AirAsia in talks with China's COMAC to acquire narrow-body jets: Tony Fernandes

Key Concepts:

• COMAC (Commercial Aircraft Corporation of China)
• Narrow-body jets
• Air Asia's fleet expansion
• Restructuring phase post-COVID
• Low-cost hub airline strategy
• Aircraft evaluation and order placement

Air Asia's Interest in COMAC Aircraft

Air Asia is in active discussions with COMAC to potentially acquire narrow-body jets for its fleet. Tony Fernandez confirmed the seriousness of these discussions, stating that ignoring COMAC would be a mistake in the long run.

Attractiveness of COMAC Planes

• Engine Commonality: COMAC planes use General Electric engines, the same as Air Asia's existing and ordered fleet of 800 planes.
• Chinese Market: China is a significant market for Air Asia, with flights to 23 destinations.
• Proven Technology: Fernandez highlighted China's advancements in technology, citing examples of cars, mobile phones, and chips.
• Production Rate: COMAC is increasing its aircraft production rate, potentially leading to faster delivery times.
• Personal Experience: Fernandez has flown on COMAC planes and visited the factory, expressing confidence in the company's dedication and passion.
• Price and Quality: Air Asia's interest is driven by the planes being "good" and "the right price," not solely because they fly to China.

Evaluation and Order Placement Timeline

Buying aircraft is a complex process, not a quick purchase. Air Asia is currently evaluating a slightly smaller aircraft and assessing its order book. The airline is still in the restructuring phase after six years of COVID-related disruptions, aiming to complete it within the next two months. A decision on COMAC planes will likely be made after the restructuring is finalized and the airline returns to its previous operational level.

Air Asia's Future Strategy

Air Asia aims to build a low-cost hub airline in Kuala Lumpur and Bangkok, similar to a "Dubai" model. This strategy involves enabling passengers to connect and fly to further destinations using a narrow-body plane strategy. The goal is to facilitate longer-distance travel through efficient connections.

Financial Performance and Growth

Air Asia has reported two profitable quarters, signaling a return to growth after the COVID-19 pandemic.

Notable Quotes:

• Tony Fernandez: "Anyone who doesn't look at it [COMAC] um will pay the price in the long run."
• Tony Fernandez: "We don't buy Chinese planes because we fly to China. We buy Chinese planes because they're good or they're the right price."

Technical Terms and Concepts:

• Narrow-body jets: Aircraft with a single aisle, typically used for short to medium-haul flights.
• Low-cost hub airline: An airline that operates a hub-and-spoke model with a focus on low fares and efficient operations.
• Restructuring phase: A period of organizational and financial adjustments to recover from a crisis or improve performance.

Logical Connections:

The discussion flows from Air Asia's interest in COMAC to the reasons behind this interest, the evaluation process, and the airline's broader strategic goals. The restructuring phase is presented as a prerequisite for making a final decision on aircraft acquisition.

Synthesis/Conclusion:

Air Asia is seriously considering acquiring COMAC aircraft due to factors like engine commonality, the importance of the Chinese market, proven technology, and competitive pricing. The decision is contingent on completing the airline's restructuring phase and evaluating its fleet requirements. This potential acquisition aligns with Air Asia's strategy to build a low-cost hub airline and expand its network.