Some Comments On Air Asia

Air Asia has declared that they are not moving to the new KLIA2 Terminal. They have been throwing up excuses like cracks on the tarmac and so on.

The KLIA2 is set to open by May 2nd, 2014. There is also an "open day' for the public on 27th April, 2014. This seems to indicate that it is all systems go for KLIA2. The first flight that will land will be a foreign airline, not Air Asia. 

Other budget carriers will also be using the KLIA2 when it opens. Hence there is no reason why KLIA2 is unfit for Air Asia. 

However this is Malaysia. There is always udang sebalik batu. The MCA owned Star newspaper has been playing up the KLIA2 issue quite loudly. People should know that Tony Fernandes, the owner of Air Asia now sits on the Board of Directors of The Star. There is an obvious link there between Tony and the MCA.

Here are some comments I received from an astute observer who seems to know the airline industry and Air Asia in particular quite well.  

AirAsia not moving to KLIA2.  

Tony is a shrewd and calculative businessman.  He positions himself well to extract as much as he can for AirAsia and himself. Sometimes to the stage only they and themselves matter and nobody else.

In KLIA2, AirAsia believes they are the anchor tenant utilising 80% of the facilities. They are not happy with the charges levied by MAHB which would be eating into their depressing bottom line.

Their "holding out" is just an act to ensure Government steps in and offers them concessions in KLIA2; and above all manipulating National Aviation Policy to safeguard their survival.

Tony who is the so called proponent of "freedom of the skies" is findingcompetition from Malindo eating into his forecast and he is unable to keep his lenders and institutional shareholders happy.

Knowing that MCA will eventually take charge of the Ministry of Transport, Tony feels comfortable because he sits on the Board of The Star newspaper which is MCA controlled. 

CIMB and its Group is a major investor in AirAsia and by itself gives Tony even further accessibility to Putrajaya. 

Of course his closeness to Khazanah (through Kalimullah and friends) further reinforces his linkage to the appropriate imfluential parties.

Acting Transport Minister Hishamuddin Hussein Onn does not seem to want to play ball with Tony Fernandes. 

So Tony is hoping for the much easier 'pushover' Prime Minister  to intervene on the KLIA2 issue. 

However his greatest disappointment is that the MCA is yet to take its position in the Ministry of Transport. Under the current missing MH370 scenario it is very unlikely that any MCA leaders have the gumption to assume the job of Minister of Transport. The MCA will only ask for the appointment AFTER all the publicity, outcry and media attention over MH370  has died down. The MCA prefers layers of protection - where they will not have to feel anything.

And as far as the Prime Minister is concerned, in the current climate he wants it to be seen as a Ministry of Transport  decision and not his. In other words the 'pushover' Prime Minister is also playing it safe. 

So the "musical chairs" game is being played between Tony, the PM, The Star and the MCA in the hope that AirAsia succeeds in this KLIA2 game play and beyond.

The other issue that is bugging Tony Fernandes is that he is straddled with massive aircraft orders with Airbus.

If competition in Malaysia and the region becmes more severe (it is) and the market conditions dampen, Tony will be caught out with such huge orders from Airbus.

Obiviously his other game plan is to sell the Airbuses he has ordered to other airlines at good margins - when he becomes desperate. Lets hope he is not caught out there too.

Times do not look good for AirAsia. They have already started cancelling and merging flights. It shows that competition is already undermining their profitability.

There is a growing feeling among travellers that AirAsia only sounds cheap but it is really not so. 

The novelty of cheap travel with not much leg room, having to pay for what you need and being carted around like herds of cattle is loosing its glamour. More so as other low cost carriers provide better all round services and offers.

AirAsia is banging on their political accessiblity and influence to ensure their survival. What they do not understand is that people are aware and are getting irritated with Tony's style.

Tony thinks he is doing Malaysia a favour. He does not realise that he is what he is today because Malaysia gave him the opportunities and the resources he has exploited to his advantage. 

Air Asia's success cannot be repeated in India, Indonesia or in any of the other markets where Tony has entered. Only Malaysia has given Tony the opportunities. Air Asia began as a monopoly low cost airline in Malaysia. During the time of Badawi, whose son in law Khairy was (or still is) a shareholder in Air Asia, they were given plum domestic routes previously flown by MAS.

So these were all fantastic opportunities for Tony.  Other players are now in the market including Malindo, Firefly, Silk Air  etc. Each one of them takes a bite out of market share.

There is also something else that needs to be said.

MAS has suffered some technical glitches lately. Then an engine caught fire on a Malindo air flight. Folks say that was a brand new ATR 72-600 turboprop. Here is a picture of the burning airplane :

Maintenance is possibly at fault.

The feedback is that none of our local airlines may pass the requirements of their AOCs or Air Operators Certificates. 

One airline has taken to hiring retired senior staffers from the Department of Civil Aviation as its employees. Want to guess which airline?

I hope these practises are not done to 'bend the rules'. Dont play play with airline safety.

It would be prudent for the Ministry of Transport to ensure that all airlines stick 100% to the AOCs and conduct audits of their AOCs every six months.  This has to be an ongoing process.