AirAsia India turns the corner

Dino D'Amore
By Dino D'Amore May 9, 2016 19:54

AirAsia India turns the corner

The management at AirAsia India deserve significant praise for managing to pick-up the prices of the botched first launch and re-organising the airline into the carrier that we see today. As mentioned here last week, the airline has a virtual low cost monopoly at its Indian hub and that is starting to tell as load factors for Q1 2016 have come in at 86% from 79% for Q1 2015 on the back of a 5.4 lakh (540,000) passengers carried, up a huge 127% year on year. At this rate of growth the airline will be able to absorb Airbus deliveries to the group with relative ease. The worries seen in 2014/14 at AirAsia are finally binging to subside and the Indian airline looks to be in good health. The airline had a fleet of six A320 aircraft at the end of the quarter. This Indian load factor now matches that of the group as a whole for Q1 2016, which includes Malaysia AirAsia, Thai AirAsia, Indonesia AirAsia, Philippines AirAsia and AirAsia India at 86%. AirAsia saw a Q1 increase in passengers of 17% year on year to 13.9 million. The group’s total fleet size stood at 170 aircraft, 171 including one aircraft that was delivered to AirAsia Japan in Q4 2015, which has not commenced operations.

So long as oil prices remain below $70 a barrel, it is likely that airlines within India will be able to make money and at the same time the ticket prices will encourage more and more people into the air. The Indian airline market is volatile but, if these current economic conditions remain for some time, the Indian airlines should be able to build up a significant cash position and/or decrease the cost of debt significantly. These measures will help a great deal to bring more lessors to the table in India, but although we have had significant promise of action by the Indian government on de-regulation and implementation of the Cape Town Treaty, we can argue that nothing concrete has been done and airports and fuel suppliers still have first lien on aircraft before the owner of the asset gets a look-in. As Indian aviation grows rapidly once again, airlines will need to look to lessors for aircraft at speed. Now is the time for airlines in India to do something about the regulatory position and the airports which seem to operate a law unto themselves when it comes to aircraft on their tarmac at the same time that they have an unpaid bill baring the same logo.

Meanwhile, Thai AirAsia X (TAAX) is looking to utilise A330-300s on new routes to Tehran and Muscat, a dramatic shift in focus for the carrier that has concentrated on South Korea, China and Japan over recent times, with India added earlier this year.
It is a good move for TAAX to be looking to expand services as this will assist the domestic Thai AirAsia airline in reciprocal feeding as it battles with a myriad of strong competitors including the ever-growing might of Thai Lion Air.

Dino D'Amore
By Dino D'Amore May 9, 2016 19:54