AirAsia X: a brand with a huge potential, but remember, “you’re only buying the flying”

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AirAsia XOn Wednesday another bid to make a success of long-haul, low-cost flying takes off from Kuala Lumpur, destination – London Stansted.

AirAsia X has been selling seats for as little as £99 each way, though after making a series of test bookings it seems a more likely one-way fare is £200. In true low-cost fashion, “you’re only buying the flying”. Checked luggage costs £12 each way for a 20kg bag, with meals a further £7 per flight (and you get a discount if you book before-hand).

But…AirAsia X is different

Did you know that to optimize aircraft utilization, AirAsia X planes will land in London at different times on different days? And though that’s out of the norm, as a passenger, I only care about my flight timings, not the next day’s flight timings. Hence, I personally quite admire this move.

Did you know that AirAsia X CEO, Azran Osman-Rani, regularly writes on the AirAsia blog, Just Plane Thoughts. And he does so in a very candid way too. Moreover, he’s not the only one, but part of a much larger team of bloggers (many first-timers) formed of people from all over the airline.

In my interactions with Azran, he mentioned that AirAsia X is not taking the existing low-cost model long haul, rather it’s unbundling the current full-service long haul model and trying to figure out where costs can be cut and money made. Increasing aircraft utilization, a great example of this thinking. And it’s this willingness to question everything, to not take anything for granted, that makes AirAsia X different, and poised for success.

Why it’s unlikely to go the way of Oasis HongKong

Very simply, because low cost long-haul carrier has the support of AirAsia and the blessings of Sir Richard Branson. Moreover, Oasis HongKong and most other airlines that went bankrupt last year did so amidst record-high fuel prices and a shortage of talented staff. AirAsia X has the advantage of low oil prices, and is probably spoilt for choice when it comes to hiring people in this current economic climate.

And AirAsia X knows how to make money!

The airline is not leaving any stone unturned when it comes to ancillary revenues. It’s charging people for baggage, for food (you can’t bring your own on-board) and has even got an XL-class, which promises to offer Business Class seat comfort at a price just a bit higher than Economy class on full service carriers. In the future, you can expect many more in-the-cabin innovations from AirAsia X, which would charge the customer for value addition. I don’t see them going down the Ryanair-way, but certainly be a Southwest, when it comes to building a LCC brand.

Hear it from the horse’s mouth

Here’s Azran himself, speaking about the importance of branding for low cost carriers, and revealing some exciting developments at AirAsia X.

The most important reason why I think AisAsia X will be a success – the team is having fun while running the business!

What do you think? Is AirAsia X poised for success? Will the long haul low-cost model work? Or will it fail, yet again? Let’s hear it in the comments section.

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Shashank Nigam

Shashank Nigam

Shashank Nigam is a globally sought-after consultant, speaker and thought leader on airline branding and customer engagement strategy. He is the Founder and CEO of SimpliFlying, one of the world’s largest aviation marketing firms working with over 85 aviation clients in the last ten years. Nigam is also the youngest winner of the Global Brand Leadership Award and has addressed senior executives globally, from Chile to China. Nigam’s impassioned and honest perspectives on airline marketing have found their way to over 100 leading media outlets, including the BBC, CNBC, Reuters and Bloomberg, and into leading publications such as The Wall Street Journal and the New York Times. He writes a dedicated monthly column in Flight’s Airline Business, challenging the typical assumptions about airline marketing. His new book on airline marketing, SOAR, is an Amazon bestseller that’s shaking up the industry and inspiring other industries to learn from the best airlines. Born in India, raised in Singapore, he now lives with his wife and two young daughters in Toronto.
Shashank Nigam
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Showing 29 comments
  • Vinay Rajan
    Reply

    AirAsia has established itself as one of the top low fare airlne in asia. The growth was slow and steady hence good learning has been involved.
    On the market side – Unlike any other markets, asian market is a people intensive one and the routes they have started in quite high in load factors.

    Hubbing is an important point they have to consider and increse their efficency. If they could manage a 2-3 hr connection time from their top destinations (AirAsia) they can fill up the London flight for sure. But this is a big question..

    Marketing is another key element they need to work on

    If these ponits are implemented, AirAsiaX will do fairinly good with the current situation and improve their efficency down the lane say in 2-3 years.

  • Abdallah AlSalem
    Reply

    Again it depends on the managements

  • Ronald Kuhlmann
    Reply

    Unlike its predecessors, there is a huge shorthaul network that can feed into the longhaul flights. London passengers need not want to go just to KL but have a low cost option to much of SE Asia. However, the timing could not be worse as people seem to be curtailing travel at any cost and the demand pool, while potentially huge, is fairly limited right now.

  • Perry Rees
    Reply

    What’s the USP? How are these guys different from all the other low-cost long-haul operators who have failed?

  • Naresh [Nick] Lalwani
    Reply

    Hope does not end the way Ryan air is looking at cahrging passengers for Toilet use ???
    Low cost , No frills , No snack, No beverages .No free baggage ??
    What else do we need to pay for besides the seat , fuel Tax
    wish all the success to Air Asia

  • Stephen Sergeant
    Reply

    I feel the honeymoon period is over for so called “lo-cost” airlines and most consumers are now fully aware of the ‘nickel-and-dime’ approach of these players.

    Their eventual performance will depend on the airlines ability to offer real value to the customers and not just gimmick prices. Gold Coast – London via KL is a different animal from Dublin -Stansted. How many customers can travel 26 hours without food, entertainment or a toilet! If passengers can do the maths (and most can these days) then the airline will only sell seats and therefore succeed if the bottom line value is there.

    Good luck I say as the more capacity the better for the consumer and industry!!

  • Aamer Quraishi
    Reply

    AK has already started flights to India in the city of Trichi in Kerala from KUL effective 01st Dec08. Its doing fairly well. Its working fine, as the target segments are the affordable fliers. Trichy has a lot of labour traffic & VFRs from Kerala as well as Tamil Nadu to the far-east. The success ratio for AK has been high in terms of new destination start-ups. Their marketing campaigns are also very targeted to flown flyers of AK. I remember I once flew AK from Bangkok to Phuket and it was a decent flight, (value for money). They still send me their marketing flyers over email, hence will always keep me posted of their developments as and when they grow. Now that’s nice. Keeping in mind I flew 4 years back with them. Their business in mostly from repeat customers, which signifies the value story.

  • Ashok Toshniwal
    Reply

    In the present economic scene time only will tell. Otherwise there are success stories like Easyjet, Ryan air etc. While Easyjet extended its concept beyond flying too, into easycruise, easyhome etc. etc.

  • Ziaur Rahman
    Reply

    Indeed, with the global economy in a recession, the world will beat its doors to finding cheap travel tickets. I think with creative, no frills positioning, AirAsia will win the hearts of many budget conscious travellers. ziaiitm@ gmail.com , IITM -dhaka

  • Pete Roth
    Reply

    I think Airasia X is poised for success. The long haul low cost model will most definitely work provided that they deliver on their promises. I think the fact that the company is starting up now works in their favour. Traditional carriers are under tremendous financial pressure while AirAsia X has the benefit of startup funds and is the low cost provider during a downcycle. Will they stand the test of time…….well, the company will have to get the message out and stay true to their core brand values then expand to more routes and presto!

    Good Luck, looks like an exciting project!

  • Ben Dijkhuizen
    Reply

    I believe that is difficult to adapt the profitable low-cost model for long-haul operations, certainly if you have a limited connecting network. The high aircraft utilization that underpins the low cost business model is without any effect here. Moreover crew costs are higher, MX cost are higher and one has to adopt catering procedures/equipment which also cost money. The possibilities to use less expensive secondary airports are not really available I am afraid. In the cabin you will at least need a mixed layout like the legacy carriers so that you support a bit the low cost environment in the back. This requires a different approach. There are some opportunities: charges for food, IFE etc. but overall I would say stay away from the LCC model for longhaul.

  • Kenneth J. Goldstein
    Reply

    On all counts, YES as my view is that a “low cost carrier” needs to build its route structure so that it can feed passengers to and from its domestic base-and at the same time maintain its low cost offering. As an aside, there is a “Low Cost Carriers Conference” in Kuala Lumpur, Malaysia put on by the “The Asia Business Forum” that you might want and consider in attending. It will be at the JW Marriott Hotel from June 17-18. I will be presenting a paper there.

  • Jay Sorensen
    Reply

    Cheap is the new chic, and a la carte is the method. Herb Kelleher, the father of the low cost airline industry, said it best at the Low Cost Airlines Congress in London, “People are shopping for bargains. If they have decreasing income, it’s right for LCCs.”

    Wal-Mart, as one of the few bright spots in a deep recession, obviously shares Herb’s passion for low prices. AirAsia X has adopted the same low price style, but with an a la carte twist. It all begins with a brand that delivers the lowest price. AirAsia X announced its Kuala Lumpur – London service with a £99 fare.

    This is an amazingly low price, but the amazing alchemy of a la carte pricing helps these companies scoop up more revenue from today’s consumers. Of course you are going to check luggage on your London flight, want a seat assignment, pre-order a meal, maybe buy insurance, and possibly book a hotel. It all adds up to an attractive ancillary revenue boost for AirAsia X.

  • Ahmed Sultan
    Reply

    It is too early to predict the success or the failure of the low-cost long-haul model. The historical experience, represented by Oasis Hong Kong Airlines and Canadian Zoom Airlines, is not encouraging at all. Even, the 20% stake of AirAsiaX, which held by Richard Branson’s Virgin Group, adds more reservations to the whole idea. Moreover, it is widely known that LCC model does not work for flights over about 13 hours. However, the current economic situation might act to the advantage of AirAsiaX. Something else to be considered is the fact that Malaysian Airlines operates 2 daily Boeing 747 flights between Kuala Lumpur and London. That simply means that MH is making more than 700 daily seats available. It will NOT be a problem for AirAsiaX to acquire some of the existing MH customers who might be enticed by the price advantage of AirAsiaX.
    I heard Tony Fernandes, the CEO of AirAsia talking about an important fact which might make things easy for AirAsiaX. He said that their cost is 0.03 US$ per ASK.
    The support of feeder traffic provided by AirAsia as well as the existing traffic conditions between Kuala Lumpur and London are unique to AirAsiaX. Thus, the hoped-for success of AirAsiaX is not automatically applicable to any similar long-haul model.
    Email: management@ultraconsultants.net

  • Kenneth J. Goldstein
    Reply

    By and large I agree with Vinay and would not mind is their long-range arm, Air Asia X would enter the trans-pacific market as the fares need to be adjusted for the market. They are a good carrier with the right mentality and direction-and one that I will be discussing at the upcoming Low Cost Carrier Conference in June (17-18) put on by the Asia Business Forum. You can contact either me or Jacqueline Tao ( jacqueline.teo@abf-asia.com ) for more details. And one should comment that they are a low cost carrier that has BOTH a domestic and international feed, and will not go the way of Laker, Shuttle by United, TED or other poor examples of a carrier within a carrier!

  • Kenneth J. Goldstein
    Reply

    I am sorry to say that I disagree completely with what Ben has to say. Not only is Air Asia achieving good aircraft utilization in BOTH their domestic and international/long haul networks. The beauty of their operation is that even their “short haul” is in fact long haul due to the sphere of their operation-within Southeast Asia. Thus the business model of either a Southwest or Ryanair where you are able to maximize aircraft utilization due to many short hops is being done by them since they have longer routes. Their aircraft commonality (A-320 and A-330) and fuel efficiency are also to their advantage. They are in fact the model for the future where you can feed their international from a strong domestic one I would strongly suggest you view their website and learn more about them or attend the “Low Cost Carriers Conference” in Kuala Lumpur in June (17-18) to learn more about this business model for success in the airline industry.

  • Marcus Osborne
    Reply

    Whenever I find a brand that matches it’s offerings to my requirements for value, I become not only a brand loyalist but also a brand ambassador. For years I sang the praises of Cathay Pacific. Then about 15 years ago I moved to Malaysia and started flying Malaysian Airlines. It wasn’t long before I was an MAS loyalist. When AirAsia arrived I dismissed it as a little upstart, out of it’s league and destined to go the way of Pelangi Air and many others.
    But then I had to fly to Macau and the only flight that matched my schedule was on AirAsia. I swallowed my pride, apologised under my breath to MAS and boarded the brand new Airbus, so crisp, clean and shiny compared to the 25 year old MAS 737’s and their tired interiors.
    I was greeted by a smiling face and enthusiasm that was contagious and hard not to like, especially compared to the glum and tired looking MAS crews.
    I’ve become a regular AirAsia customer but my choices have been made based on price – RM680 for my wife and I to fly to Singapore and back compared to RM1710 on MAS and so on. If another low cost carrier were to start plying the same routes, I would switch to them. As far as I am concerned, there is no brand loyalty with LCC’s which is one reason why I am not convinced AirAsia X will survive and thrive.
    Amongst other things, branding allows premium pricing which doesn’t sit well with LCC’s and as you quite rightly said, you are only buying the flying.
    Even just selling flying, AirAsia still lost US$128 million last year and will struggle over the next few years with lower volume and revenue per seat etc. Add in the 100 odd planes they’ve ordered and I see nothing but turbulence ahead for Air Asia and AirAsia X.

  • Ben Dijkhuizen
    Reply

    I took the question a bit more general and did not react as such to the specific Air Asia situation which, indeed, may be different but that would be an exceptional situation. The availability of hub feed will offer a different scope like I indicated in my first reaction. Also the current trading-down approach of business people may in my view certainly have positive effects on the performance of LCC’s also in the long-haul segment. The other issues negatively affecting profitable low cost long-haul services remain: higher cost for crew (including accommodation!), airport charges, handling, catering, other logistics etc. resulting in a marginal advantage vis-à-vis the legacy carriers with their additional advantage of extensive coverage and feed through alliances. You will agree that this type of budget services on the long-haul segment in itself has led to classical cases of failures.

  • James Joseph
    Reply

    Air asia is a receipe for success

  • pfk98
    Reply

    AirAsiaX… be careful.

    Most recently, my wife and I were stranded in Abu Dhabi when AirAsiaX announced they were canceling service to/from Abu Dhabi in January this year. They didn’t notify us (their stranded passengers) until Feb 10th. Neither did they offer any accommodation nor answer our emails asking for help. We had to get back to Malaysia on our own. They won’t reimburse our additional expenses either.

    They said they would refund the Abu Dhabi/Kuala Lumpur portion of our trip, but it will take them 30-50 days to process the refund. Such an attitude!

    Watch out for these guys. If you are considering using AirAsiaX, It might be a good idea to develop a plan B… just in case.

    • Shashank Nigam
      Reply

      Doesn't sound very pleasant. Though, from what I understand, they had
      announced long ago that they were suspending the Abu Dhabi flights –
      I'm surprised passengers like you who had bought the tickets weren't
      informed. Did their emails hit the spam box?

      Nevertheless, I've forwarded your concerns to someone I know in
      AirAsia X – will keep you updated what I learn.

    • Shashank Nigam
      Reply

      Hi pfk98 – I just heard back from AirAsia X regarding your specific
      incident. It turns out that the CEO himself has spoken to you
      regarding the matter and offered to put you on the earlier AirAsia X
      flight as well, but you weren't able to take it. Frankly, I think this
      is a sort of customer service that's way beyond what's generally
      expected of even legacy airlines, let alone LCCs.

      I think it's always good to hear both sides of the story before
      reaching the conclusion.

  • pfk98
    Reply

    Shashank – Hmmm, sounds like you are the one who has reached a premature conclusion . The Star Newspaper announced the cancellation of service on February 1. I was in Egypt February 1… having left Malaysia on January 25th. I asked Azran when the decision to cancel was made, because if it was on or before the 25th I would have canceled the trip had I been informed. He said he didn't remember. Strange.

    There were no emails sent to me until February 10. Your people confirmed that. Why are you surprised passengers like me were not informed of the cancellation? Check the travel forums and blogs. It's a fairly common occurrence. It's the second time for me.

    I was advised to try and book an early return flight.. after I had purchased tickets on Qatar Ailines from Abu Dhabi to KL. That was after I had given up on AirAsiaX answering my emails. Azran only called me (after my return to Malaysia) because he was told to by his boss. His only offering was to advise me to buy insurance before I book again. AirAsiaX wants their customers to buy insurance to protect themselves against AirAsiaX… when AirAsiaX cancels service for commercial reasons. Yah, right.

    I agree with your statement… “Frankly, I think this is a sort of customer service that's way beyond what's generally expected of even legacy airlines, let alone LCCs.”

    AirAsiaX has great equipment, airport staff, flight staff, and prices. But, if any of you guys, including Azran, had to make your living doing customer service, you would all starve to death.

    Have a nice day.
    Paul K

    • Shashank Nigam
      Reply

      Thanks for adding more insights Paul. Just a clarification –
      SimpliFlying is an independent website and is in no way affiliated to
      AirAsia or AirAsia X.

      Incidentally, I had learnt about the route closure on Twitter around
      Jan 25th, and Azran himself made a public announcement in Singapore on
      Jan 28th. That's why I'm surprised that as a passenger who had booked
      a ticket wasn't informed earlier.

      • pfk98
        Reply

        Shashank,

        There's no reason to be surprised AirAsiaX does not notify paying passengers of cancellations. It's very common with those guys. Their customer service is pathetic.

        Whenever there's a problem, it's never the fault of the airline… even when they cancel for “commercial reasons”.

        Sincerely,
        PaulK

      • pfk98
        Reply

        Shashank,

        When you get a chance, check out the “AirAsiaX- review” on http://www.frequentflyer.com.

        These guys have quite a bit to say about AirAsiaX customer service.

        PaulK

  • phuket hotel
    Reply

    Wow I have never heard of this before, what an interesting spiritual story. It's truly an inspirational and interesting story.

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