AirAsia X achieves phenomenal growth in Australia over the last decade

9 May, 2017

Late this year AirAsia X will celebrate its tenth anniversary in the Australian market - and overall. The Malaysia based long haul low cost airline commenced operations in Nov-2007 with a flight from Kuala Lumpur to the Gold Coast and has steadily grown over the last decade to become the third largest foreign airline in Australia.

AirAsia X is now almost as big in Australia's international market as Virgin Australia. It is also nearly as large as Jetstar's long haul unit, which launched in 2006. Malaysia AirAsia X flew 1.6 million passengers to or from Australia in 2016, representing growth of nearly 50% compared to 2015, according to BITRE data. Its share of the international market grew from 3.1% in 2015 to 3.9%.

AirAsia X cut capacity to Australia in 2015 as part of a restructuring initiative, leading to a 24% reduction in passenger traffic. In 2016 AirAsia X added back most of the Australia flights it had cut and grew in the Gold Coast. As a result, its 2016 Australia traffic was up 13% compared to the previous high mark from 2014.

In addition to a record level of capacity - AirAsia X offered more than 2 million seats in the Australian market for the first time in 2016 - the higher traffic was partially driven by load factor improvements. AirAsia X achieved a 77.2% average load factor on Australia routes in 2016 compared to 75.4% in 2015 and 75.8% in 2014. Its system-wide seat load factor improved in 2016 from 75% to 79%.

AirAsia X annual Australia passenger traffic and seat load factor: 2007 to 2016

Note: Indonesia AirAsia X, which suspended services to Australia in 2016, is not included as it is considered a separate airline
Source: CAPA - Centre for Aviation and BITRE

AirAsia X currently operates 53 weekly flights from its Kuala Lumpur base to Australia, including 14 frequencies to Melbourne, Perth and Sydney and 11 to the Gold Coast. In 2016 AirAsia X reinstated year-round double daily service to Melbourne, Perth and Sydney.

In the Gold Coast market, daily service from Kuala Lumpur was reinstated in late 2015 and a tag from Gold Coast to Auckland was launched in Mar-2016. Four additional Kuala Lumpur-Gold Coast frequencies were added in Jul-2016, resulting in the current schedule of seven weekly Kuala Lumpur-Gold Coast-Auckland flights and four weekly Kuala Lumpur-Gold Coast turnaround flights.

Australia is AirAsia X's largest market, accounting for 31% of its current seat capacity. AirAsia X currently has a 5% share of seats in Australia's international market - which makes it the third largest foreign airline in Australia after Emirates, Singapore Airlines and Air New Zealand.

As Blue Swan outlined last week, Jetstar and AirAsia X were the pioneers in the current generation of long haul LCCs. Gold Coast was AirAsia X's first route and Australia has remained an important market as it has expanded rapidly. Jetstar has been relatively conservative in expanding its long haul operation and as a result AirAsia X's long haul operation is now three times the size of Jetstar's long haul operation overall. In Australia, AirAsia X has almost as much capacity as Jetstar's long haul unit. Combined AirAsia X and Jetstar account for 80% of all long haul low cost capacity in Australia.

See related report: Australia has embraced long haul low cost operations with a network increasing to record numbers

AirAsia X is looking at further expanding in Australia over the next few years with a combination of additional frequencies in its existing markets and potential new destinations. The planned resumption of flights to London and other potential new European destinations could help support additional capacity at its existing Australia destinations.

AirAsia X is also looking at resuming services to Adelaide, which it suspended during its 2015 restructuring. Several new potential new Australian destinations are under evaluation including Brisbane, Cairns, Canberra and Townsville.

Attracting AirAsia X would a be a major breakthrough for any of these airports as they are currently not served by any foreign LCC. Canberra and Townsville currently only have two international routes and one foreign airline.

Townsville may seem like a longshot for attracting AirAsia X as it is currently only connected with Bali and Port Moresby. But Townsville has ambitions to become a bigger international player and is in the same airport group as the Gold Coast.

AirAsia X has been remarkably successful in the Gold Coast since making the Gold Coast its first destination in 2007 due in part to a close relationship with the airport and local community. As AirAsia X looks at other potential destinations in Queensland it will be keen to duplicate this formula.