Fuel Tax, airport charges keep Air Asia away from India

A plan to buy 100 Airbus aircraft will be submitted to the board of Asia’s largest budget carrier, AirAsia , in about two weeks, the airline’s CEO, Tony Fernandes, said on Friday, in a deal that could be worth $9 billion. He also said he had no immediate plans to enter the Indian market because he thought the aviation fuel tax and airport charges were still too high.

Reuters reported earlier this month that AirAsia was putting the final touches on the deal, ending a flirtation with Canada’s Bombardier. Fernandes said the order will involve a mix of aircraft and not just Airbus A320s.

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“I’ll be submitting it to the board in two weeks,” Fernandes told Singapore’s Foreign Correspondents Association.

AirAsia, with an operating fleet of more than 100 aircraft, has ordered a total of 375 Airbus jets as part of dramatic expansion plans that now include the acquisition of Indonesia’s Batavia Air. It has said it will accelerate deliveries as rising demand helps it offset high fuel costs.

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Turning to India, which last week said it will allow foreign carriers to take stakes of up to 49 per cent in Indian airlines, Fernandes said he had no immediate plans to enter the market because he thought the aviation fuel tax and airport charges were still too high.

Indian newspapers had speculated AirAsia could be the first overseas carrier to take advantage of the new rules.

Fernandes, who owns Formula One team Caterham, said he is in Singapore to interest Asian bankers in financing aviation deals that historically have been dominated by European lenders. The F1 race in Singapore had attracted financiers from around the region, he said.

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“We’re trying to get Asian banks interested. I think by introducing Asian bankers to the aviation market, costs will reduce. Asian banks have much more liquidity than European banks,” he said.

He said another source of funding for the aviation industry could come from wealthy individuals who are searching for yield products and would be interested in putting money into aviation trusts that would buy aircraft and lease them to airlines.

“Cost, cost, cost. That’s my focus over the next few months,” Fernandes had said in a Tweet earlier on Friday.

He added that the public listing of his long-haul budget carrier, Air Asia, was progressing and appeared imminent, although he would leave the final decision to management.

“I reckon it will be in December,” he said, without indicating how much the IPO could be worth. Earlier reports this year said the IPO could be worth $250 million.

AirAsia reported last month a 3 per cent year-on-year fall in second quarter net operating profit to 130.94 million ringgit due to higher user charges and rental commitments even as revenue rose 9 per cent to 1.18 billion ringgit.

Reuters