AirAsia Flies In China as Low Cost Carrier

AirAsia Flies In China

AirAsia Flies In China as Low Cost Carrier. Tony Fernandes has reason to smile, as he has been dreaming of creating a low-cost airline in China for the past 10 years, and now he seems to have made his way. His enthusiasm, however, was not reflected in the share price of AirAsia Bhd, which yesterday experienced a marginal increase.
It closed eight sen higher to USD 0.82, one day after AirAsia signed a memorandum of understanding (MoU) with two Chinese parties.

Analysts believe the potential is enormous. The agreement came six weeks after AirAsia entered a joint venture (JV) with Vietnam Gumin Company Ltd and Hai Au Aviation Joint Stock Co to establish a low-cost airline in Vietnam.

Fernandes has been working on China's agreement for the past two years. It was supposed to have signed the agreement in November last year, but was canceled at the eleventh hour. Two days ago, however, he managed to write.

"Now, we have earned the right to be called AirAsia (in China)," said AirAsia Group CEO in a text message to StarBiz. The agreement is between AirAsia and China Everbright Group, a financial services conglomerate that is a major shareholder in China Aircraft Leasing Group Holdings Ltd, and the Henan Government Working Group.

The plan is to establish AirAsia China to be based in Zhengzhou, the capital of Henan, to carry out domestic and international flights. The agreement also included plans to establish a maintenance, repair and overhaul center and a low-cost air terminal there, as well as an academy to train pilots, crew and engineers.

It is not known whether the company in China would lease China Aircraft Leasing aircraft, but AirAsia has hundreds of aircraft orders for its regional expansion.

"AirAsia is the first airline to do this in China.It is big, since the latter does not do all this.The fact that it is partnering with government-listed companies shows that the government supports it.
"But there will also be challenges, and although AirAsia has to work very hard, it remains to be seen how it will be able to solve all the problems," said Mohshin Aziz, senior analyst at Maybank Investment Bank Bhd.

AmInvestment Bank Bhd in a research note said: "We believe that the joint venture MoU is positive for AirAsia's long-term perspective, being the largest low-cost foreign carrier (LCC) operating in China. Foreigner to enter China in 2005, and AirAsia and AirAsia X currently travel to 15 destinations in China.

"In addition, with the company in China, AirAsia will complete its presence in all major territories of the Asia-Pacific region, having successfully built its presence in Malaysia, Thailand, Indonesia, the Philippines, India and Japan."

AirAsia has several companies in Asia and, adding Fernandes, adds China to its fold, represents the last piece of the AirAsia puzzle, as it closes the loop in all major territories of Asia and the Pacific. AirAsia connectivity spreads across Asia-Pacific - from China, Japan and South Korea in the north to Australia and New Zealand in the south to India and the Middle East in the west, with ASEAN in the center.

"AirAsia is building an unsurpassed base and a network that will be unassailable. We have seen the enormous advantages of having an international network with links to a home network," added Fernandes.