Sunday, September 16, 2012

Airasia experience: You do not play by the rules

Now it seems that Airasia may not be acquiring Batavia Air. What could have happened.

You should know by now that Airasia, under Tony Fernandez does not play by the rules (or rather whims and fancy) of each respective country that they it is operating in. Dealing with governments, they are always tough. Throughout the 10+ years that Airasia has been operating in, "simple" has never been in the dictionary of the airline operation business. You play by the rules, you are already dead by now. You get routes, you do not get routes. Unfortunately, that is the case and scenario of the airline business.

Prior to the MAS-Airasia share swap announcement, there was rumour that Airasia was moving its base to Indonesia which of course Tony denied. Of course then, after that Airasia announced the working partnership as well as share swap deal with MAS which I do not see the logic. Story turned, the share swap was off and Airasia was back to Indonesia and in fact they announced the acquisition of Batavia Air. Look at Batavia Air. The acquisition is never for the synergies but for the immediate penetration of the Indonesian market. The planes are not the same, The age of the airplanes, I am sure Airasia would be replacing them. The routes and agencies are probably what Airasia is going for. And then, there must be something wrong with the statement by this Indonesian minister. Anything wrong here? Something to do with someone is not getting what he wants? These guys have to be brought to their senses. On one end, they want to improve the efficiencies and status of the airline industry in Indonesia. On the other end, something else are more important.

Then of course with our Malaysian Prime Minister's endorsements, the set up of Malindo Airways. Scaring tactic? Of course, I am pro competition, but why an Indonesian airline. Why not Jetstar or any other private airlines that are more established? Then who is NADI? You do not bring an amateur to fight against a professional. As much as I like the stories of underdogs, most of the time, the David(s) suffered losses to the Goliath(s) - sometimes heavily.

The one advantage which is all above the rest for Airasia - operational efficiencies. As I have said, it is not easy to manage the operational efficiencies for an airline company and no country can deny that. Government will always play "hide and seek". They will come back seeking for help, in the end. As in the case of India just recently when the country opened up the airline industry after 5 years of deliberation, allowing 49% foreign ownership. You know what - because many airlines have failed and when comes to this stage, only then government come to their senses. Yet again, do I see them reversing their decision? This is why Third World countries will always remain Third World.


Gark said...

The main reason AirAsia want to buy out Batavia is not for the routes or the aircraft. What they require is to take over the existing Batavia air's landing rights at all the airport. Airasia is subjected to limited landing rights due to PMA (foreign) company status. Indonesian government is always pro local companies, and with lobbying by Lion Air, Airasia expansion is limited.

Gark said...

IMHO, Lion air can compete with Airasia,if they have the right management. I have riden with them many times, on local routes. They are cheaper than Airasia, but somehow they are lacking an identity, just like taking a public bus, no service and no 'soul'. Not to mention their safety record is not good, with their airlines banned from landing in Europe.

Lion air abandoned a USD 1 billion IPO recently due to strained financials, partly due to AirAsia's competition. In the end I choose to ride with AirAsia, although not the cheapest.

felicity said...

Ya you are right landing rights which to a certain extent translate to routes. without landing rights, no routes especially point to point service provider.

Lion AIr started on a wrong note with old airplanes, hence safety has become a concern. It needs rebranding. This is also why they announced a 100 Boeing purchase?

Gark said...

Lion air has about 400 planes on outstanding order from Boeing. If Lion Air do not expand aggressively, they will be in trouble as the local market is not able to adsorb so much expansion. They will need the IPO for injection of funds sooner or later.

The low cost airline in Indonesia is mostly mature, with Citilink, lion air, Srivijaya airline, Batavia airline & Mandala air all competing on price. Currently Lion air is the largest of all with 40% market share, but most of the routes are all domestic. Airasia domestic route is only about 10%, because of landing rights, hence they are concentrating more profitable routes from Malaysia to/from Indonesia (>50% market share). Lion air knows this and wants to hit this route. So far no Indonesian budget airline has ventured internationally.

felicity said...

I agree, airline business is about expansion. One can't stay stagnant as by saying stagnant, it is a "sitting duck". strategy.

khengsiong said...

Talking about operating efficiency...

Once I was in Kota Kinabalu Terminal 2 waiting for my AA flight back to KL. I saw the plane of Cebu Airways landed first, about 15 min earlier than AA's flight. But it the end, it was the AA plane which left the terminal first.

In airlines lingo, we say that AA had shorter turn around time. And the consensus is that this is a good thing.