Cheaper AirAsia tickets; it scraps administration fee

It stands to lose up to RM400mil in revenue yearly

KUALA LUMPUR: AirAsia Bhd stands to lose up to RM400mil a year at the group level with the abolishment of its administration fee from its fare structure but the airline says it will replace lost revenue with income from higher passenger growth and its ancillary business.

“Reducing the cost of fares is the only way to get people to travel. We believe this will help increase our load factor and make us even more competitive,” group chief executive officer Datuk Seri Tony Fernandes said.

There are also other ways of generating income, such as hotel, food (onboard) operations and priority booking, he added.

From left: AirAsia X CEO Azran Osman-Rani, Datuk Aziz Bakar (middle), regional head of commercial Kathleen Tan and Datuk Seri Tony Fernandes at the media conference

Speaking at a news conference yesterday to announce the administration fee abolishment – a first for a major airline – Fernandes said scrapping the charges would create savings for passengers who now only have to pay the seat fare and airport taxes.

The administration fees range from RM22.50 to about RM43 per route (one way).

“We scrapped fuel surcharges last year and still managed to make record profits. We feel the same way about this ,” he said

AirAsia Bhd returned to the black with a net profit of RM203.15mil in the first quarter of 2009, after two consecutive quarterly losses previously.

Revenue increased 33% to RM714.2mil due to better ancillary income and stronger passenger growth.

“The past six months were tough for airlines all over and AirAsia has only grown stronger.

“None of our targets have been changed despite the economic conditions and outbreak of the A(H1NI), we are not affected by the recent flu scare; we are doing well and growing our capacity,” Fernandes said.

“Next week, we are expected to let go of all of our 16 Boeing 737s.

“We will then focus on a brand new A320 fleet which will help lower fuel costs,” he said. Currently, the carrier has 62 A320s.

He added that AirAsia was on target to fly more than 20 million passengers this year against about 18 million last year.

Fernandes also urged airports worldwide to reduce charges to further encourage air travel.

“The only other charge that is not controlled by us is the airport charge,” he said.

Meanwhile, AirAsia chairman Datuk Aziz Bakar said the carrier was withholding the RM65mil arrears in airport tax owed to Malaysia Airport Holdings Bhd as discussions over the settlement of the airport tax debt between the parties were still ongoing.

Currently, passengers pay RM6 in airport tax for domestic flights and up to RM51 for international flights.

Fernandes said the RM6 airport tax for domestic flights was “all right”.

However, he said the RM51 for international flight at the low-cost carrier terminal should be reduced to RM10.