AirAsia launches RP unit

Eyes Clark hub

December 17, 2010

SOUTHEAST Asia’s budget carrier king Tony Fernandes yesterday launched a joint venture airline with Philippine businessmen, giving a jolt of competition to what he described as an underserved aviation market.

AirAsia Group Chief Executive Officer Tony Fernandes (left) shakes hands with Antonio “Tonyboy” Cojuangco, Jr., a cousin of President Benigno S. C. Aquino III, during a news conference in Makati. Southeast Asian budget carrier king Mr. Fernandes yesterday launched a joint venture airline in the Philippines, giving what he described as an underserved market a big jolt of competition. -- AFP
AirAsia Philippines, Inc. in which AirAsia will hold a 40% stake, should begin flight operations in August next year using either Clark or Subic -- two former United States military bases near Manila -- as its base, the Malaysian said.

“We do expect to be profitable straight away,” Mr. Fernandes told a press conference.

The partners have approved an authorized capital expenditure of $25 million for the joint venture.

“The amount does not include the cost of putting the terminal. We still have to compute that. Our aircraft will be leased from AirAsia Malaysia. We will have three to five 150-seater Airbus 320s to be used in the next few months,” he said.

Mr. Fernandes said internal funds would capitalize the joint venture, in which investors led by Antonio “Tonyboy” O. Cojuangco, a cousin of President Benigno S. C. Aquino III, hold a combined 60%, the minimum local equity stake set by the Constitution.

“Many of the routes that AirAsia Philippines will be going to are already being exploited by other AirAsia companies, so the setup cost for AirAsia Philippines is very low,” enabling low fares, Mr. Fernandes said.

Local competition includes successful budget carrier Cebu Pacific, which recently went public, and the loss-making flag carrier Philippine Airlines (PAL).

“Cebu Pacific has done a fantastic job,” Mr. Fernandes said, praising its equally low-cost, no-frills model but saying there was more than enough room for the AirAsia group to grow.

“I think PAL could have, I’m sure, done a better job,” he added.

Kuala Lumpur-based AirAsia has set up similar joint ventures in Thailand and Indonesia and previously announced plans to set up a unit in Vietnam.

However, Mr. Fernandes said AirAsia was now giving priority to the Philippine joint venture before proceeding with the Vietnam project.
The flashy 46-year-old tycoon, who also heads the Lotus Formula One team, said that just a tiny segment of the Philippine population of 95 million people were currently making use of air travel, giving the project huge potential.

Marianne Hontiveros, a music industry executive, will be the AirAsia Philippines chief executive, with Mr. Cojuangco as chairman.

“We need tourism badly in our country, and we have so much to offer,” Ms. Hontiveros told the press conference yesterday.

Transportation ministry Undersecretary Glicerio Sicat welcomed the airline investment as a boost to a tourism sector that is seriously falling behind its Southeast Asian neighbors due to bad infrastructure and security problems.

“As Tony Fernandes himself said, more people would be able to fly,” Mr. Sicat told reporters.

He said the government expects AirAsia to serve certain areas not adequately served by local carriers.

“He (Mr. Fernandes) said some of their routes would be pioneering.

We will improve the airport facilities, that will be our contribution,” Mr. Sicat told reporters.

The Aquino government has singled out tourism as a potential key growth driver, and had warned PAL, which is facing labor problems, to shape up or face tougher competition under an “open skies” regime that will let more foreign airlines in.

The Philippines tourism ministry hopes to double annual tourist arrivals to six million, raising annual tourism revenues to at least $4.6 billion and creating three million new jobs.

Michael L. Romero of the local port operator Harbour Centre will be the vice-chairman of AirAsia Philippines.

“AirAsia Group has been interested in putting up a hub in the Philippines for the past three years. It was only last year that we finally decided to have this joint venture,” Mr. Romero said.

“We believe in the reputation of the budget carrier as it was able to have 25 million passengers today from 100,000 passengers when it started. Carriers around the world are going to the low-cost model as it is more attractive to the passengers,” he added.

Victor Jose I. Luciano, president and chief executive officer of Clark International Airport Corp., told reporters in the same briefing the airport in Clark, Pampanga is “always ready to accommodate AirAsia Philippines.”

“We are just waiting for them to decide whether they will have their hub in Clark. But we will respect their decision if they opt to have it in Subic,” he said.

Mr. Fernandes said the company was “still weighing options” whether to choose Clark or Subic as the hub for operations.

“We will have the decision within the month. Hopefully, we can have our maiden flight by March or April next year,” he said.

Last month, AirAsia said net profit for the September quarter rose to 327.29 million ringgit ($62.89 million) from 130.07 million ringgit in the same period last year. -- AFP and Aura Marie P. Dagcutan. Businessworld.

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