APEC 2015: AirAsia Banks on Philippines After First Airliner Disaster


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MANILA, Philippines – Passenger traffic coming from the Philippines and its local affiliate’s ongoing re-fleeting program will help the Southeast Asia’s biggest budget airline rise next year, after it grappled with its first crash in Indonesia last December, the chief of AirAsia Group said on Tuesday, November 17.

“I am predicting a big year in 2016 and I am very confident Filipinos are going to love our products,” AirAsia Berhad CEO Tony Fernandes told a media roundtable on the sidelines of the Asia-Pacific Economic Cooperation (APEC) CEO Summit 2015 in Makati City.

Asked how the business has been since its first airliner disaster in Malaysia, Fernandes replied: “We are optimistic. [In terms] of passenger traffic, the Philippines is actually the best.”

‘Best’ passenger traffic

Its third quarter records showed that Philippines AirAsia had a load factor of 84%, a 19 percentage-point increase year on year. Load factor refers to a measure of plane occupancy.

Compared to AirAsia Group’s operations in Malaysia, Thailand, Indonesia, and India, the Philippines recorded the highest increase in load factor in the third quarter of 2015.

“For fourth quarter, we will make money, which is great and I am super confident going forward,” Fernandes said.

Its parent company AirAsia Berhad recorded MYR1.32 billion (P14.22 billion or $301.40 million) revenue in the second quarter of the year, an inch higher than those of last year, thanks to higher passenger volume.

It was last December 28 when AirAsia Indonesia flight QZ8501 to Singapore crashed, with over 160 people on board gone missing. This was AirAsia Group’s first airliner disaster since its establishment 12 years ago. Some business analysts have then said that the incident could discourage some passengers from using the airline at least in the short term, which would have an impact on its bottom line.

“Load is now trending upwards to pre-QZ8501 levels on sales campaigns and brand recovery efforts. Philippines AirAsia’s re-fleeting plan is also on track where older aircraft that were acquired during the acquisition of Zest Air will be sold or targeted to be returned to third party lessors. This will help the associate to continue reduce its cost further. Network optimisation is in place and the number of agents will also be increased in the Philippines,” Fernandes said.

The local unit of AirAsia operates domestic destinations such as Kalibo (Boracay), Puerto Princesa (Palawan), Tagbilaran (Bohol), Cebu and Tacloban. Its international destination include China and Korea.

Higher capital

Asked if the airline group has plans of increasing its investments in the country, its CEO said: “We will keep discovering new places and new things. It is a challenge here, but there is big prize at the end of the day in the Philippines.”

The shareholders of Philippines AirAsia are investing more money into the airline for next year, increasing the airline’s capital stock to P5 billion ($106.84 million) to fund the lease of 5 more aircraft for 2016.

Philippines AirAsia currently has a capital of P2 billion ($42.75 million).

AirAsia Berhad used to operate in the Philippines through Filipino company AirAsia Philippines (Air Asia, Incorporated), which has a 49% stake in AirAsia Zest (Zest Airways, Incorporated).

Just recently, the Civil Aeronautics Board approved its petition to operate as a single company with just a single certificate. The company is now called Philippines AirAsia, Incorporated.

It, however, has pushed back its $200-million initial public offering (IPO) to first quarter of 2018 from 2016, as it finalizes the streamlining of its operations and re-fleeting of aircraft.

“More investments will come after IPO, but we do not want to announce what we are going to do because as soon as this is on Rappler or Philipine Daily Inquirer, then other airlines will copy us,” Fernandes said.

Master short-haul

The AirAsia chief, meanwhile, hinted that it will continue to focus on operating short-haul flights even after IPO.

“It will probably be the next CEO who looks at long haul, not me. You set the doorsteps of China, Philippines, Japan, and Korea. On the other side you have a 700-million ASEAN market, with most of these people not [having been] to the Philippines yet,” he added.

Asked about AirAsia’s access to the US market, Fernandes replied: “When I run out of that (ASEAN market), then I look at the Americans; But it is complicated — security, [President Barack] Obama… Leave that to PAL (rival Philippine Airlines, Incorporated).”

Source: Chrisee Dela Paz, Rappler.com

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