U.S. Markets closed

AirAsiaX seeks connectivity with $6 bln Airbus jet deal

By Tim Hepher

PARIS, Dec 18 (Reuters) - Malaysian budget carrier AirAsiaX placed a $6 billion order for 25 Airbus A330-300 aircraft on Wednesday in a bid to challenge network carriers by piggy-backing off the success of Asia's largest low-cost airline, AirAsia.

Malaysian entrepreneur Tony Fernandes, whose AirAsia group has already ordered more than 500 smaller Airbus planes, described the move as a bid to set up the low-cost equivalent of a major connecting carrier such as Dubai's Emirates.

"It's time to take the next step and build the equivalent of an Emirates in the low-cost arena," he said.

AirAsiaX plans to build long-haul bases on the back of AirAsia short-haul networks, focusing initially on a corridor of demand from North Asia to Australia via Southeast Asia.

AirAsiaX said it would have 57 owned or leased wide-body jets by 2019.

Passengers will be able to switch between aircraft operated by no-frills airlines using the same brand at hubs across Asia, starting with existing bases in Thailand and Indonesia.

"Having low-cost narrowbody (jets) criss-crossing Asia enables us to have a big market," Fernandes said.

"Having a bunch of A330s criss-crossing a much larger part of the world enables us to have an unassailable network in the low-cost market."

Singapore's Scoot and Nok Air of Thailand announced plans this week to set up a new low-cost airline based in Bangkok.

Typically, low-cost airlines in the United States and Europe have focused on short-range flights, while legacy carriers compete with major Gulf airlines to handle long-term traffic.

Fernandes said AirAsiaX would restart flights to Europe using the two-engined A330s in 2016, or earlier if it can improve the economics of four-engined A340 jets in its fleet.

Flights using the thirstier four-engined A340s to London and Paris were halted in 2012 due to high fuel prices.

AirAsiaX has yet to select engines for the new A330s, Fernandes said. The airline is seen likely to order the same General Electric engines as on existing AirAsiaX jets.

The carrier said it had options for another 10 of the Airbus A330 planes. The newly ordered planes will be configured to hold 377 passengers and be used for flights over 4 hours.

AirAsiaX Chief Executive Azran Osman Rani said he expected strong Asian demand in the future given that low-cost airlines had not penetrated the market in that part of the world as much as in Europe or the United States.

"I will bet my bottom dollar that this is not the last order we will place," he told Reuters.

Both he and Fernandes reiterated interest in a revamped version of the A330 with improved engines - echoing the successful relaunch of the A320 with new engines from 2015.

Sitting alongside Fernandes at a Paris signing ceremony, Airbus officials said they would look at the idea, but industry sources said there was no indication that such a project was close to being launched.

The A330 has enjoyed a renaissance of sales in recent years as the competing 787 Dreamliner ran into delays.

Wednesday's deal is the largest single airline order for the current generation of Airbus A330 wide-body jets.

Fernandes said AirAsia also plans to return to the Japanese market after ANA agreed this year to buy AirAsia out of a budget airline venture, dissolving a loss-making alliance.

He did not provide details of the plan, which he said would be announced soon.