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  • The X-Factor In Air Asia X's Move
    Posted by Rupa Haria 1:26 PM on Jul 12, 2011

    Airlines change airports all the time, but AirAsia X's decision to relocate its long-haul operations in London from Stansted to Gatwick has wider meaning for the British air transport landscape, showcasing both the good and the bad in U.K. government's handling of the sector.

    AirAsia X’s chief executive, Azran Osman-Rani, was in London today to announce the move of one of the airline’s flagship routes. From October 24, the airline will operate from London Gatwick airport to Kuala Lumpur, abandoning Stansted where the airline has been flying to since March 2009.

    Osman-Rani says Stansted was a good partner, but it is time to move on. The economics of Gatwick simply are a better fit, both because of the lucrative catchment area and the short- and long-haul connections on offer.

    But the move likely would not have happened if the government had not forced BAA to unload Gatwick airport, creating a competitive environment among runway providers in the Greater London area. Gatwick is run by Steward Wingate, who, at the time AirAsia X debuted in London, was managing director of Stansted. Osman-Rani describes Wingate as a “very persistent man. He never gave up [chasing] when he moved to Gatwick”.

    Wingate himself was lured over to Gatwick by Global Infrastructure Partners after BAA’s sale of Gatwick was approved by the Competition Commission in 2009.

    Since then, Gatwick has been on a serious business development drive as it lures airlines to fly from the south of London. It’s already half way into its £1 billion program to upgrade the airport. With shiny new facilities and a team standing by with open arms at Gatwick, along with, no doubt, discounts and incentives, it would be tough not to walk away from an airport with a rather uncertain future (see my AWST story on that here).

    But it was not just positive incentives from Gatwick that drove AirAsia X to the airport. The U.K. government’s high aviation taxes also influenced the low-cost airline’s decisions. “Times have changed [for Stansted]”, says Osman-Rani. “Air passenger duty has reduced the advantage that Stansted has in acting as a hub or gateway into Europe."

    Passengers travelling from Malaysia and beyond were taking advantage of AirAsia X’s low fare offers to Stansted, then transferring to mainland Europe onto other low-cost airlines such as Ryanair and Easyjet, both of which operate extensive route networks from the airport.

    However, with APD for flights from the U.K. set to increase again in the next budget (read my blog on that here), low fares just aren’t low anymore. Osman-Rani says he has seen the number of passengers transferring “significantly diminish”.  That reduced the incentive of remaining at Stansted, the low-fare hub dominated by Ryanair.

    Osman-Rani also blames the tax regime for the disappearance of truly low-fare long-haul fares. When AirAsia X launched its service, it came with teaser fares of £99 one way. But with APD heading into triple digits, that simply is no longer possible. At the very best, the airline may get down to £199 one-way, although not at current fuel prices and perhaps never given the introduction of costs linked to next year's inclusion of airlines in the European Union emissions trading system.

    That all leaves one big question, though, for AirAsia X. Is it really still a low-fare carrier?  One-way fares from Gatwick to Kuala Lumpur will now start at £338. A quick search on Expedia shows that a return flight (from Heathrow) with Malaysian Airlines on the same dates is priced at £865. After opting for up to 20kg luggage, standard meals, a comfort kit, and pre-selected seating, the price of an Air Asia X flight is £718. That’s just £148 cheaper than full service Malaysian. And that doesn’t include the cost of in-flight entertainment and the on-board tipple. Low-fare or just no-frills?

    Tags: tw99, air asia x, gatwick, stansted

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