AirAsia PH moves to Manila from Clark

AirAsia's decision to move to congested NAIA and leave Clark, which fits its business model of locating in secondary airports, is months and millions of dollars in the making



MANILA-BOUND. AirAsia flights will be from its new hub in Manila following decision to downsize operations in Clark. File photo by KD Suarez/Rappler

MANILA, Philippines – The Philippine affiliate of budget airline giant AirAsia is moving house.

From the sprawling Clark International Airport in Pampanga where the Malaysian parent has been operating since 2005, AirAsia Philippines is moving to Terminal 4 of congested Ninoy Aquino International Airport (NAIA), the country’s main gateway.

This was announced by Tony Fernandes, AirAsia Group CEO, in a tweet Friday morning, September 13.

“AirAsia Philippines is moving to Manila. More choice more value. The world’s best low cost airline going to NAIA,” Fernandes tweeted.

This announcement puts into question the viability of Clark as an airport primarily catering to budget airlines. It also highlights AirAsia’s decision to pour investments into Clark, which fits right smack into the budget airline model of locating in secondary airports that charge less fees.

Rationalizing operations

AirAsia’s decision has been months — and millions of dollars — in the making.

Since it commenced operations in Clark last March 2012, AirAsia Philippines has introduced routes to local destinations, hoping to catch international passengers flying in through parent AirAsia or other international airlines.

INFOGRAPHIC: How PH budget airlines change the game

With two Airbus A320 aircraft, AirAsia Philippines introduced destinations, like Kalibo, Davao, Puerto Princesa. Not long after, these flights were reduced. Eventually they were cut all together.

AirAsia then trained its eyes toward regional destinations, flying to Hong Kong, Macau, Taipei, Kuala Lumpur, Hong Kong and Singapore, among others. Some of these were eventually “rationalized,” too.

Three landmark events provided hints that AirAsia’s move to Manila from Clark was forthcoming.

3 landmark events

In March 11, AirAsia and Zest Air, which is owned and operated by the business group led by former Ambassador Alredo Yao, announced a share-swap deal.

The investors of AirAsia — Fernandes and the Filipino group led by Maan Hontiveros, Antonio “Tonyboy” Cojuangco Jr. and Michael Romero — acquired 85% economic interest and 49% voting rights in Zest Air. In turn, Yao received $16 million as well as 13% interest in AirAsia Philippines.

It was a marriage of convenience, as well as necessity. AirAsia has 2 Airbus aircraft in Clark while Zest Air has a fleet of 12 Airbus aircraft operating at the NAIA Terminal 4.

Zest Air badly needed an equity boost amid stiff competition in the local airline industry. AirAsia has deep pockets but need the traffic boost that a Manila hub would provide.

Then came August 16. In a surprise move, Civil Aviation Authority of the Philippines (CAAP) ordered the grounding of Zest Air’s fleet due to aviation safety concerns, which Zest Air countered.

READ: CAAP suspends Zest Air for safety violations

Costly suspension

The 4-day suspension was costly. It was losing around P70 million a day, a report said. Some placed the initial losses at around $10 million, excluding penalties other countries may impose.

Hontiveros, the AirAsia CEO, said ZestAir is facing heavy penalties from China and Korea for cancelled flights, and had to pay for the tickets of affected passengers booked with other airlines, as well as hotel accommodations.

“I intend to shore up resources to be able to support the operations of ZestAir. We intend to pump in additional investments into ZestAir,” she said but refused to divulge exact figures.

Zest Air then announced a rebranding, which includes painting its aircraft with “AirAsia” in classic red.

READ: Zest Air to be rebranded 

‘Apprentice Asia’ star

Not long after, the AirAsia executives, led by Fernandes, made a courtesy call to President Benigno Aquino III in Malacañang. AirAsia’s Cojuangco was in that meeting. Cojuangco is Aquino’s cousin.

Fernandes and his team also called on Transportation Secretary Joseph Emilio Abaya. CAAP and other aviation body report to the transportation department.

It was just a month after Fernandes’s business reality show, “Apprentice Asia,” wrapped up. Fernandes has chosen the Filipino go-getter Jonathan Yabes as the winner over the Singaporean finalist.

READ: Filipino Jonathan Yabut wins ‘Apprentice Asia’

Fernandes revealed his plans to put up a hub in Manila to Aquino and Abaya, Wyrlou Samodio, Civil Aeronautics Board head for legal affairs, confirmed this to reporters on Thursday, September 12.

Decision day

On Tuesday, September 10, AirAsia Philippines’ board met. The decision has been made: AirAsia will be moving flights to Manila. The die has been cast.

“The directive to me by the board of AirAsia is to cut further losses in AirAsia Inc. Philippines. The direct losses arising from the suspension of the operations of ZestAir which is very sizeable,” Hontiveros stressed.

On September 12, AirAsia announced it is winding down its Clark flights.

READ: AirAsia Philippines suspends some Clark flights

Fernandes said this is not AirAsia’s goodbye to Clark.

“Clark routes will be temporarily suspended. We will be going back to Clark,” Fernandes clarified.

The Clark–Hong Kong flights would resume on Dec. 20 in time for the Christmas season. – Rappler.com

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