Mar 24 2012
When Malaysian entrepreneur Tony Fernandes bought the heavily indebted carrier AirAsia in 2001 for the nominal sum of one ringgit, few could have predicted that by now it would be vying to be the world’s largest no-frills carrier. One side-effect of the airline’s rapid expansion has been Kuala Lumpur becoming one of the most important transport hubs for independent travellers in Southeast Asia.
In the early years, AirAsia concentrated on short-haul flights around Malaysia and neighbouring countries in Southeast Asia. Introducing competition into a market long dominated by bloated national carriers made flying around the region much more affordable. The rapid expansion stepped up a notch in 2007 with the launch of AirAsia X, which by this year was flying to about 80 destinations in more than 20 countries.
But what goes up, must come down, and a major fall in profits in 2011 has prompted a significant rethink in AirAsia’s strategy. Both European routes (London and Paris) stopped at end of March, while its service to Christchurch, in New Zealand, will follow suit at the end of May. A major rationalisation in India has seen the Mumbai and Delhi routes suspended too.
In the future, unless fuel prices drop massively, AirAsia X will limit itself to flights of eight hours and less, concentrating on core markets such as Taiwan, Japan, China and Australia. In terms of short-haul, AirAsia continues to add routes around the region, both out of its main hub, LCCT, and subsidiary bases, such as Bangkok, Jakarta and Manila.
For its part, ailing national carrier Malaysia Airlines (MAS) has closed several routes since the start of 2012, including Dubai, Karachi, Cape Town, Johannesburg, Rome and Buenos Aires. The carrier lost a record 2.5 billion ringgit in 2011 (about 820 million US dollars), so further rationalisation seems highly likely.
These route closures come less than a year (August 2011) after AirAsia bought 20 percent of MAS, and the state investment body, Khazanah Nasional, took a 10 percent stake in AirAsia. However, both airlines insist that rising fuel costs and the global economic situation are to blame for the route closures, rather than anti-competitive behaviour.
The overall effect of the changes is that travel to Europe, South Africa, South Asia, Latin America and New Zealand has suddenly become more difficult and costly from KL. On the upside, domestic Malaysian air travel, as well as travel to other Southeast Asian countries, North Asia and Australia, are unlikely to get any harder, and may even get easier.
Whether all these route closures will have a negative effect on Malaysia’s tourism industry is trickier to predict. Likely drops in independent travellers from Europe could well be outweighed by an increase of package tourists from China. But after a decade of heady growth for Malaysian visitors numbers and air traffic alike, it looks like clear blue skies have been replaced by a period of turbulence.
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