AirAsia X hopes its new route will be more attractive for traffic to and from Kuala Lumpur. Photo / 123RF
Low-cost carrier AirAsia X is hoping it will be third time lucky in New Zealand.
The Malaysia-based airline has operated New Zealand flights twice before but pulled out, first because of earthquakes in Christchurch after two years' flying and then from Auckland after three years, when more lucrative routes beckoned in 2019.
But following the economic destruction of the pandemic, the airline says it is in better shape than ever to rebuild, having shrunk its fleet, restructured debt, renegotiated supply contracts and slashed costs.
Chief executive Benyamin Ismail says the airline has taken a good long look at which route will work best into New Zealand.
Last time it flew Kuala Lumpur-Gold Coast-Auckland, but the demand was seasonal and there was a high proportion of not-so-lucrative leisure traffic.
From November, the medium-haul airline will fly Kuala Lumpur-Sydney-Auckland, initially three times a week but with ambition to build back to daily.
"The last time via the Gold Coast the demand is sporadic, if we go through via Sydney there could be a lot of upside," said Ismail. "The difference is, there is more spending power and potentially business traffic - that's something we want to capture."
He said previous flights between Kuala Lumpur and New Zealand had been a 50/50 mix of southbound traffic from Malaysia and Kiwi travellers heading north.
Flights via Sydney could be more attractive to Malaysian travellers and others in its regional Asian network.
"What we want to do is, we want to bring a lot of the Malaysian traffic to New Zealand."
Coming out of Covid with pent-up demand and competitors charging higher fares, the airline could take advantage of that situation.
"New Zealand itself was a great tourism spot - we want to go back and make sure that this time we're in for the long term."
Ismail said AirAsia X flew daily via the Gold Coast in the past and he didn't see why it couldn't repeat that frequency.
"I think we just want to be cautious. I don't want to be trigger-happy so if it does well, I think pretty quickly we can just turn it on and switch it on to seven times a week."
AirAsia X is selling one-way seats between Auckland and Sydney for as little as $169. Premium flatbed fares start at $499 on the Tasman.
One-way economy fares from Auckland to Kuala Lumpur start at $499 and premium at $1999.
Although economy fares don't include food or bags, the Sydney prices are about a fifth of what some other airlines have been charging as a lack of capacity and heavy demand pushes up fares.
Air New Zealand and Qantas now have a bigger share of traffic than they had before the pandemic and aren't yet flying at pre-Covid capacity. Virgin Australia was the third biggest airline on the Tasman before Covid but is now concentrating on the Australian domestic market and is yet to confirm a return to the NZ-Australia route. Latam flies between Sydney and Auckland on its Santiago route and Qatar flies via Adelaide to Doha - both five time a week.
Auckland Airport general manager, customer and aeronautical commercial, Scott Tasker, welcomed the extra competition AirAsia X would bring as the international rebuild continues. It is forecast that international capacity will be about 70 per cent of pre-Covid levels by the end of this year.
"The new service will not only provide more choice for transtasman travellers looking for competitive fares on the popular route between Sydney and Auckland, but is a great option for those wanting to connect through to AirAsia's extensive Asian network."
Malaysian Airlines, which pre-pandemic was one of the cheaper options for longhaul travel, has resumed between two and three services a week from Kuala Lumpur to Auckland.
AirAsia X had pulled out of New Zealand for commercial reasons a year before the pandemic hit. When Covid-19 arrived, the airline suffered badly as Asian routes were grounded as borders closed and it didn't have a domestic network to fall back on.
Cargo provided some revenue, says Ismail.
The fleet of 24 Airbus A330-300 planes was more than halved to 11, although it hopes to add four more by the beginning of next year. About 1700 staff out of 2600 in total were furloughed, in the case of pilots, or laid off, the airline's fragile balance sheet took a beating and last September it posted a record quarterly loss.
The airline is part of Capital A, an increasingly diverse conglomerate owned by Malaysian tycoons Tony Fernandes and Kamarudin Meranun.
A court-backed debt restructuring allowed the airline to reverse 33 billion ringgit ($12.9 billion) in provisions previously set aside for these liabilities.
Under the restructuring plan approved by creditors and suppliers in November, AirAsia X was to repay just 0.5 per cent of its more than $12b in debts and to terminate supply contracts.
As part of the deal, Airbus agreed to reduce the airline's aircraft orders to 15 A330neo wide bodies (down from 78) and 20 A321XLR narrow bodies (from 30), Forbes reports.
The airline has just worked through a credit scheme whereby passengers with tickets from flights cancelled during the pandemic can use them to the same value anywhere on the network during the next five years.
Ismail told the Herald the airline could now make a clean start.
"If we didn't go to the courts, we may have issues where we have outstandings that we owe people, and potentially not even had enough money to grow back. We're in a good position," he said.
"I think now, we just want to make sure that we kick-start flying."
The airline has what it describes as "robust" plans to grow, with 13 routes planned to start this year including Auckland, Sydney, New Delhi, Seoul, Tokyo, Sapporo, Osaka and Honolulu as well as London, Dubai and Istanbul.
Demand that was held back during the pandemic is fuelling the boom in travel and Ismail is confident that demand won't be spent by the time AirAsia X is flying its new or revived routes. And demand was so strong that it could charge more.
"The demand is there and we think it allows us to charge slightly higher fares [but] we're still far cheaper than full-service carriers. We're quite confident on that."
He said the recent easing in oil prices was a good sign and the renegotiated contracts also eased costs. The airline was bringing back pilots and hiring cabin crew, initially in Malaysia.
He said the pressure to staff airports, airlines and their suppliers was making it tough to run the business. "There's a lot of issues that we face at a lot of airports now," said Ismail.
"Even though you want to rush back and you think that you can start in two months, but technically you can't because some of the airports have done their restructuring or their cost cutting and their manpower reductions during Covid."
It would take many months to rebuild the aviation infrastructure.
In Asia his airline faced other problems - renegotiating landing slots. "Governments have become more supportive of the national carriers or the local carrier so they will give up as many slots as they can to the local ones before they start giving them to international airlines."
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