AirAsia’s Renewed Southeast Asia Focus to Include Launching a New Airline

Photo credit: AirAsia planes at the Kuala Lumpur airport Flickr / malique

The pandemic has wrought big changes on Southeast Asia’s largest budget airline, AirAsia. The collection of carriers, primarily owned by Malaysia’s Capital A, is preparing to launch a new airline in Cambodia while also on the cusp of a major corporate overhaul.

Capital A unveiled Friday plans for a new local joint venture in Cambodia with Sivilai Asia. The startup timeline and potential routes for the new airline, likely to be named AirAsia Cambodia if the practice at the group’s other airlines is kept, were not released. A local subsidiary would allow AirAsia to operate nonstop routes to countries from Cambodia where it does not have a local operation, for example China, India, and Japan.

“Cambodia is a market that is familiar to us and where we have deep infrastructure in place,” Capital A CEO Tony Fernandes said. “That’s why all our future airlines will be based in Asean,” referring to the Association of Southeast Asian Nations.

The new subsidiary could solidify AirAsia’s lead in the Cambodian market. In December, AirAsia (Malaysia) and Thai AirAsia will operate 13.9 percent of the seats to and from the country, just slightly ahead of partially state-owned Cambodia Angkor Air’s 13.5 percent share, according to Diio by Cirium schedules.

AirAsia and Thai AirAsia serve Phnom Penh and Siem Reap from both Bangkok Don Mueang and Kuala Lumpur. The former begins flights between Penang and Phnom Penh in January.

The group is already the largest in Southeast Asia. AirAsia and AirAsia X’s airlines in Indonesia, Malaysia, Philippines, and Thailand will have 17 percent share of Asean capacity in the first quarter, or nearly 7 points higher than the next largest airline, Lion Air, Diio data show.

The Cambodian play comes after Capital A outlined plans to divest its airline assets to AirAsia X in recent weeks. The company would be renamed AirAsia Aviation in what would essentially be an International Airlines Group for AirAsia-branded carriers in Southeast Asia. That plan, however, is not final and the group described it as “a work in progress,” in a Bursa Malaysia filing on December 6. Interestingly, Capital A does not appear to have an equity stake in AirAsia X since the long-haul, low-cost airline’s pandemic bankruptcy restructuring, potentially marking Capital A’s equity exit — there is still significant crossover between the boards of both companies — from the airline business.

The corporate restructuring follows Capital A’s decision to sell its holdings in AirAsia India to Tata Sons in November. The airline will become part of Tata’s re-energized Air India with plans to merge it with Air India Express in 2023. And earlier, the group closed its Japanese subsidiary, AirAsia Japan, due to the pandemic in October 2020.

“2022 was about restarting our airline to pre-Covid levels,” Fernandes said, adding that they expect the capacity recovery to be complete by the second quarter of 2023. “The second half of 2023 will be when we focus on our continued efforts in growth.”

Capital A is “confident” that it will return to the black in 2023, Fernandes added.