Air Asia flying high after first year of operations

KUALA LUMPUR - One year after it started operations as Malaysia's first low cost no-frills carrier, AirAsia has romped home with a record passenger load factor and a clean profit.

The airline, which garners a large portion of its business from online bookings (www.airasia.com), recorded 665,440 passengers between July and December last year, compared to 621,899 in the previous 15 months. The passenger load factor increased to 70 percent from 67 percent in the financial year ending 2002.

AirAsia's chief financial officer, Raja Mohd Azmi Raja Razali, said the company made a profit of RM19.4 million (US$5.02 million) between April and November 2002. It also repaid the liabilities of RM40 million when it acquired the company in December 2001.

As it moves into its second year of operations, AirAsia's focus will still be on developing the domestic market. It will introduce new destinations, increase the frequency of its existing routes and improve its service, said its chief executive officer Tony Fernandes.

Fernandes said there was still a lot of potential in the domestic market, and the airline wanted to strengthen its operations on home ground before expanding overseas.

AirAsia will add three more destinations - Bintulu (Sarawak), Sandakan (Sabah) and Alor Star (Kedah) - by the end of February. It will also start flights Kota Kinabalu and Kuching.

The airline will also increase the frequency of flights on existing routes - flying daily to Labuan, and adding one more flight to Penang.

Fernandes said AirAsia might start flying to regional destinations either at the end of this year or by the first quarter next year. In line with this expansion the company will increase its current fleet of six planes to 15 by the end of the year. It will take delivery of its seventh plane next month.

Fernandes revealed that AirAsia would also start a travel company, called "Go", by the end of this year. It will market holiday packages on routes served by AirAsia.

To the question of whether the threat of a US-led war on Iraq and a subsequent increase in fuel prices would affect the company's bottomline, Fernandes saidthe current escalating cost of fuel was already hitting the company badly.

"However, we have hedged our fuel cost for the first quarter of this year, and have contracts up to the second quarter."