airasiaxairbusa330-300melzhao.jpg AirAsia

AirAsia Plans Chinese Maintenance and Airline Venture

Establishing a new low-cost carrier and MRO facility will form basis of joint venture.

AirAsia’s bid for nominative determinism is nearing completion after the Kuala Lumpur-based carrier announced plans to expand into China.

“This Chinese venture represents the final piece of the AirAsia puzzle,” said CEO Tony Fernandes.

“In just 16 years, we have successfully built a presence in Malaysia, Thailand, Indonesia, Philippines, India and Japan, with China closing the loop on all major territories in Asia Pacific.”

Under an MoU with local government in Henan, central China and Everbright, a state-owned company, the parties will launch low-cost carrier AirAsia (China), invest in terminal and training facilities, and set up an MRO facility - all in Zhengzhou.

AirAsia and AirAsia X - its separately listed long-haul brand - currently fly to 15 destinations in China.

AirAsia has agreed similar joint ventures (although more often with private entities) in other countries, with mixed success. The airline’s initial foray into Japan, for instance, failed due to strategic differences with its partners, while India is proving as difficult a market to conquer as most analysts predicted.

Unlike India, China is still to embrace low-cost air travel, but AirAsia will still face significant competition from the big three state carriers: Air China, China Eastern and China Southern.

Intriguingly, Fernandes has signalled that his new carrier may order the Comac C919, which would mark the first break from the A320 family for the AirAsia group.

This would undermine the standard low-cost practice of having a homogenous fleet, and saddle the new carrier with an aircraft with inferior operating economics.

Yet that may be a price worth paying to secure the political capital needed to jump-start budget air travel in China.

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