Video: Azran Osman-Rani, CEO of AirAsia X, discusses growth plans

In this video interview with CAPA, AirAsia X CEO Azran Osman-Rani discusses what is next for the low-cost long-haul carrier after finally securing a Kuala Lumpur-Sydney route and withdrawing services from Europe and India.

Mr Osman-Rani outlined the carrier's plans to focus on developing its existing network, with future expansion to centre around increasing frequency to existing Asian destinations with an ultimate aim of double daily frequencies across its network.

Ruling out plans to enter any new countries in the near-future with the potential exception of through partnerships like charter operations, Mr Osman-Rani noted the appeal of operating to destinations with a large catchment area, saying that the benefits of a large catchment outweigh the cost disadvantage of operating to such airports.

Despite AirAsia X's high-profile network re-alignment last week, in which London and Paris routes were cut, AirAsia X's medium-term network development has largely been heading in the same broad strategic direction. In 2008 Mr Osman-Rani highlighted the carrier's growth through 2013 as covering five Australian cities, four to five in China, two to three in Japan, one to two in Korea, two to four in India and "a few" in the Middle East, with many to receive multiple frequencies a day.

These were all destinations to be served on the carrier's A330 workhorse, making that network the carrier's “core bread and butter", as Mr Osman-Rani said at the time. The selection was straightforward given AirAsia X's focus on having A330s serve points within nine hours from its hub in Kuala Lumpur, broadly the operating limit of the A330. There are few additional countries that fall within the carrier's nine-hour radius, with many not fitting AirAsia X's destination profile. Mr Osman-Rani says the carrier could enter new markets if a company would guarantee seat sales. AirAsia X used this approach with Tehran, where it operated charter flights before seeing the high demand and launching regularly scheduled flights.

Since the carrier's start, A340 services to Europe comprised a separate strategy owing to the different capital commitments and higher expenditure, such as on fuel. The strategy was heavily linked to oil price and aircraft availability. Following the end of European services to London and Paris by Apr-2012, the carrier's two leased A340s will be withdrawn from scheduled services but available for charter flights.

Today, the carrier's original A330 network strategy for the medium-term is progressing, with the exception of India and the Middle East. Mr Osman-Rani said the lesson that the carrier has learnt from operating to India, and Europe too, was the need for high frequency flights and not to "stretch ourselves too thin". However, AirAsia X also faced significant structural disadvantages in India with brand recognition and poor distribution, despite reporting a cost per ASK of USD3.50 cents in 2011 with a non-fuel ASK of USD1.70 cents.

An example of the need to adjust route plans pragmatically came when AirAsia X briefly served Abu Dhabi but faced significant price undercutting by incumbent carriers, leading to its withdrawal. AirAsia X founder and part-owner Tony Fernandes in recent days has signalled that AirAsia X would serve Jeddah in Saudi Arabia, but Mr Osman-Rani remains hesitant given distribution challenges.

Mr Osman-Rani in the video interview explains the carrier's need for scale and desire to increase frequencies on existing routes, expanding presence in existing countries. Mr Osman-Rani has affirmed his intention to serve a fifth Australian city by the end of 2013.

An option in the future may be to deploy A330s from current or future AirAsia short-haul bases, like Japan or Bali. Mr Osman-Rani said the possibility remained but he would first want to the see the short-haul carrier establish itself. Also a possibility is a return to Europe as factors such as demand and taxing regimes, improve. And, of course, in a competitive world there is always the unspoken need to remain ahead of the opposition.

Even the fact that AirAsia X was announcing the new Sydney route was prompted by Singapore Airlines' low cost subsidiary, Scoot, saying in Dec-2011 that Sydney would be its inaugural route. This galvanised a previously unwilling Malaysian government into finally giving AirAsia X the necessary designation, even though flag carrier Malaysia Airlines will also be affected.

AirAsia X planned and actual A330 route strategy: 2008-2012

Market Plan in 2008 Planned service effective 02-Apr-2012
Australia 5 cities 4: Gold Coast, Melbourne, Perth and Sydney
China 4-5 cities 4: Chengudu, Guangzhou and Hangzhou on the mainland and Taipei in Taiwan
Japan 2-3 cities 2: Osaka and Tokyo
Korea 1-2 cities 1: Seoul
India 2-4 cities 0 (previously 2, Mumbai and New Delhi, but to be withdrawn in coming months)
Middle East "a few" 1: Tehran

AirAsia X frequencies per week: 02-Apr-2012 to 08-Apr-2012

Route Frequency
Kuala Lumpur-Chengdu 5x
Kuala Lumpur-Christchurch 4x
Kuala Lumpur-Gold Coast 5x
Kuala Lumpur-Hangzhou 7x
Kuala Lumpur-Melbourne 7x
Kuala Lumpur-Osaka Kansai 4x
Kuala Lumpur-Perth 7x
Kuala Lumpur-Seoul Incheon 7x
Kuala Lumpur-Sydney 7x
Kuala Lumpur-Taipei Taoyuan 11x
Kuala Lumpur-Tehran 4x
Kuala Lumpur-Tianjin 5x
Kuala Lumpur-Tokyo Haneda 3x

AirAsia X has no plans to cancel its 30 aircraft on order, comprised of 20 A330s and 10 A350s. The carrier stated it would make a decision on the deployment and future of its 10 A350s on order, the first of which is scheduled for delivery in 2017, at the time, but Mr Osman-Rani noted that these could possibly be deployed on existing A330 routes.

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