Air Transport World

Asia/Pacific. (ATW's World Airline Report).

AIR ASIA: Billing itself as one of Asia's first low-fare, no-frills carriers, Malaysia's second national airline is patterning itself after Southwest and Ryanair. Air Asia started flying in 1996 as a "me too" carrier with fares slightly below those of Malaysia Airlines. After years of losses it was acquired at the end of 2001 by Tune Air, which slashed fares on domestic routes by up to 60% and announced its fares would be nonrefundable and that passengers would be charged for inflight refreshments. At the same time, radical restructuring took place along with aggressive expansion. The fleet has grown from two 737-300s at the end of 2001 to six in May, with another six due through the remainder of 2003. Longerterm plans call for another eight in 2004.

CEO Tony Fernandes says Air Asia's main objective "is to get more Malaysians flying." It is serving 12 destinations in Malaysia with 45% of bookings coming on the Internet. For the year to June 30, 2002, it posted a small profit of $61,500, and for the year ended last month it was forecasting a profit of $9.2 million.

AIR CHINA: The airline officially merged on Oct. 11, 2002, with China Southwest and Zhejiang Airlines. The group also holds interests in Dragonair and Air Macau. Air China has a strong brand and holds most of the country's international routes, It had been unprofitable since the Asian currency crisis in 1997 but posted a small profit in 2001 and reported a pretax profit of $13.53 million in 2002. The profits had set up the possibility of a public listing in 2004 but the effect of SARS may derail those plans, with Air China forecasting that it may not meet its profit forecast for this year. It appears to be taking the brunt of the SARS contagion, with Beijing virtually quarantined from the outside world. China's airline consolidation will give Air China a much stronger presence in the key domestic market, which had been a weakness.

AIR-INDIA: The Indian government has withdrawn both Air-India and Indian Airlines from the privatization route after failing to attract any real interest.

Air-India posted its first operating prof it in six years, $6 million, in FY02 and is expected to report a profit of $21 million for the year ended last March 31.

The airline is still to make a decision in an impending order for 10 firm and seven options worth $2.7 billion, believed to favor the 777. Air-India also is looking at 18 narrowbodies in the A321/737-900 class.

Air-India remains grossly underfunded overstaffed and operating a tired fleet. Additionally, its expansion plans appear to be clouded by its insistence on following a strict social agenda.

AIR MACAU: It is expected that the SARS outbreak will devastate the airline's 2003 profit, which hit $9.3 million in 2002, as capacity on its most profitable routes has been cut by more than 40%. The routes from Macau to Taiwan account for 75% of Air Macau's revenue. It cut weekly flights from Macau to Taipei from 64 to 42 while flights to Kaohsiung were slashed from 24 to 14. Virtually all Taiwanese passengers transit Macau to Chinese destinations with Air Macau.

Last year the airline faced greater competition for traffic between Taiwan and China with EVA Air and Dragonair obtaining more access. It has been Striving to reduce its dependence on transit traffic and through 2002 launched new services to Singapore, Kota Kinabalu and Kuala Lumpur. Its development over the past 12 months and that planned for 2003 reflects the transition of Macau into a tourist destination.

The airline is taking delivery of three A319s this year. In October it launched a dedicated twice-daily freighter service on the key Shenzhen-Macau-Taipei route using a leased 757-200. It flies to 10 mainland cities, two in Taiwan, Bangkok and Manila.

AIR MAURITUS: The national airline of Mauritius has been affected badly by SARS, with all flights to Hong Kong, Singapore and Kuala Lumpur halted. Last year 40,000 Mauritians visited Asian countries, including nearly 12,000 traveling to Singapore. The airline operates the A340 as its major long-haul aircraft.

AIR NEW ZEALAND: The airline has restructured with a $498 million bailout from the NZ government and is back to profit after surviving the collapse of its subsidiary Ansett in 2001. As part of the overhaul, ANZ launched a new low-frills Business Express all-economy operation last year on domestic routes with a fleet of 10 737-300s converted to a single-class 136-seat configuration from a two-class 122-seat arrangement. Fares were slashed by up to 28% year round.

For its short-haul international routes, ANZ ordered 15 A320s with 20 options to replace 767-200s and 737s, with deliveries to start in October. Management also has used its lower-cost subsidiary Freedom Air to boost the company's presence into Australia, with a 23% jump in capacity last year. For longer-haul routes, CEO Ralph Norris says the airline is looking at 300-seaters.

Before that decision is taken, ANZ must gain regulatory approvals for an equity tie-up with Qantas. In November, the Australian airline agreed to spend $310 million to take a 22.5% stake in new ANZ stock. While both Australian and NZ regulators gave an initial thumbs-down to the deal, approval is expected by Sept. …

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