Bangkok and Kota Kinabalu airports – new Southeast Asian hubs? A Capital dream for Tony Fernandes
Capital A Group's CEO Tony Fernandes has built a remarkable empire of airlines in Southeast Asia. He has often spoken about owning airports too, but has done little about it.
This year he has twice identified the potential for new air hubs - firstly in Bangkok, and latterly at Kota Kinabalu in Malaysia's Sabah State, in both cases comparing them to the global role filled by Dubai.
Capital A airlines would play a key part in developing each of them.
In Bangkok's case, services are split between two airports, each with an identified role, and three if you count the U-Tapao/Rayong/Pattaya airport to the south. That doesn't bear comparison with Singapore, but a collection of Capital A airlines operating there at one location would make a difference.
Kota Kinabalu is a different prospect, with seven million passengers in 2023 and less than 10 million at its peak. 'KK', as it is known, which is already a tourist haven, might be better suited to attracting new markets as a stopover point if Mr Fernandes' vision should materialise.
The key question in all this is whether or not Mr Fernandes is going to put his money where his mouth is, and commit to investing in and operating airports as he has often indicated he is interested in doing but without actually having tied the knot with any of them.
- Capital A Group’s Tony Fernandes waxes lyrical about both Bangkok and Kota Kinabalu becoming ‘the new Dubai’ as hubs.
- The group’s airlines would be heavily involved in both cases.
- The Asia Pacific region is almost back to normal, but Chinese travel may never be what it previously was.
- Hub ambitions must be tempered with realism.
- There is logic in his proposition for Bangkok, but difficulties implementing it.
- There is plenty of additional tourist potential at Kota Kinabalu, and the synergies exist on which a hub might be built.
- Should there be a new terminal there, or a new airport?
- Mr Fernandes often talks about operating airports but needs to demonstrate some commitment.
Capital A Group's CEO perceives value in airport hub operations in Bangkok and Malaysia
Tony Fernandes, the celebrated entrepreneurial CEO of Capital A Berhad (previously the AirAsia Group), takes a keen interest in airports, being responsible, for example, for cutting jibes about KLIA2, the second terminal at Kuala Lumpur International Airport when it was under construction - famously labelling it a 'Taj Mahal.'
He has a thing about airline hubs as well. This is a little unusual for a group in which the airline members, along with those in the separate AirAsia X Group, for the most part operate low cost point-to-point services, short, medium and long haul, using an identikit model, with passengers arranging their own connections when they are appropriate to their journey.
AirAsia is currently operating LCCs in five ASEAN countries (Association of Southeast Asian Nations, the political and economic union of 10 states in that region), namely Malaysia, Indonesia, the Philippines, Thailand and Cambodia, where the newest addition, AirAsia Cambodia, launched in May-2024.
Likens Bangkok to Dubai
Earlier this year, in Jan-2024, shortly after a meeting with the then Thai Prime Minister Srettha Thavisin, Mr Fernandes said that it was time Bangkok became the global aviation hub of the ASEAN bloc, just like Dubai is the 'global hub' in the Middle East.
He argues that he wants to see Bangkok become the next Dubai in those terms, as the ASEAN region has high potential - it has a population numbering more than 700 million - and also that infrastructure for low cost airlines should be included in the country's future airport expansion projects.
As far as Bangkok is concerned, that already seems to be the case, as Airports of Thailand (AoT) has identified the city's Don Mueang Airport as the focus of low cost, short haul activity, while the newer Suvarnabhumi airport is tasked with hosting legacy, full service and long haul flights.
See related CAPA - Centre for Aviation report: Bangkok Suvarnabhumi Airport five-year expansion plan approved as it gears up for regional challenge
By that measure, Suvarnabhumi would be the hub to which he refers - which, coincidentally, is how IATA saw it when Suvarnabhumi was under construction, and when it leant on AoT to focus its attention on the new airport and to discard Don Mueang (which it did, but which turned out to have been a mistake).
There might be a quid pro quo here
Mr Fernandes' remarks may have been a buttering-up exercise, because at the same meeting he asked for a raft of favours, including a 40% reduction on excise tax for jet fuel; the maintaining of the current rate of the air navigation service; and an increase in traffic rights on Thailand-India routes.
It also became known that 25% of the 412 aircraft the group has ordered have been earmarked for the Thai operation, and that Thai AirAsia and Thai AirAsia X would eventually, in two or three years' time, merge into one airline better suited to hub operations than the two individual airlines are today.
There is logic in his proposition, but difficulties implementing it
Whatever the politics behind that move, there are reasons for both AoT and Capital A group to covet the Bangkok 'super-hub' that Mr Fernandes envisages.
Suvarnabhumi was the world's 26th busiest airport in 2023, clawing its way back up the ratings following huge traffic losses during the COVID-19 pandemic.
It was also the ninth busiest in the Asia Pacific region, and second busiest in Southeast Asia after Singapore, where the management might have something to say about what should be the premier hub for the region. (In 2019 Suvarnabhumi was 19th busiest globally, with 65.4 million passengers, again just behind Singapore Changi).
Singapore's Changi Airport has marginally greater capacity on Capital A member airlines than does Suvarnabhumi, but in both cases the percentages are low - less than 5%.
But of course, Capital A's capacity is focused on Don Mueang in Bangkok (over 60% of the total).
That raises questions about how a Bangkok hub that benefits Capital A airlines would work. Right now, not very well, but a high speed rail line is under construction connecting the city's central district and both airports, as well as the U-Tapao-Rayong-Pattaya airport well to the south. That will definitely make a difference if the rail transfer time between the two central airports can be kept as low as 30 minutes or less.
Likens Kota Kinabalu to Dubai!
Bangkok is one thing, but Mr Fernandes' recently voiced aspirations for Kota Kinabalu Airport, the main gateway to the Malaysian state of Sabah and the island of Borneo, are something else again.
Kota Kinabalu is operated by Malaysia Airports Holdings Berhad (MAHB), which is currently going through a wholesale privatisation exercise, so no immediate changes are anticipated at any of its airports.
In the longer run, though, the new owners, which include a global big hitter in the form of Global Infrastructure Partners (GIP), could latch on to his vision, which is possibly why he chose to make them now, before the ink dries on the deal.
That vision was couched in these terms. Mr Fernandes said, "One of my last dreams is to make Kota Kinabalu a transit or stopover airport for countries like a mini Dubai or Doha."
He went on to point to Sabah's potential due to its strategic location between Oceania and North Asia, adding: "Those flying between Japan and Australia can use Sabah as a stopover". He said: "We are planning to have flights between Tokyo and Osaka soon, and then…introduce Sydney, Melbourne and Perth to start with. From there, we can open more connections and opportunities for Sabah, especially with places like Phuket and Bali".
Hub ambitions must be tempered with realism
We have to be realistic about the prospect for developing an air hub.
Many airports would like to be one, especially during the off-season, if they are otherwise reliant on inbound point-to-point leisure travel - as in the case of Iceland's Keflavik Airport, for example, even though that often means additional expenditure on building appropriate transfer facilities for passengers who don't even enter the country to spend their tourist dollar.
Just as it is the case that airport cities, another facility that is often high on the wish list, do not often work out as anticipated, the ambition to develop a hub has to be tempered by reality.
In Oct-2023 CAPA - Centre for Aviation examined the claims of Kazakhstan to be able to develop a 'Silk Road air hub', but concluded that a lack of foreign airlines, of alliance member airlines, and of foreign low cost carriers, combined to make that a difficult target to achieve.
Other examples include, for example, Malta, which a decade or so ago tried and failed to set itself up as a hub between Europe and North Africa; also numerous smaller airports across the Middle East which think that they can successfully challenge Dubai, Doha and Abu Dhabi for transfer passengers.
And only recently, Caribbean Airlines CCO Martin Aeberli, speaking at a CAPA - Centre for Aviation Summit in Port of Spain, Trinidad, insisted that Port of Spain Piarco Airport "has the potential to be a hub", due to its geographic location.
Singapore showed the way in the past
One advantage Kota Kinabalu has is a regional proximity to Singapore, one of the earliest exponents of a sixth-freedom single airline transfer hub globally, as well as regionally, and one that also helped pioneer the concept of a stopover package at the transfer point without incurring an additional charge.
Location of Kota Kinabulu International Airport
Asia Pacific almost back to normal
Mr Fernandes zeroed in on the location of Kota Kinabulu between Oceania (the lightly populated region that includes Australia, New Zealand, and the Pacific Islands), and North Asia (principally the heavily populated China, Japan and Korea).
The entire region was the slowest to recover from the effects of the COVID-19 pandemic, but has caught up now, with a 101.6% recovery rate in seat capacity in week commencing 26-Aug-2024 compared to the same week in 2019.
This is marginally better than Europe (101.7%), while remaining two percentage points behind the global average.
Regional COVID-19 recovery compared to 2019, from 2020
It is already the case that routes between principal international airports, such as Beijing Capital, Tokyo Narita and Seoul Incheon, and Southeast Asia generally have the second highest combined capacity in most cases, after the capacity within the local North Asia region.
Capital A Group airlines already have 62% of capacity at Kota Kinabalu; Chinese travel recovering, but only slowly
Thus there is the prospect of attracting travellers on these routes to Capital A services via Kota Kinabalu, where AirAsia and AirAsia X already hold 61.0% of the capacity (week commencing 26-Aug-2024).
Especially so as Chinese travellers, in particular, are beginning to reappear on the international scene, if only slowly. International air travel from China is recovering, but set to remain at a fraction of what it was in 2019 for the time being, and may even never approach a return to pre-pandemic levels, according to some estimates (including from the Asian Development Bank).
Plenty of tourist potential
There is definitely ground to be made up, and plenty of potential to go with it.
In Malaysia as a whole, China/Hong Kong visitors to the country made up 11.9% of the total and Japan 1.6% in 2019. In 2023 the ratios were 7.3% and 1.1% respectively.
In both cases South Korea did not register (less than 1%).
Malaysia - visitor arrivals by market for 2023
AirAsia X already serves seven cities in China including Beijing, Shanghai and Hong Kong, as well as Tokyo and Osaka in Japan and Seoul, and in addition Taipei.
In Oceania it serves Sydney, Melbourne and Perth in Australia, but not New Zealand or any of the Pacific Islands, and AirAsia also serves Perth.
It has served Europe in the past (until 2012), Paris and London, also Honolulu in the United States - but withdrew those services owing to reasons that included high taxes, fuel prices and weak demand.
AirAsia X: network map for the week commencing 26-Aug-2024
AirAsia X also serves Kota Kinabalu from Kuala Lumpur International Airport, offering it as a 'side trip' to its international network.
The synergies exist on which a hub might be built
So, there are potential synergies in place upon which AirAsia X could build a network, with Kota Kinabalu as an alternative north-south hub to Kuala Lumpur, the two remaining connected by the airline, in addition to services offered by AirAsia.
Right now it may not have the fleet to deliver this dream, but there are more than twice the number of aircraft on order (34) as there are those in the fleet at present (16).
To begin with, eight Airbus A321-200N and four A330-900 planes are scheduled for delivery in 2027, and some of those, but more likely existing aircraft, could be allocated to a Kota Kinabalu base/hub.
A juicy prospect
Mr Fernandes says AirAsia has brought some 80 million passengers to Sabah over the past two decades, and that he wants to continue to expand its tourism potential. He believes that at the current expansion rate, AirAsia would require a terminal of its own there to be effective.
He declined to say whether there should be a new airport or merely renovation of the existing airport, but insisted he was just giving the government and MAHB the "juice", saying that there is no point building a terminal that no one is going to fly to, and that, "We want to make KK a hub, but you need to give us the right 'juice' and terminal, otherwise it's hard for us".
Sentiments that one might recall from the planning of KLIA2.
New terminal or new airport?
He continued, "Building a new airport would be a long-term project, no matter how quickly we act. But in the meantime, we must consider temporary solutions to realise our vision. If there is a chance to make KK a hub, let's not wait for the new airport, or terminal, or a new site. Grab the opportunity now. One thing we are good at is if there's a chance, grab it now."
The Sabah Tourism Board chairman Datuk Joniston Bangkuai said the need for a new terminal had been raised with Chief Minister Datuk Seri Hajiji Noor, and iterated that "this is where Sabah and AirAsia understand each other's needs. We can make it a reality. We want AirAsia to play a role in this".
The CAPA - Centre for Aviation Airport Construction Database confirms that there is no construction activity at present at Kota Kinabalu.
Kota Kinabalu ticks the boxes for both short and long-stay tourism
Does Kota Kinabalu cut the mustard in the tourism stakes?
Although it is an industrial city, with a metropolitan population of 750,000, it is a coastal one, partly surrounded by rainforest and known for bustling markets, modern boardwalk, beaches and culture. It is also a gateway to Kinabalu National Park, the home of 4,095m-high Mount Kinabalu after which it is named.
In short, it offers attractions relevant to both the long-stay visitor and the short-term, including stopover, one.
Mr Fernandes often talks the talk about operating airports but needs now to walk the walk
It should be noted that Mr Fernandes, like his northern hemisphere counterpart Michael O'Leary at Ryanair, has indicated on several past occasions that he would like to become involved in airport investment, in the Philippines and - intriguingly - at Bangkok's Don Mueang airport.
As recently as Apr-2024 he was quoted as saying Capital A's aviation services arm, which is one of five departments and has no shareholding in AirAsia, has expressed interest in acquiring airports across the ASEAN countries. Recently the company has been looking at Thailand in detail, where there is some movement on ownership involving Airports of Thailand.
He concluded, "Personally I've always wanted to own an airport and I want AirAsia to own its own airport".
With events as they are in Malaysia, MAHB coming under full private ownership, the best he can probably hope for there is to build a new airport; be it in Kota Kinabulu or elsewhere, or, in KK's case, an airline-specific terminal for the anticipated hub venture.
There might be richer pickings to be had in Thailand.