the Malaysian capital of Kuala Lumpur moved its main airport from then Subang International Airport (which has been renamed Sultan Abdul Aziz Shah Airport) to Kuala Lumpur International Airport in 1998, AirAsia has been lobbying unsuccessfully to make its hub at Subang, which is served by Malaysia Airlines’ Firefly budget subsidiary.

AirAsia has also asked the Singapore authorities to be allowed to set up base at the smaller Seletar Airport which is currently being used on a limited basis for charters and training. Yet when a budget terminal was constructed at the main Changi Airport, AirAsia chose not to use it but insisted on operating along full-service airlines out of the main terminal. Mr Fernandes understood only too well the advantage of being where the action is, as suggested by his preference for NAIA to Clarke because the former offers “more choice, more value.” Changi’s Budget Terminal has since been closed and AirAsia may feel it has made the right decision.

However, AirAsia Philippines’ suspension of flights coming on the heels of AirAsia’s failed relationship with All Nippon Airways (ANA) in its joint venture – then named AirAsia Japan and has since been renamed Vanilla Air by ANA – may suggest more than just a temporary adjustment issue as the carrier makes plans to shift airport bases. (See Everyone loves vanilla, but do they really? Aug 24, 2013) This is not helped by the increased competition in the region and by the overrated potential that some analysts have hyped up although it is to be recognized that with Asean Open Skies, there is room for growth.

Maybe it has to do with the stars too. AirAsia’s new joint venture in India may not take off as scheduled by the end of this year because of administrative procedures. Yet the delay till 2014 may be a blessing in disguise considering the present poor market. Just so in the same way that AirAsia Philippines may resume Clark-Hong Kong flights for the Christmas season. A matter of economics?

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About Dingzi
Writer by passion, with professional expertise in aviation, customer service and creative writing. Aviation veteran, author, editor and management consultant. Besides commentary on business issues and life-interest topics, travel stories and book reviews, genres include fiction, poetry and plays. Nature lover who abhors cruelty of any form to animals, and a tireless traveler. Above all, a dreamer.

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