Tuesday, 10 October 2017

Market update: AirAsia X to increase flights to South Korea on strong demand

AirAsia X, the long-haul arm of Malaysia's budget carrier AirAsia, plans to increase flight frequencies to South Korea as it sharpens focus on North Asian markets to meet an anticipated robust demand, top company executives said Monday.

"We are targeting 80% load factor in the first 12 months of operations," Chief Executive Benyamin Ismail said at a news conference after announcing four-times-a-week flight from Kuala Lumpur to popular tourist destination Jeju island.

The new route will add more than 150,000 in annual capacity, he added.

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"South Korea is an important market and we have seen tremendous growth from our existing routes to Seoul and Busan, which will now be complemented by our new service to Jeju, saving our guests the hassle of domestic transit to the island province," he said.

The airline, which carried two million passengers in the Malaysia-South Korea route, is expecting demand to remain strong in the months ahead, Benyamin said.

AirAsia X plans to increase from December its weekly flights to Seoul from Kuala Lumpur to 18 from the current 14 and also raise the frequency of weekly flights to Busan to five from four in the same period, he added.

Meanwhile, the company will cut flights to Australia next year to focus more on North Asian markets, Group Chief Executive Kamarudin Meranun said. "We have scarcity of resources and therefore we need to be selective," he said.

The company's load factor - a measure of how full the planes are - rose by five percentage points on year to 80% in April-June period. Its seat capacity increased 26% from a year earlier to 1,722,513 and it carried 1,387,257 passengers, 34% more than a year earlier.

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While analysts favour AirAsia X's move to reduce Australian exposure, they expect its North Asia expansion strategy to boost profitability if it can generate an "attractive" yield.

AirAsia X has been facing strong competition in its Australian routes from Middle Eastern Airlines such as Emirates, MIDF Amanah Investment Bank's analyst Tay Yow Ken said. "Only 50% of AirAsia X's Australia routes were profitable," he said.

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