The 4th Air Asia

Finally, a break from Kane is Real. Yes, I can hear your sighs of relief! Here's my other passion. The Red Airline that could.

News Article: AirAsia, VietJet Air sign partnership

OVERCOMING OBSTACLES

Tony Fernandes has done it once again. Overcoming the 2 key challenges of 1) bureaucracy and red tape profound in many Asian governments and 2) the stern opposition of the country's national carrier.

When Tony initially wanted to start up the new AirAsia with local company VietJet, Vietnam Airlines protested, partly because they know how popular AirAsia is in SEA and how its eaten away at the monopolies of national carriers like MAS. But somehow, Tony has managed to charm the key governments officials who are the gatekeepers in charge of having the final say to whether he can or cannot open up a new AirAsia in their backyards. Once before, Tony wasn't an important figure with the government. Now, he is practically following them everywhere there are international summits. He followed Najib to Paris sometime back for some bilateral France-Malaysia trade thingy to work out concessions and discounts for future purchases of Airbus aircraft. Two days ago, Tony used the 16th Asean Conference to officially sign the partnership with VietJet, in front of Najib and the Deputy PM of Vietnam.

With the favorable approval by both governments, its confirmed, Tony is free to eat away at Vietnam Airlines' market share. Tentative first flights for VietJet AirAsia begin in August according to the article.

SIGNIFICANCE OF VIETNAM

Why the need to open up a 4th AirAsia? The reasons are mostly geographical.

1) Routes. Currently as a Malaysia company AA can only operate Malaysia-Vietnam routes. Thus, AA can only fly from KL to Hanoi, HoChiMinh, etc. AA can't operate routes like Hanoi-Bangkok. Because the two destinations have nothing to do with Malaysia, and so govn regulations say that AA has no business there. How did Tony solve the solution? Open up AirAsia Thailand. So now Air Asia has become a local Thai company. Therefore, Hanoi-Thailand is a go.

Therfore, the strategic geographical importance of a base in Vietnam is to gain access to upper East Asia, the markets of China, Japan, and Korea. So I'm guessing there will eventually be Hanoi-Beijing, Hanoi-Tokyo, Hanoi-Seoul flights, or something like that. Why not fly there straight from KL you ask?

2) Time and Distance. For successful low-cost operations, a flight should be no more than 3 to 4 hours away. Any longer, and you require bigger planes to be economical, and bigger planes add more expenses, like longer gate rentals because of longer boarding times, longer baggage load time, etc. And also, as we all know even RapidKL busses are more comfortable than AA's black leather seats. Hence, the reason why long haul AA-X has had to introudce flat beds and comfy stuff, cause ppl can stand a hard surface for only 3-4 hours at most!

So yes, Air-Asia could fly to Jpn and Kor from KL, but that would be the job of AA-X then. And personally, I don't think AA-X is doing as well as AA in terms of profit margins. So by flying out of Vietnam, Tony solves the 3-4 hour distance problem. Hanoi is already 3 hours away from KL, and is probably 3 or 4 to Japan, China, or Korea. Thus, there will be two types of passengers flying to those places outta Hanoi 1) local Vietnamese wanting to go there for holidays/business 2) transit passengers from Bangkok, KL, Jakarta, Singapore.

3) Reverse Traffic. For us ASEANS, everytime AA opens up a new destination to a new country, we immediately say, yes! We Malaysians/Thais/Indonesians are going to benefit! We are getting low-cost access to other countries now! But we also have to think of the reverse, the benefit also belongs to the people on the other side. For instance, the new destinations to India are actually for the thousands of Indians who want to come to Malaysia, not so much that a lot of Malaysians want to go to India. The same goes for the KL-Dhaka route, in which AA brings in lots of Bangla migrant workers. And the same for KL-Indonesian routes. All the maid agencies are now using AA to bring in the maids. So with the opening up of Hanoi -China/Japan/Korea, the dual purpose is not only for us ASEANS to get access to their countries, but also to give them low cost access to ours. This is Tony's primary spiel when trying to convince local and foreign authorities to open up new routes: the spill over benefits from tourism and business.

WHAT NEXT TONY?

I'm guessing AirAsiaIndia. I'm pretty sure he has dreams of an AirAsiaChina, but we all know that THAT is the ultimate challenge, dealing with the Chinese government. And now that Vietjet Air Asia is being set-up, the access that Tony will get to China from Vietnam will appease him. For now.

Oh wait. First things first. Lotus needs to become F1 champions.