AirAsia X reportedly suspended plans to launch Kuala Lumpur-Manchester service due to the UK Government’s plans to increase its Air Passenger Duty (APD) (Airwise, 25-Oct-2010). Manchester Airport's Head of Government and Industry Affairs, Brian Conway, stated the carrier had been in talks with the airport for “many months” but chose to launch services to Paris Orly Airport instead due to the government tax being too high. UK Transport Secretary Philip Hammond responded stating the government is aware it is making UK airports and airlines more highly taxed than competitors, but it needs to meet its twin goals of cutting the deficit and meeting aviation growth while also meeting climate change targets. He added the government has started developing a new national aviation policy, to be introduced by the end of 2012. Mr Hammond said the new policy would encourage growth at regional airports.
AirAsia X drops plans for Manchester due to tax
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Malaysia continues to record some of the world’s fastest passenger growth rates, driven by rapid capacity expansion by Malaysia Airlines (MAS) and AirAsia along with the launch of Malindo Air.
Malaysia Airports has recorded 18% passenger growth for 1Q2014, including 16% at Kuala Lumpur International Airport (KLIA). This follows growth of 18% for the full year in 2013, including 19% growth at KLIA, making it the fastest growing major airport in Asia.
The rate of growth is expected to slow down for the remainder of 2014 but remain in the double digits for the full year. The growth over the last year has been spectacular but has come at the expense of airline yields and hence profitability.
Southeast Asia low-cost airline fleet to expand by almost 20% in 2014. Are more deferrals needed?
Southeast Asia’s low-cost carrier fleet is still projected to increase by nearly 20% in 2014 despite a recent spate of delivery deferrals and suspensions of expansion. The region’s LCC fleet also grew by about 20% in 2013, creating overcapacity in several Southeast Asian markets and leading to the current pressure on yields and load factors.
The AirAsia Group has made the right move in slowing down expansion by deferring deliveries and selling aircraft. Tigerair Mandala and Jetstar Asia also have decided to take at least a one-year hiatus from expanding their fleets. More Southeast Asian LCCs, including potentially the Lion Air Group, need to make similar adjustments for market conditions to improve.
Southeast Asia is still a market with huge opportunities for further LCC growth. But LCC capacity expansion has started to outstrip supply, perhaps necessitating a pause for breathing space.