Loudmouth low class carrier operator Tony Fernandes is getting a real slap of his face, on top of a run for his money. The NADI-Lion Air new joint venture hybrid budget airliner Malindo Airways is set to be a major airlines in the region.
Reuters take on this:
Lion Air to launch Malaysia-based budget airline
By Siva Sithraputhran
KUALA LUMPUR | Tue Sep 11, 2012 3:37pm IST
(Reuters) – Indonesia’s Lion Air will set up a new low-cost airline based in Malaysia, it said on Tuesday, a challenge to dominant budget carrier AirAsia Bhd as Southeast Asia’s growing middle class fuels demand for cheap flights.
The new carrier, Malindo Airways, will begin flights between Indonesia and Malaysia next May with a fleet of 12 Boeing 727 aircraft which it plans to expand to 100 planes within a decade, Lion Air President Rusdi Kirana told reporters in Kuala Lumpur.
The move is the latest in a burgeoning rivalry between Lion Air and Malaysia-based AirAsia as strong economic growth and rising incomes spur rapid passenger growth among Asian low-cost carriers, helping to shield Western planemakers from the malaise gripping developed economies.
“Malindo is an opportunity to tap a robust market that is right for the entry of a new low-cost carrier,” Malaysia’s Prime Minister Najib Razak said at the launch event.
AirAsia (AIRA.KL) has made inroads into Lion Air’s home market, announcing in July it would make its first major acquisition by buying Indonesia’s Batavia Air.
AirAsia chief executive Tony Fernandes said in May his group was looking to list its Indonesian operations by the first quarter of next year as it moves its regional base to Indonesia.
In contrast with other budget carriers, Malindo Airways will have in-flight entertainment, extra legroom and free light meals, as well as low fares, Kirana said. Its hub will be Malaysia’s new budget terminal, KLIA 2, which is currently under construction.
“I should be selling at what AirAsia is selling, or I may sell lower,” Kirana told reporters, referring to ticket prices. He did not say how much Lion Air was investing in the new carrier.
Lion Air has a 49 percent stake in the airline, a joint venture with Malaysia’s privately held National Aerospace & Defense Industries Sdn Bhd, which holds the majority 51 percent
Despite Asia’s increasingly crowded budget carrier field, Kirana said there was still a need for “two or three more airlines with specific business models” by 2013.
Lion Air ordered 230 Boeing short-haul jets worth $22 billion last November to take its total orderbook to more than 400 planes. Sources told Reuters last week that AirAsia is close to a deal to buy up to 100 Airbus jets, closely on the heels of its record order for 200 last year. (Writing by Stuart Grudgings; Editing by Daniel Magnowski)
Lion Air would be the largest airlines operation in the region. CEO Pak Rusdi Kirana is hinting that they could offer cheaper tickets but with much better products, compared to AirAsia. Naturally, the now bullish Malindo Airways would be a major threat against AirAsia, even when Fernandes says its not.
‘Malindo Airways will not pose threat to AirAsia’
AirAsia Chief Executive Tan Sri Tony Fernandes has welcomed the new low-cost airline in Malaysia, Malindo Airways, but dismissed that the new budget carrier will be a potential threat to AirAsia Bhd, Asia’s largest frills-free airline.
He said the formation of Malindo Airways clearly indicated the growing importance of budget carriers in the global aviation industry, particularly in Malaysia and in the Asean region, in tandem with the Asean Open Skies Policy, which will come into force in 2015.
“I welcome Malindo Airways’ establishment. AirAsia had always wanted Asean to be opened up. This is a good step,” he told Bernama.
Fernandes quashed claims that Malindo Airways would force AirAsia to bow to pressure due to the keen competition in Indonesia.
He said neither the airline nor the joint-venture partners of Malindo Airways posed any threat to AirAsia’s vast airline network in the Asian region.
“The new airline is not an issue for us in AirAsia. We have competed in a country like Malaysia which has a strong airline such as the Malaysia Airlines (MAS).
“We also have in hand a strong team for AirAsia, AirAsia X and AirAsia Indonesia. I am proud of what we have and we will continue to grow.
“We are building a global brand and I don’t think that something like this (the new airline) will slow us down,” added Fernandes, who is now based in Jakarta, overseeing AirAsia’s Asean region operations.
AirAsia Malaysia is now headed by Aireen Omar.
National Aerospace and Defence Industries Sdn Bhd (NADI) and PT Lion Grup today signed a joint-venture agreement to form Malindo Airways which will begin operations on May 1 at KLIA2 in Sepang.
The signing was witnessed by Prime Minister Datuk Seri Najib Razak.
The budget carrier will take off with a fleet of 12 Boeing 737-900ER aircraft to destinations between big cities in Malaysia and Indonesia before expanding to other Asian countries.
Malindo Airways is considering offering low fares, even lower than AirAsia, in addition to the in-flight entertainment systems and in-flight connectivity in all of its aircraft. — Bernama
Malindo’s initial investment of 12 world’s most popular and reliable airlines workhorse, the most recent B737 model from Boeing; B737-900. It could fly 160-170 passengers from this region to any East or West Asia destination in a single hop. In time, it would not be a surprise if Malindo Airways starts to fill-in the gap on point-to-point markets, against Malaysia Airlines’ or Garuda’s traditional hub-to-hub operations.
A promising bullish market for budget airlines market, but offering better products against current low regional low cost carriers would probably see Malindo Airways expand to 100 aircrafts within ten years.
As a full service airliner with state-of-the-art entertainment system, wifi and mobile phone connectivity (coupled with a choice of business class option) but at budget ticket price, definitely the highly popular regional low cost carrier AirAsia would be a lesser choice for passengers. Malindo will be operating from KLIA2 from May next year. At this point of time, AirAsia has yet to confirm their date and schedule to move their operations from KLIA LCC Terminal.
This joint venture is very strategic for Malaysia Airports. Lion Air soon will be operating 220 B737s and would be the largest airlines in Indonesia. Eventually it would number 400. The market for the fourth most populated nation in the world is tremendous. If some of this market is being channeled through KLIA for a third destination, it would add more business for Malaysia Airports and indirectly, Malaysia’s tourism earnings.
Analyst already predict that Indonesian air travelers would increase by 52% by 2015. The steady promising growth is projected in Lion Air’s order of 22o aircrafts from Boeing.
Lion Air’s growth and potential is really promising. The airlines is serving Jakarta-Jeddah sector with 500 seater B747-400s. As the market grow, it is expected that Lion Air acquire suitable aircrafts which include wide body to serve right destinations. This is unlike AirAsia which intercontinental AirAsia X is already showing problems and has been canceling what deemed to be lucrative routes such London and Paris.
Prime Minister Dato’ Seri Mohd. Najib Tun Razak officiated the new hybrid-budget airlines this afternoon. It is a demonstration of a strong endorsement, in the spirit of Malaysia-Indonesia brotherhood and regional ASEAN co-operation ahead of the Open Sky policy beginning 2015.
“This will fortify the airlines business in the region”.
This is also a strong message to the arrogant and incurably annoying Fernandes for his grandstanding upon the ‘AirAsia-Malaysia Airlines share-swap’ last August where the latter was suckered to pay RM 18 million for lousy Queen’s Park Rangers sponsorship.
This serves Fernandes well. Especially after Fernandes’s sordid attempt to do an ‘Airport Spring’ against Malaysia Airports, which is a GLC under Khazanah Holdings Bhd. last December. And recently in May when the ‘share-swap’ signed on 9 August last year was overturned in a scheme which only lasted 36 weeks, Fernandes threatened to take his operations to Jakarta. It is obvious soon to be largest airlines in Indonesia has better faith in Malaysia compared to Fernandes.
This is a third slap on Fernandes’s face as he tried to grow bigger into the Indonesian carrier’s market by acquiring a much lesser carrier Batavia Air.
Fernandes also failed in his attempt to hoodwink everyone for his failed Formula One team, once upon he wanted to be known as Team 1 Malaysia and ‘Lotus’.
The acid-test for Fernandes is straight forward. AirAsia placed a huge order of 200 A320 Neos. If any aircrafts from this order is passed over to another carrier, is a sign that the confidence for their ultra-bullish market growth projection is threatened. AirAsia X already has problems on routes assignment with their current order of A330s.
Even Virgin Supremo Sir Richard Branson quit on AirAsia X.
This is the way forward where Fernandes lost. For those who are bullish about AirAsia under Fernandes’s watch, the ‘good old days’ and as Datuk Rockey put it, “Honeymoon years” are numbered. Prime Minister Najib has never lend this much support for AirAsia, nor Fernandes. Not even when Fernandes was grand-standing for the Batavia Air acquisition.
*Updated Wednesday 12 September 200am
Wall Street Journal just reported that Pak Rusdi announced in Kuala Lumpur that Lion Air increased the order of B787-8 Dreamliners by ten. Some of these planes would be in the service of newly formed Malindo Airways.