Monday, May 23, 2011

AirAsia wants to be just like Southwest Airlines

Being number one in Asia is no longer enough for low-cost airline boss Tony Fernandes. Now he wants to double the size of Malaysian carrier AirAsia's fleet to catch up with industry titan Southwest Airlines.

Fernandes indicated ambitious plans for Asia's largest low-cost carrier as he closed in on a potentially massive deal to buy Airbus aircraft, which could rival a recent USD$16 billion, 180-plane deal as one of the world's largest.

The expansion plan reflects confidence in a fast-growing Asian transport market which continues at a blistering pace despite concerns over fuel prices.

"We have done a study (which shows) that AirAsia has a potential to have about 500 planes... that we could be the size of Southwest Airlines. That would give you some idea; we already have an order of 175 or so," he told reporters in an interview.

"The market is big and the market is growing. We are in a fantastic playground, Asia Pacific," Fernandes said.

Such a deal could make Malaysian group AirAsia to Airbus what Southwest is to Boeing, dominating the customer list for their respective narrow-body airliners.

Texas-based Southwest Airlines started operations after a legal battle in 1971 and has grown into the world's top low-cost airline with a fleet of 548 Boeing aircraft.

AirAsia already has the largest number of A320 aircraft on order of any airline, second only to a US-based leasing company.

Fernandes is looking at placing a big order for A320neos, a revamped version of Airbus's best-selling, medium-haul plane.

Airbus has been under pressure to deliver on pledges to announce hundreds of sales of the A320neo at the Paris air show on June 20-26, as rival Boeing tries to persuade airlines to hold off and wait for an even bolder potential redesign of its 737.

The timing appears to support AirAsia. "I am never one who particularly likes air shows, but aircraft manufacturers like air shows so let us wait and see," Fernandes said.


The Malaysian entrepreneur was speaking in the Team Lotus motorhome on the eve of the Spanish Grand Prix.

He has spent the past few days shuttling between the United States, Spain and France to negotiate a deal almost certain to be well over USD$10 billion for aircraft and engines and to indulge his passion for motor racing -- as principal of Team Lotus.

Wearing a bright red AirAsia-branded cap, Fernandes said the airline's links to popular Formula One had boosted its growth.

"The AirAsia brand is growing rapidly and it is a lot to do with this, and me wearing this cap... We are only nine years old and I am talking about 500 planes."

In a sign of the stakes involved for engine makers as well as the plane's designers, Fernandes held talks last week with the chief executive of General Electric, the co-parent of a French-US joint venture that competes to supply engines.

GE and French partner Safran are trailing well behind Pratt & Whitney in the battle to supply engines for the A320neo.

Indian discount carrier Indigo chose Pratt over GE-Safran joint venture CFM International to power a fleet of 180 A320neo jets provisionally ordered earlier this year.

"I was in GE. We have been in discussions with Pratt. I flew from there to Barcelona, Barcelona to Nice, so although I am running a Formula One team it has been a very, very productive last few days for AirAsia," Fernandes said.

In sharp contrast with the secrecy surrounding most aircraft deals, Fernandes, an avid user of Twitter, has chatted openly about his whereabouts as he played off big-time manufacturers.

"For a Fortune top 25 company his humility is great," Fernandes noted after meeting GE chief executive Jeffrey Immelt.

On Friday, it was reported Fernandes was close to a big Airbus deal after he tweeted he was off to Nice for talks. Fernandes confirmed afterwards that a deal could be "imminent".

"I touched down and I saw a Google alert and my tweet was picked up. Welcome to the new world," Fernandes said.


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