Posted by- Neelam Mathews
Jan 19, 2012
The recent decision of AirAsia X to stop flying to Mumbai and London raised many eyebrows about the sustainability of long haul low cost services. Though the immediate concerns point towards high jet fuel prices, immigration concerns as well as high airport taxes have also impacted the overall grand strategy to increase yields, rationalization and allocation of aircraft fleet to more profitable routes, says consultancy Frost & Sullivan.
“These routes (Delhi and Mumbai and Paris and London) were bleeding on a low cost model and with the MAS-AirAsia collaboration, cutting off duplicate capacities makes sense,” says Amartya De, Frost & Sullivan Senior Consultant for Aerospace & Defense.
“Part of the network rationalisation process is also to bring passengers from European destinations on MAS up to Kuala Lumpur and then giving them a choice to scout South East Asia and move further to Australia either on Qantas or on a low cost model. Key to the rationalisation and optimisation is improving how the airlines interface at their Kuala Lumpur hub. MAS and
AirAsia might develop a transfer program, with the construction of KLIA 2,” he said.
With AirAsia’s Sydney route soon to be opened, there are significant advantages to Malaysia as a hub. Giving direct competition to Singapore, with a parallel low cost link connecting Melbourne, Perth, Darwin, Gold Coast and Sydney, AirAsia offers pan-Asian connections to fuel the routes
for South East Asia regional connections spanning as far as India.
Another parallel route which is likely to emerge and coexist is the British Airways-MAS partnership. “The opportunity is tremendous in order to maximise the network potential that a combination of AirAsia, AirAsia X, Malaysia Airlines and IAG could bring along with Qantas. The tie-up with MAS could become a component of Qantas’ new international strategy,” says De.
“This new development, along with the SIA-Virgin partnership, will intensify the Kuala Lumpur-Singapore rivalry. A similar pattern is emerging at Changi with Jetstar having started flights between Singapore and Beijing while SIA added another daily frequency only to be passed onto Scoot
later,” said De.
Scoot aims to help SIA re-capture the growth the group has lost over the past decade. Scoot is geared to enable SIA to capture the growth at the low end of the market but it will also allow the group to catch up in the premium economy segment. SIA-Sydney arrival and departure times are
expected to occur during off-peak hours for Scoot, which might be the same case for AirAsia X so that they do not overlap with MAS-Qantas flights timed to serve the premium market.
“The overall grand strategy sets up parallel routes from Europe and South Asia through Singapore and Kuala Lumpur reaching the far end of the world terminating in Australia and New Zealand each serving its own market and earmarked segment of passengers and each giving an opportunity to switch to a low cost network,” said Frost.
“As for the immediate issue at hand, AirAsia X will surely be able to sustain its long haul low cost services to Australia much better than what ensued on its London route.”