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Last Updated: Friday, 5 January 2007, 03:16 GMT
Asian budget airline in long-haul move
By Jonathan Kent
BBC News, Kuala Lumpur

Air Asia plane
Air Asia wants to bring the cost of long-haul flights down
The low-cost airline model which has revolutionised travel in Europe, the US and lately Asia may be about to go global.

The biggest no-frills carrier in the East - Air Asia - has announced the launch of a sister company to ferry travellers between its hubs in South East Asia and Europe, primarily the UK.

"We're going to really bring down costs on the long-haul product [in a way] that was never deemed feasible," Air Asia's chief executive Tony Fernandes told the BBC.

"I think that will allow us to offer fares to London from $80 to $450 (41 to 231) return," he said.

'One class product'

Mr Fernandes announced on Friday that the carrier, which expects to carry some 18 million passengers around South-East Asia this year, would launch a new airline under its banner to do what many believe is unfeasible.

"It's going to be a one class product," explained Mr Fernandes.

"It may have some rows of seats that are nice but you pay for that."

"We're not going to have business class lounges and separate check-in counters, but some people may be prepared to pay a little more for extra legroom."

The first route is likely to be between Malaysia's under-utilised air hub outside Kuala Lumpur and the UK.

Expansion

Mr Fernandes says he is not wedded to the idea of flying to a London airport but would rather go for whichever offers the best deal. But from there he sees enormous room for expansion.

"I think there is huge potential in Europe, China, India, Australia, the Middle East, Japan, Korea and one day the US but that's not in out immediate plans."

Both regions have a diversity that appeals to tourists.

Tony Fernandes, chief executive Air Asia
Mr Fernandes believes in risk taking

Asians are as enthralled by the prospect of strolling past Big Ben on a cold rainy day as Europeans are of sipping cocktails on white coral sand beaches in January.

The traffic will surely be two-way, he says.

The Air Asia announcement follows the launch a few weeks ago of a low-cost London to Hong Kong service by new operator Oasis.

However, the Malaysian based airline is already well established. When it launched in December 2001 it had three aircraft.

Now it has 50 and is waiting for another 85 units of the A320 model from Airbus.

Barriers

But what distinguishes Air Asia, beyond being a market leader, is its rather un-Asian combative approach.

When it started out, Air Asia found itself up against politicians who saw it as a threat to the country's flag carrier Malaysia Airlines.

Three years ago when it launched its first international service to Thailand's Phuket island, a former tourism minister told Mr Fernandes his firm should to stick to domestic services.

Barriers were put up. Malaysia's government would not give its blessing for the airline to fly Kuala Lumpur to Bangkok.

In response, the budget carrier simply set up a Thai arm and went into partnership with Shin Corporation, a company linked to the country's former Premier, Thaksin Shinawatra.

The Thai authorities subsequently approved the route. Now it flies all around South East Asia as well as to China.

Risk taking

Mr Fernandes assessment of the role of the entrepreneur in forging new markets is blunt: "It's about having balls".

We're making the hard decisions that many wouldn't have done, on the firm belief that people will be driven by low fares
Tony Fernandes, chief executive, Air Asia

He acknowledges that the new venture involves considerable risks.

There is a big difference between being prepared to save a few dollars on a three-hour trip across Europe or Asia and enduring 14 hours across eight time zones in a cramped seat, along with scores of other potentially grumpy and frustrated passengers.

Air Asia has created a new market and won a legion of fans in Asia.

But there have also been many complaints in the local media about delayed flights and other problems, that could be amplified on a long haul route.

Mr Fernandes remains undeterred: "We're making the hard decisions that many wouldn't have done, on the firm belief that people will be driven by low fares."

The success of the new venture will no doubt rest on how would-be passengers weigh convenience and comfort against price when flying half way round the world.

The rest of the industry will be taking note.


SEE ALSO
UK airlines deny Air Asia tie-up
03 Jan 07 |  Business
Air Asia 'to form UK alliances'
02 Jan 07 |  Business
Regulators block Virgin America
28 Dec 06 |  Business

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