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AirAsia X loses US$40m in 3 months

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moa999

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While they may keep hitting my inbox with supercheap fares - eg. pretty regularly A$199 from SYD-KUL

they are losing money hand over fist.
A US$40m net loss for the three months April-June 2014.
All this from a fleet of ~22 A330s and 2 A340s

Most of the loss (different metric) blamed on Australian routes.

Sydney and Perth routes to be trimmed from double daily to 11/12-weekly

Interesting over 50% of AirAsia X's traffic is through traffic (ie. not stopping in KUL)

AirAsia X records 2Q2014 loss as Australia underperforms. But long-term prospects are still bright | CAPA - Centre for Aviation

Note that AirAsiaX is listed separately to AirAsia, although AirAsia retains a chunk.

AirAsiaX also rebranding its Premium Class to "Business" (aka Jetstar and Scoot, although with a much better flatbed product) and Hotseat to Premium.

Also:
http://airasiax.listedcompany.com/misc/qr/presentation_slide_2Q2014.pdf
http://airasiax.listedcompany.com/newsroom/PressReleases_2Q2014.pdf
 

juddles

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I thought Air Asia X was meant to be a success story?
 

Foreigner

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In the short term the share price has taken a hit but long term prospects look bright.
 

moa999

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But with 50% transfer pax they are competing against more than MAS
 

Cool Cat Phil

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Could this be a telling picture beginning to unfold that the LCC product struggles on long haul sectors.
AirasiaX failed on the KL > London route in just a couple of years & Paris barely made it a year in existence.

JQ have made many changes to routes & schedules on long haul in the last 12 months including ditching AKL > SIN.

Rumours had it 3-4 years ago JQ were going to fly to Munich & Athens from SIN.... That clearly won't happen any time soon ( or at all) one would think.

Scoot despite still being in its infancy has not grown to the 20+ destinations that it was stated in would reach in its first couple of years.

long haul LCC travel from Asia may be struggling possibly due to a number of reasons, but could it be that the costs ( in particular fuel & labour ) involved for such long sectors make the routes unprofitable?

My thoughts for the day anyway.
 
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BAM1748

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long haul LCC travel from Asia may be struggling possibly due to a number of reasons, but could it be that the costs ( in particular fuel & labour ) involved for such long sectors make the routes unprofitable?

My thoughts for the day anyway.

LCC are a need, people wouldn't use them if they had more money to spend on travel. I think as Asia becomes richer they don't want LCC any more than a man from Melbourne, also as they do become richer their wages increase and they start pricing themselves more in line with western prices. India could be the next China for manufacturing.

As soon as they can, all the Chinese I know go and buy a Mercedes, they don't want low cost Great Walls.

Matt
 

Formal Hall

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LCC are a need, people wouldn't use them if they had more money to spend on travel. I think as Asia becomes richer they don't want LCC any more than a man from Melbourne, also as they do become richer their wages increase and they start pricing themselves more in line with western prices.
The man from Melbourne does what an LCC however. I don't think this is an East/West divide, it is more than AirAsiaX and Scoot appeal most to the backpacker set, no matter where they hail from. In fact, increasing wealth usually means more individual travel rather than package tours, which could hurt the full service airlines (I don't think the LCC offer group rates and the flexible payment options tour groups would need).

The problem is simply one of yield, not enough people paying for premium and last minute fares. Hence AirAsiaX putting more emphasis on its Business seats by dropping the twee names for everything.
 

Cool Cat Phil

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The man from Melbourne does what an LCC however. I don't think this is an East/West divide, it is more than AirAsiaX and Scoot appeal most to the backpacker set, no matter where they hail from. In fact, increasing wealth usually means more individual travel rather than package tours, which could hurt the full service airlines (I don't think the LCC offer group rates and the flexible payment options tour groups would need).

The problem is simply one of yield, not enough people paying for premium and last minute fares. Hence AirAsiaX putting more emphasis on its Business seats by dropping the twee names for everything.
Well said. Yield must be getting squeezed now for AirAsiaX particularly as MAS are discounting heavily to attract custom.
 
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aussiejohn

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I seem to recall that the Air Asia X flights to London were suspended due to both escalating fuel costs, and the British Governments's desire to have the highest passenger duty charges in the entire world. Of course those UK APD charges have gone up even higher since then.

There have been tantalising hints that they would be back on the route once they got their new A350 planes, as they would be more fuel efficient, and presumably there are other economies to be gained with them as well. But I think the APD is going to be the stumbling block, though I guess Ryanair finds a way to make it work.

The big but of course is flying 14 or so hours from KL to London on a LCC. I did the flight once, in a premium seat, and I have to say that I would have happily done it again. The food etc is irrelevant to me, and I can bring my own entertainment. All I want is leg room, and whilst I wasn't overly keen on the angled flat bed, it was a million times better than crammed up in a pokey little Qantas A380 cattle class seat I flew home from London on, I can tell you. And my entire trip from Melbourne to London (SIA/Silk to KL economy, AAX to London premium) was cheaper than QF cattle class.

I guess there is a market segment that will tolerate the discomfort on a long journey to save money, but I think that market is shrinking, so the economics of LCC long haul is becoming more fraught perhaps.
 

lastrow

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The comments here about the viability of long established national airlines trying to compete with the Asian cheapies are spot on. I cannot understand Qantas squeezing up their Y seating in the hope of packing in more pax at K Mart prices. As has been observed by earlier contributors there is a large and growing traveller segment who would willingly pay a higher fare for some more leg room and wider seats. After all , not everyone shops at K Mart. David Jones does not lack customers who will pay for a superior product.
 

dajop

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IBut I think the APD is going to be the stumbling block, though I guess Ryanair finds a way to make it work.
Yep, Ryanair aren't flying many (any?) routes where the longhaul rates of APD kick in. It's 13GBP if < 2000 miles. Air Asia passengers in the >6000 mile category face 97 GBP APD.
 
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