AirAsia expects PH unit to turn in profit by ’15

Malaysian budget airline giant AirAsia Bhd would take a “breather” in terms of expanding its Philippines-based fleet until 2016 even as the unit targets to post a profit by next year by focusing on profitable routes, AirAsia owner Tony Fernandes said last week.

Fernandes, a Malaysian tycoon, said during the 23rd World Economic Forum on East Asia that indications from an ongoing turnaround strategy being implemented meant the airline would be ready to add planes to its fleet of 16 mid-range aircraft, 14 of which are being used by AirAsia Zest, in two years.

Fernandes said the consolidation of AirAsia Zest, which involves a takeover by AirAsia Bhd and its Filipino partners, coupled with new infrastructure projects like expressways being built in Metro Manila, would also accelerate the company’s growth.

“The good news is connector roads will be ready by 2016. That will help us with our plan to going back to Clark [International Airport],” Fernandes said, referring to a decision to temporarily end its operations at the Pampanga air gateway as it “realigns operations.”

“The integration of Zest is taking a bit longer,” Fernandes added. “We are still waiting for Senate approval. But once that happens we can really go for it.”

AirAsia Zest, which operates at Manila’s Ninoy Aquino International Airport, is still controlled by Filipino businessman Alfredo Yao, with AirAsia Philippines owning a minority stake. AirAsia Philippines widened its losses by more than a fifth to 24.6 million ringgit (about P334 million) in the first quarter, a filing at the Malaysian stock exchange showed.

Fernandes, however, said “there was a chance” for its Philippine operations to post a profit by 2015 despite increasing competition from local carriers Philippine Airlines and Cebu Pacific.

“We have had a few false starts but third-quarter and fourth-quarter sales have been very good, load factor for domestic is very high,” Fernandes said.

New routes would also contribute to growth as the airline wanted to expand to Japan, South Korea and even Guam, following the restoration of the country’s category 1 status by the US Federal Aviation Administration, he said.

“We are not a domestic airline per se although domestic sales are really good. We think growth is going to come from the international [business] where we think we are a bigger brand than others,” he said.

It was nevertheless keen on the local business as Fernandes said they wanted to develop and expand hubs outside Manila’s Naia. AirAsia Zest also appointed a new CEO, Joy Caneba, formerly the carrier’s chief operating officer.

For example, the group was keen on  developing other routes similar to what it did with flights from Kuala Lumpur directly to Kalibo, a gateway to vacation hotspot Boracay Island. “It’s pretty full, running at about 80 percent (load factor),” Fernandes said. “There are a lot of jewels in the Philippines that we can take advantage of,” he added.