Decline in global oil prices a boost to the aviation industry - Tony Fernandes

Oil prices account for 50 percent of the total cost for AirAsia and the recent decline in global oil prices would mean that the budget carrier registers higher profitability.

In an interview with Astro AWANI on Tuesday, he said the company matches its revenue to costs when it comes to hedging.

“We have only hedged 12 percent of fuel needs for 2015, obviously we have a huge benefit now because we are 'un-hedged'," said Fernandes.

AirAsia has been a success story with its low cost model cutting into the sphere of full service airlines.

Since its inception 13 years ago, the low cost carrier has been voted as the "World's Best Low Cost Carrier" for six consecutive years since 2009.

His model also hinges on the ancillary income which accounted for 22 percent of revenue in 2013. Items sold on board and "extras" that a passenger requires would come under ancillary income.

Fernandes said the restructuring of Malaysia Airlines System (MAS) would have a major impact on the aviation industry.

"I look forward to a revitalised MAS. It will be great if both MAS and AirAsia can be successful and bring in tourists and create jobs," he added.

When asked about lowering fares with lower oil prices, he said he was hopeful if oil prices are stabilised.

"What I don’t want to do is to remove the fuel surcharges and tomorrow oil prices jumps up again. It’s too volatile so let’s get a stable base for oil before removing surcharges.

"For us, we want lower prices – airport charges, ticket prices because we want to create more demand and make Malaysia the centre of low cost travel," said Fernandes.

On the new KLIA2 terminal, Fernandes said there were issues in the past but with Malaysia Airports Holding Berhad's new CEO, he was hopeful that they could work together to make Malaysia the hub or the “Dubai” of low cost travel.

On the future of airlines, he said that it had too many models currently. He foresees that in the future, airlines would be segmented into business class, premium economy and first class while the rest would be low cost airlines.

When asked about the sustainability of long haul budget airlines model, Fernandes said he was optimistic as the planes were full and the challenge was to get the right revenue and cost structure.

He said Air Asia had pioneered long haul low cost travel which was now gaining traction with more players such as Singapore Air, Ryan Air, Norwegian Air Shuttle and Lufthansa entering the market.

Fernandes said that he hoped to enter the Japanese market again in October next year with a partnership with Rakuten and two other partners.

On India, he said Air Asia was doing very well as the company had overcome the initial challenges it faced in the Indian aviation market.

Air Asia India which currently has 3 aircraft, hopes to increase its aircraft count to 6 by the first quarter of 2015 and 25 to 30 aircraft in three to four years time. He also added that the company was looking at expanding the cities it flew to with New Delhi being the possible addition.

On the regional view, Fernandes said that Thailand was on the way to recovery while Indonesia’s new government is very pro – tourism which will be positive for the aviation sector while Philippines was turning the corner.