Air Asia shakes, rattles and rolls airline industry giants
In December 2001, Tony Fernandes, a former accountant from Warner Music based in Malaysia, purchased Air Asia (Hicom) a beleaguered Malaysian domestic airline, $11 million in debt, for a mere twenty-seven cents. By the end of 2002, Air Asia reported $66 million in sales along with $8 million in profits. Just recently, outwitting aviation regulators out to protect national carriers, Air Asia snagged another first in its short history since its metamorphosis. Landing rights were recently granted at three international destinations: Phuket and Bangkok, Thailand, and Bali, Indonesia.
A proposed round trip fare to Bali on Air Asia is $118 versus Singapore Airlines¹ tariff of $406 – a substantial difference. Although Thai Airways and Cathay Pacific Airways have yet to comment, Malaysian Airlines responded by slashing fares on shared routes by fifty percent. According to BusinessWeek online, Singapore Airlines is founding its own budget airline, ValuAir.
Other fares, such as one way flights from Kuala Lumpur to Penang for $16 contributed to Air Asia¹s success. Fernandes¹ success is based on other cost-cutting measures: Tickets can only be purchased through the Internet, there are no free meals, and by implementing a shallow approach on landing, aircraft tires are changed once in every 180 landings instead of 70.
Air Asia¹s next step is taking the airline public.
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