AirAsia X on strong footing, Capital A to benefit as economy tightens

Despite soaring oil prices and weakening currencies, the outlook for aviation remains positive due to “extremely strong” demand, said Tony Fernandes, CEO of AirAsia parent company Capital A.

“We’re looking to add 20 more aircraft to the fleet for the first time in a long, long time even before Covid,” he told CNBC’s “Squawk Box Asia” on Friday.

What would be a “problem,” however, is getting the aviation group’s fleet back out of maintenance, Fernandes added.

“In AirAsia we have 205 aircrafts and in AirAsia X we have about 20 aircrafts … getting slots and obviously getting them ready for service has been a big challenge.”

The positive outlook comes in spite of negative market reactions to Fernandes’ resignation as AirAsia X’s Group CEO this week. AirAsia X is the long-haul budget flight arm of AirAsia.

AirAsia X shares dropped after the Oct. 31 announcement, and losses since the development still stood at about 5% as of Friday morning.

“Unfortunately, whatever I do gets blown out of proportion. I went in there [AirAsia X] for a short period … I just went in there to kickstart an airline that would have been heavily restructured and was in hibernation,” Fernandes said.

Unlocking ‘real value’ of Capital A
AirAsia X slipped into PN17 status in October 2021, a designation issued by Bursa Malaysia
to financially distressed firms. These firms can be delisted, should their financial position fail to improve.

“I think we’re coming out of PN17. While I was very against it, I thought it was harsh to put us into PN17 … actually we’ve turned a negative into positive.”

In his four-month tenure, Fernandes created a cargo business in AirAsia X, which he said has contributed “about 20% to the airline’s revenue during the pandemic” and will continue to play a vital role in its recovery.

He added that AirAsia X now has “very strong footing” and better cost structure.

Fernandes told CNBC that he is now focusing on the larger Capital A group and “unlocking its real value.”

He added that there will be a newly formed holding company “very soon,” which would contain all aviation services, including its engineering company Asia Digital Engineering, restaurant brand Santan and its consulting arm.

“My job now is to make sure we deliver profitability, good cash flow growth, have the right funding on all of these and from where we were … the sky looks really good,” Fernandes said.

E-commerce provides ‘huge opportunity’
Even as the economy tightens, Fernandes said he is “not worried” as Capital A will benefit as a “value provider.”

“I’ve been through many slowdowns in the economy and people will go to the best-value operator,” he added.

In addition, the pandemic has provided a huge opportunity with the boom in e-commerce, which Fernandes said is here to stay.

“Even in logistics, it’s a wonderful time for us to grow. For the first time in our history, we’ve taken three cargo planes.”

He added: “It still takes a long time to ship products even from Kuala Lumpur to Singapore. [At] AirAsia, we do it in a day now. And so we will do point-to-point logistics, change the whole model, and we see a huge opportunity for us.”

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