Contributor - Asia

Jennifer Meszaros

AirAsia X has begun laying plans to “aggressively” cut a number of routes and reduce its fleet size, including deferring the delivery of 78 Airbus A330neos as part of a larger effort to rein in costs to counter the effect of the new coronavirus.

 


According to the carrier’s recently released 4Q19 and FY2019 financial statements, plans include delaying&nbsp;its A330-900 deliveries, selling&nbsp;two A330-300s, and the early return of a further five aircraft to lessors. The aircraft sales could fetch a market price of up to $100 million while the airline expects new lessor agreements to slash its lease rates by 30 percent. The budget carrier did not elaborate on the duration of the A330-900 delivery deferrals but did add that it was working on additional short-term wet-lease arrangements while renegotiating the company’s lease maintenance reserves. The airline, which operates a fleet of 24 A330-300s, revised its deal with Airbus last August to take 78 A330-900s and 30 long-range A321XLR narrowbodies rather than 100 A330neos.

 


In terms of routes, AirAsia X intends to move toward a dual-fleet strategy and replace its current 377-seat A330 service on medium-haul thin routes using the 236-seat A321. It will also use the A321s on routes within a six-hour radius from its Kuala Lumpur hub. Additional plans call for slashing a number of non-profitable routes including Tianjin and Lanzhou in China, and Jaipur in India. The airline said it had already canceled more than 600 flights for March and will undergo an aggressive capacity-management program for the first half of 2020 to mitigate challenges posed by the Covid-19 virus. According to an investor’s presentation, flights to and from China accounted for 30 percent of AirAsia X’s capacity before the outbreak.

 


“The Company expects major headwinds for the first half of 2020 amidst the outbreak of novel Covid-19, on top of the persisting global economic slowdown as well as irrational competition within the local aviation industry,” said AirAsia X Group CEO Nadda Buranasiri. “A downtrend has been observed on passenger bookings in the forward months, as all tourism-related businesses face the impact of the Covid-19 outbreak.”

 


AirAsia X intends to redeploy capacity into other core markets and launch an extensive promotional campaign. The carrier added that it had hedged 80 percent of its fuel requirement for the first quarter of its 2020 fiscal year at average Brent hedge prices of $59.8 per barrel. For the remainder of the year, AirAsia X has hedged 72 percent of the fuel requirement at average Brent hedge prices of $59.6 per barrel.

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