Cheap oil paves way for Air Asia to spread its wings

AirAsia CEO Tony Fernandes said the budget carrier is ready to start expanding in South-east Asia, on the back of cheaper oil prices.
AirAsia CEO Tony Fernandes said the budget carrier is ready to start expanding in South-east Asia, on the back of cheaper oil prices. PHOTO: AFP

SAN FRANCISCO (REUTERS) - With low oil prices reducing its operating costs, AirAsia Chief Executive Tony Fernandes said the budget carrier was ready to start expanding again in Southeast Asia, and was eyeing Vietnam and the Philippines.

Speaking to reporters on the sidelines of a US-ASEAN trade conference in San Francisco on Wednesday (Feb 18), said the pace of expansion would depend on securing approvals for new routes and airport access.

"We're going to start expanding again in different parts of ASEAN," Fernandes said.

While some benefits of the collapse of oil prices have been swallowed up by a decline in currencies in its major markets, Fernandes said he viewed the lower fuel costs as "an opportunity to expand, to regrow, to put capital investment in."

In November, AirAsia reported a consolidated third-quarter net loss of 406 million ringgit (US$96 million, S$135 million), versus a year earlier net profit of 5.4 million ringgit. It blamed foreign exchange losses and a writedown at its Indonesian affiliate.

The company had also said its major shareholders were evaluating "all strategic options" after Reuters reported that Fernandes was sounding out investors to take the company private in the wake of a steep fall in its shares.

Fernandes said the two Southeast Asian markets that excited him most for expansion were the Philippines and Vietnam, calling the latter "the last piece of our jigsaw puzzle."

But securing route approvals was a problem, and lack of available take-off and landing capacity at Manila's Ninoy Aquino International Airport needed to be resolved, he said.

Clark International Airport could be a good alternative solution, Fernandes said, but this would require the government to invest in a new high speed train into Manila. Fernandes also said he hoped to win approval for flights to Hawaii this year, but could not predict when that might occur.