Wednesday, 14 March 2007

Another Budget Airlines?

The story of AirAsia is phenomenal.

It began as the heavily-indebted subsidiary of the Malaysian government-owned conglomerate, DRB-Hicom, and was losing money big-time.

Then came along some Malaysian-Indian dude called Tony Fernandes who decided he wanted to own an airlines.

Now this guy is an accountant. He worked very briefly with Virgin Atlantic as an auditor, subsequently becoming the financial controller for Richard Branson's Virgin Records in London.

Upon his return to Malaysia, he became, at 27, the youngest-ever managing director of Warner Music.

That's even younger than I am now.

So he buys this failing airlines and decides he's going to turn it into a budget airlines - back then a completely UNHEARD-OF concept.

He started it just after the September 11, 2001, which is debatably the worst day in the history of commercial aviation when nobody wanted to fly.

Everyone figured this fellow Fernandes had flipped.

Everyone predicted that the company would fail miserably.

Yet, just one year after his takeover, AirAsia had broken even and cleared all its debts. Its initial public offering (IPO) in November 2004 was oversubscribed by 130 per cent.

This dude is WAY COOL.

Of course, the national carrier, Malaysia Airlines wants a slice of the pie.

Only recently, after drastic policy changes did MAS narrow its losses to 136.4 million ringgit (US$39 million) from 1.14 billion ringgit (US$326 million) a year earlier.

Since Air Asia has been thriving, MAS presumptously expects to achieve profit as well from its low-cost carrier called Firefly beginning next year.

Who knows, it may.

Since Firefly is based in Penang, a northern state, the domestic destinations are currently not being serviced by any other airline and so it gets to fill in the niche. Air Asia operates out of Kuala Lumpur.

However, we already have six airlines - Malaysia Airlines, AirAsia, Berjaya Air, Transmile and Fly Asian Xpress (FAX) and Firefly. Granted, Transmile is cargo, Berjaya does exclusive charters and FAX is based in East Malaysia.

But we have a relatively small population. In fact, Malaysia is a relatively small country.

How many people do you expect up in the air at any one time? And how can MAS compete with AirAsia's super deals? I just bought a ticket (minus airport tax) to Jakarta, Indonesia for 30sen. That's $0.09 for the Americans. :)

I have wondered why they bother charging at all for the ticket. Of course, it's probably funkier to say I paid 30sen for a ticket. Makes it sound like I had to toil to save up for it. :)

But yeah, it would be fascinating to watch the competition unfold between AirAsia and Firefly.

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