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AirAsia X Berhad • Annual Report 2014
aircraft earn positive income but this will also be in US
Dollars, providing us with better currency mix as a natural
hedge against adverse foreign exchange movements.
Our market leadership in the routes we have established
is such that even with the frequency trimming, we are still
capturing more than 50% of all the core routes that we
currently service.
In addition to the redeployment of aircraft, we have begun
to consolidate our routes, terminating those that are
under-performing while adding capacity to more profitable
sectors. We have, for example, increased the frequency of
flights to Seoul (Incheon), South Korea from 7 times a week
to 11 times weekly beginning in January and 14 times
weekly during peak season; while that from Kuala Lumpur
to Kathmandu, Nepal was enhanced from 7 to 10 times
weekly during the peak holiday period from 26 October
until 31 December 2014.
The process is ongoing and saw us reinforce our
connections with China, targeting in particular currently
underserved destinations where demand is high. During
the year, AirAsia X introduced flights to Xi’an, in the
north-west, and added Chongqing in the south-west to its
route network in 2015. These represent our fifth and sixth
destinations in China, after Hangzhou, Chengdu, Beijing
and Shanghai.
Further developing connections with North Asia, we
launched a new route from Kuala Lumpur to Narita, Tokyo
in November which continues to be popular, justifying our
serving a second airport in the capital city, after launching
flights to Haneda in December 2010.
ANCILLARY BUSINESS
Various initiatives were launched to further grow AirAsia
X’s ancillary business, which not only enhances our
revenue but also adds to guests’ comfort, convenience and
sheer pleasure when they fly with us.
In June 2014, AirAsia X launched 46 new Fly-Thru
connections from Australia, China, Japan, Nepal, Saudi
Arabia, South Korea, Sri Lanka and Taiwan to various
destinations in Malaysia, Indonesia, Cambodia, Thailand,
Vietnam, India, Brunei and Macau. These effectively
enable guests to connect from one sector of their travel to
another without having to re-check in either themselves or
their baggage.
We also extended our menu on board to include DeluXe
Meals which include appetizers, desserts and juices, such
as the Big Breakfast, Roasted Chicken with Stuffing and
Cranberry Sauce and, our latest meal addition, Onigiri
(Japanese rice balls) with Chicken Karaage (fried chicken).
Meanwhile AirAsia X’s Premium Class, which has been
re-branded as Business Class, continues to be a fast
favourite, and led to AirAsia X being awarded the World’s
Best Low-Cost Airline - Premium Class Seats and World’s
Best Low-Cost Airline - Premium Cabin by Skytrax for the
second consecutive year. That this innovation is valued
specifically by our guests is evidenced by the numbers.
Despite the A330-300 configuration of 365 Economy Class
seats versus 12 Business Class seats, revenue generated
by Business Class during the year was three times more
than that of Economy Class
DISTRIBUTION CHANNELS
AirAsia X has much to offer the citizens of Asean and
beyond, the majority of whom continue to be underserved
by LCCs and particularly by LHLCCs However, being still
relatively young, and catering to a large number of non-
Malaysian travellers – 70% at the last count – there is still
a need for us to create greater visibility and awareness
of our brand. This we are beginning to do by developing
alternative distribution channels as we collaborate
more closely with online travel agents (OTAs) and global
distribution systems (GDSs).
PROSPECTS
Over the last two years, along with increased capacity, we
introduced a number of new routes which typically take
12 months to mature. Given the unusually challenging
environment in 2014, the normal gestation period for some
of these routes has been prolonged. Our strategy for the
year 2015, therefore, is to let market forces take their
course, and to allow our routes sufficient time to start
yielding profits. We are, in fact, rationalising our route
frequencies and channelling excess capacity towards wet
lease partnerships entered into during the year. This way,
we believe, we should see our capacity growth in Malaysia
drop to no more than 5% year-on-year, which is both
rational and manageable in current circumstances.
Going by simple forces of supply and demand, reduced
capacity in the industry will drive up the yield of average
base fares. As the year 2015 has begun to unfold, along
with a natural pick-up in the travel sector, signs of this are
already evident. As this trend continues, we expect our
average base fare to improve in 2015 as compared to 2014.
Meanwhile, many plans are in the pipeline to grow our
revenue from ancillary services. We already have a number
of innovative products and services waiting in the wings,
such as WiFi on board, a Duty Free mall in the sky offering
the latest labels and cutting-edge technology products, an
extended menu with attractively packaged Asean meals,
children’s meals with toys on the side, fresh coffee brewed
and served by baristas… all of which can be more easily
purchased by guests using a specially designed AirAsia
EZPay Passport, a pre-paid credit card which will be able
to accommodate up to seven different currencies – the
Ringgit, US Dollar, Euro, British Pound, Australian Dollar,
Singapore Dollar and Yen.
Over and above these hard-to-resist products, there is still
huge potential to develop the Fly-Thru facility, especially to
connect flights arriving in and departing from the different
AirAsia X Group airlines bases – namely Kuala Lumpur,
Bangkok and Bali.
ACTING CEO’S STATEMENT
