Indonesia Air Asia X will suspend all flights from 1 September 2016. This will result in the cancellation of all flights between Sydney, Melbourne and Bali.
Affected passengers have been contacted and given the option of a rebooking onto new flights, including via Kuala Lumpur, or travelling prior to the route suspensions in September. Passengers booked on a cancelled flight may also elect to receive an Air Asia credit or a full refund. In the aftermath of the announcement, Tigerair announced it would offer a 20% discount on Bali flights to affected customers.
Indonesia Air Asia X is the Indonesian-based long-haul arm of the Air Asia conglomerate. The company operates a fleet of just two wide-body A330 aircraft from its hub in Denpasar. Currently, these aircraft spend most of their time flying between Sydney, Melbourne and Bali, as well as to Jeddah in Saudi Arabia. Indonesia Air Asia X is not to be confused with “Air Asia X”, a Malaysian airline which continues to operate long-haul flights from its Kuala Lumpur base. The airline is also different to “Indonesia Air Asia”, which operates narrow-body aircraft on short-haul Indonesian routes, as well as flights from Perth and Darwin to Bali. Indonesia Air Asia flights remain unaffected.
There are two likely reasons for the airline’s decision to cease operating. The first possible reason is an Indonesian government regulation that now requires Indonesian airlines to operate at least 10 aircraft. Indonesia Air Asia has a fleet of 22 narrow-body aircraft. However, with only two aircraft, Indonesia Air Asia X does not currently comply.
It’s more political, the Indonesian government insisted that it needed 10 planes or have its AOC revoked (same story for other Indonesian carriers with less than 10 planes), they got around this by wet leasing Indonesia AirAsia A320’s. The routes are tracking along well, but there is uncertainty about the viability of sustaining such an operation and therefore the decision was to cease XT operations altogether and to focus on the profitable Malaysian and Thai operations.
Another likely reason is a lack of profitability. Air Asia, a low-cost airline, is known for having some of the lowest operating costs in the airline industry. However, with so much competition on routes between Australia and Bali, many flights have been operating half-empty. In February and March this year, Air Asia’s flights from Sydney and Melbourne to Bali operated with average loads of just 50-60%. Meanwhile, Jetstar’s average load factor has been consistently around the 80% mark during the same period.
With so much competition on flights to Bali, ticket prices have also been particularly low. Low yields, combined with low passenger numbers are unlikely to be sustainable for any airline.
The MEL > DPS route for instance has three LCC’s competing on this route which makes for some very steep discounting.
Other airlines flying to Bali can now breathe a small sigh of relief, as the competition from Air Asia has been bringing down prices to record low levels. However, the good news for passengers is that a new competitor could be just around the corner…
Word on the street is that Malindo will operate MEL-DPS-KUL. Although a quick sigh of relief for GA, JQ and TT, it might be short lived as OD might be announcing its new Australian routes soon.
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