Monday, March 09, 2009

How Air Asia keeps cost low

This article on how Air Asia keeps cost low tells us a bit about some of the cost structure of Air Asia. This is quoted from Telegraph .

Great that Air Asia X is going to fly to London in 2 days' time!!!
Air Asia keeps its cost base down primarily by flying its planes for longer than legacy airlines and filling more of its seats.

But as well as these two main pillars, the airline constantly reviews its operations to look for other ways to keep costs low. Azran Osman-Rani, Air Asia X's chief executive, told me about some of these cost saving methods (although I'm sure he held back more than a few trade secrets):

More, smaller seats - The A340 that Air Asia will use for its first flights from KL-London is leased from Air Canada so the seat configuration is no different to most. However, once Airbus delivers Air Asia's new planes, they will have one extra seat in each row, going from a 2-4-2 configuration to a 3-3-3 set-up. The result for passengers will be 1.25 inches less in seat width per passenger.

Only pre-ordered food available on-board - Azran reckons he can save up to $100 per passenger on a flight from KL to London by getting rid of food on demand. "Pre-ordering means we can manage our inventory better, with no wastage," he said.

Flying planes for longer - Air Asia flies it planes for 18 hours a day compared to 12/13 hours for a legacy airline. It achieves this higher rate of utilisation by flying at odd times of the day and having no regular daily schedule. "Our passengers are time insensitive and cost sensitive," Azran noted.

Lower pilots salaries - Rather than recruiting expensive expat pilots from the UK or Australia who demand handsome relocation packages and school fees for their kids, Air Asia uses mostly Malaysian pilots, many of whom are returning from lucrative spells working for Gulf airlines.

Shorter stopovers for cabin crew - the days when air stewardesses would get three or four days to recover and go shopping after a long-haul flight are over. Air Asia cabin crew will get one night in a hotel next to Stansted airport.

Fewer cabin crew - Air Asia will fly with just nine compared to 13 or 14 on legacy airlines.

Less toilet water - Air Asia noticed that on night flights people were only using 30pc of the water in the tank, so it reduced how much it was carrying to save weight and cut the fuel bill. But Azran assured me he has no plans to start charging for the toilet, which Ryanair's Michael O'Leary recently suggested he might do.

Deploying a limited number of aircraft types - Legacy airlines typically use many different types of aircraft, which causes their maintenance costs to soar and limits their flexibility. By contrast, Air Asia only uses the mid-sized Airbus A330 and A340. Airbus tried to sell Air Asia one of its double-decker A380 planes and Azran said that the airline could have made it profitable by squashing in more than 800 economy class seats on the KL-London route. However, his concern was that the A380 would be useless on any other route and Air Asia's costs would jump as it would need to employ specialised technicians and pilots to operate the A380.

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1 comment:

Anonymous said...

If you fly planes for longer times every day and keep your planes for longer, especially if you buy planes second hand, then you run the risk of equipment failure.

Air travel has historically been the safest way to travel due to the extensive amounts of time and money spent on safety. Budget airlines today are proving that they are willing to sacrifice passenger safety in exchange for an extra dollar or two.

So what you have is essentially Tony making 2 extra dollars and giving you back 50 cents in the cost of your fair. The only downside is you put your life on the line as part of his wager.

Worth it? Everyone has a price I guess