AirAsia X pulls out of Europe, India

Malaysian long-haul budget carrier AirAsia X announced plans to scrap unprofitable routes to Europe and India as it prepares for a planned flotation, citing weak demand and a row over European Union emissions charges.

The decision to scale back will affect flights to Mumbai from January, while services to New Delhi, London and Paris will cease in March.

AirAsia X said customers who hold bookings after these dates would be offered an alternative travel option at no additional cost.

"AirAsia X will concentrate capacity in our core markets of Australasia, China, Taiwan, Japan and Korea," the carrier said.

Writing on Twitter, Chief Executive Azran Osman-Rani blamed the decision on a "weak European economy/reduced demand, continued high fuel prices and high airport and government taxes including January 1, 2012 carbon tax".

The airline is one of the first to cut routes after the European Union imposed a system of trading carbon emissions on airlines from the start of the year, drawing protests from China and the United States and fueling talk of a carbon trade war.

But the airline has also acknowledged problems in making money on those routes as the European economic crisis affects consumer spending, while in India it complains of high airport costs and a restrictive visa system hindering tourism.

India is meanwhile drawing up plans to allow foreign airlines to invest in its hard-pressed airline sector, a prospect which drove up shares in several airlines on Wednesday.

"We will refocus on core markets where we have sufficient scale, more benign fees, and are profitable. Will announce new routes soon," the executive said.

The changes end weeks of speculation over the future of the routes and a debate over the viability of the low-cost airline model, which transformed the choices available for short and medium trips, on long distances served by big network carriers.

The decision is also the latest sign of steadily growing pressure on airlines stemming from Europe's debt crisis.

French flag carrier Air France-KLM, which serves Malaysia from its Amsterdam hub, was due to announce the first step in a two-part restructuring plan later on Thursday, with the prospect of savings pushing its shares up almost 6 percent.

AirAsia X was founded by Malaysian tycoon Tony Fernandes who also runs AirAsia Bhd, one of the world's largest short-haul low-cost carriers, which is run as a separate entity.

The long-haul unit is looking to boost profitability ahead of its own share listing tentatively planned for this year.

Analysts expect the route changes to be positive for flag carrier Malaysian Airline System, which buried the hatchet and agreed a tie-up with rival AirAsia last year.

The withdrawal from London and Paris also means AirAsia X will compete more directly with Singapore Airlines' new long-haul subsidiary Scoot, which will kick off its maiden flight to Sydney in the first half of 2012.

Fernandes said through his Twitter account that AirAsia would continue to fly to India.

AirAsia X plans to fly to Jeddah and add more flights to Korea, Japan, Australia and China, he said.

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Thai AirAsia to pull out from Delhi airport

After AirAsia and Air AsiaX, Thai AirAsia has announced it would withdraw flights from India in two months from now. The subsidiary of the AirAsia Group announced it would do so from March 24.

An AirAsia executive in India confirmed on Tuesday that the airline had announced withdrawal of its flights between New Delhi and Bangkok, owing to high operating costs that include high airport and fuel charges. Thai AirAsia operates a daily flight between the Indian and Thai capitals, besides a weekly flight between Kolkata and Bangkok. The Kolkata flight will continue to operate, the executive added.

Withdrawal of the service between Delhi and Bangkok will begin with a cutback to four flights a week on February 14, from what is seven now. On March 24, it would come to a complete suspension.

Recently, Air AsiaX, a long-haul subsidiary of AirAsia that operated flights from Delhi and Mumbai, also announced cancellation of flights from India, also owing to high operating costs. Air Asia, too, had announced it was pulling out flights from Hyderabad, owing to high user development fee at the Hyderabad airport.

High sales tax on aviation turbine fuel (ATF) and high airport charges, which are proposed to be increased further, make India a high-cost market for airlines. The sales tax on ATF in the country is one of the world’s highest at 24 per cent. Fuel is almost half the total cost of domestic airlines.

Airport charges are also set to increase. The Airports Economic Regulatory Authority has proposed an increase of 280 per cent in landing and parking charges at Delhi airport. The airport operator had asked for 774 per cent increase in the charges.

In a consultation meeting that AERA held last week with all the airlines on the proposed hike in airport charges at the Delhi airport, three leading international carriers -- British Airways, Air France-KLM and Lufthansa -- said they would reconsider their expansion plans for India, saying the proposed increase was high.

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Bahrain special report

When Bahrain's security forces violently put down protests inspired by the Arab Spring last year, it exposed growing ethnic fissures and shook the perception many had of the island as the Gulf's most relaxed, democratic and liberal state. It also dealt a blow to Bahrain's economy, which is highly dependent on banking and tourism. The 2011 motor racing Grand Prix - a huge source of visitors - was cancelled and many business people avoided the country in the aftermath of the conflict.

The second Bahrain International Airshow, held from 19-21 January at the Sakhir air base, provides a platform for the country to rebuild its image. The first air show was held in January 2010, a year before the protests erupted. The organisers - Farnborough International - and the government are determined to reinforce the message of a country on the mend that remains a burgeoning centre for aviation services in the region.

But it will be tricky. Long-time ally and defence supplier the UK - represented at the last show by BAE Systems and Qinetiq among others - is one of the nations that has slapped export restrictions on dealing with Bahrain.

This has affected UK participation at the show, although Farnborough International head of marketing and communications Philippa Ewart points out that "government-to-government relations are still good and invitations have been extended to the UK defence and aerospace community as well as the UK government". The country's industry, she says, will be represented by the ADS trade organisation. "Once this situation changes, we have no doubt that UK companies will return at future editions."

A number of Western exhibitors will be represented, however. They include, from the USA, Boeing, GE Aviation and Lockheed Martin, as well as Cessna and Gulfstream from business aviation. European industry will also be there, with Airbus and Selex Systemi Integrati hosting chalets. As well as Bahrain's own aviation sector - Bahrain Air, Gulf Air, Gulf Technics and MENA will fly the flag - other Arabian exhibitors will also be present. They include Air Arabia, Qatar Airways and TAG Aeronautics.

Although Bahrain itself, with a population of only 1.2 million, has a small defence budget and domestic air transport market, its great advantage is its location, joined by causeway to the Gulf's most powerful nation Saudi Arabia.

The island, with its business-friendly legislation, has traditionally been a conduit for Saudi funds and provides a base for business aviation operations to, and from, its large and wealthy neighbour. Swiss-based Comlux - one of the world's biggest charter providers - runs its Middle Eastern operation from there. Local company MENA is also teaming up with Canadian specialist business jet maintenance, repair and overhaul outfit, GAL, to offer a cabin refurbishment and completion service at the island's airport.

On the airline side, Gulf Air - once the pre-eminent airline in the region - has been fighting off fierce competition from the Gulf's three fast-growing network carriers, Emirates, Etihad Airways and Qatar Airways for the past decade, as well as a host of strong low-cost and regional heavyweights from Flydubai to Royal Jordanian. It even now competes on about a dozen of its routes with a privately-owned, full-service domestic airline, Bahrain Air.

The fall-out from the Arab Spring has thrown its slow recovery plans into reverse for now - the cancelled Grand Prix alone was a disaster in terms of traffic - but the airline, under chief executive Samer Majali, is continuing with its restructuring strategy. This includes a fleet upgrade which is likely to see the airline move its profile away from long-haul and more to smaller narrowbodies and regional jets. Speculation is rife that - with the Canadian airframer in attendance in a big way - the show could see Gulf signing a deal for the Bombardier CSeries.

As part of an earlier restructuring at Gulf Air, its training and maintenance divisions were spun off into independent entities. Although still owned by government investment arm Mumtalakat, Gulf Aviation Academy and Gulf Technics are determined to attract more third-party custom and establish Bahrain as one of the Middle East's main outsourcing centres for crew training and MRO.

The organisers of the three-day air show itself have tried to give it a distinct identity from bigger and more frenetic events such as Dubai. There are no exhibition halls; instead the emphasis is on relaxed face-to-face meetings, with a line of VIP chalets, joined by a corridor and served by a central catering operation.

In addition, there is a static display and air display, which the public can watch from an area on the other side of the runway. The two communities are kept very much apart.

Ewart describes the Bahrain air show as a "focused business-to-business event" which provides "an opportunity for buyers and suppliers to engage in high-level networking and meetings with VIP delegations".

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