Tony Fernandes claims AirAsia debts to Malaysia Airport Holdings Bhd settled

“AMOUNT OWED TO MAHB SETTLED” so say Datuk Seri Tony Fernandes, the AirAsia Group chief executive officer. (See page 39 NST, 29 August 2008)

I am really glad to read such good news for the country that AirAsia has settled its debts with Malaysia Airport Holdings Bhd (MAHB).

Datuk Seri Tony Fernandes has been quoted to have said “We have reached an amicable resolution with MAHB. We have paid the agreed settlement amount to MAHB and accordingly taken credit for the disputed cost items ruled in our favour. ”

Unfortunately,  Datuk Seri Tony Fernandes chose not to disclose the so-called settlement sum.  Quite frankly, I don’t understand the secrecy of the so-called settlement sum after all the Minister of Transport had already told Parliament that AirAsia owed MAHB RM110.36 million since 2002.

Below is the question I posed to Parliament for the Minister of Finance to answer with regard to AirAsia’s debts to MAHB.

Tuan Wee Choo Keong [Wangsa Maju] to ask the YB Minister of Finance to state why the Ministry did not instruct MAHB to take legal actions against AirAsia for not paying its debts totaling RM110 million, which includes Airport Taxes that have been collected from the passengers, and why MAHB did not stop AirAsia from using the LCCT until full payment of Airport Taxes are made like what MAHB did to Pelangi Air previously.

I am still waiting for a reply, which will be forthcoming in October 2008.

It was most surprising that the Minister of Finance had to involve itself in a private debts between a listed company (AirAsia) and MAHB, a GLC. If this is the practice, then the Minister of Finance should start to involve himself to settle income tax disputes between Jabatan Hasil Dalam Negeri and individuals. This will be a good start for the Minister of Finance. I would like to advise all those who owed Income tax or other taxes to refer to the Minister of Finance II to settle the dispute.

I am very certain that the sum owed by AirAsia to MAHB comprised mainly of Airport Taxes and not service charges as claimed. MAHB does not provide services as such. There is another company, which is providing all the services. The question should be asked how could AirAsia owe such a big sum of Airport Taxes, which it has already collected from the passengers.

AirAsia can sign whatever secrecy agreement with Tan Sri Nor Yakop, the Minister of Finance II. I shall pursue this when Parliament sits from 13th October 2008.


  1. AirAsia I am sure could get away with this debt for so long is because there is a strong cable to Badawi. How else does one explain this preferential treatment.

    For the rest of us we would have to pay a heavy fine or go to jail.

    YB Wee, please dig deep into this shenanigan and I am sure you’ll get the truth.

    Selamat berkhidmat YB. Thank you.

  2. Oh come on YB Wee, I enjoy reading your blog a lot but what’s with you and your whole conspiracy theory behind airasia?

    I still don’t get it la. If TF and Airasia was that powerful, how come MAS still gets preferential treatment over them? It seems like TF’s been trying to get more flights to Singapore and an LCCT for themselves for ages now. I really think he would have got it if he was that tight with Bodohwi.

    As for their debts to MAHB, didn’t they already break it down in detail and explain the debts? Good to hear they’ve reached an amicable settlement on the debt, it was ridiculous for Airasia to pay the same service charges at the LCCT as in KLIA, they’re like two completely different worlds!

    I can’t stand the LCCT, it’s almost like a bus stop if compared to KLIA!

  3. The issue is not that simple. Don’t forget that AirAsia was granted the rights to fly into S’pore at MAS expense. Why can we protect a national carrier and let FireFly the rights to S’pore before AirAsia ?

    Remember the press statements by Datuk Idris’s when the routes for East Malaysia was dump to MAS ? Wasn’t it this particular routes that got the license or negotiation going for AirAsia as MAS was making huge lossess then. Finally, what was the outcome ? AirAsia just dump it back to MAS and the worse part was the even those planes that was in good conditions was stripped of parts and what not. MAS has to bear the repairs to get those planes going and the cost to taxpayers goes into the millions.

    I do occassionally fly AirAsia for short distance and since we pay less than the shabby LCCT service is to be expected. But separate the two by hard facts and if AirAsia still owes MAHB money, than it is only fair that it be settled in full and nothing less as they were also using KLIA initially. Otherwise, again the taxpayers will be suckers if MAHB will to run into red and needs bailout. As for me, paying taxes is already a burden and let not others take advantage of it.

  4. The rural air services is a loss making operation that MAS wanted no part of with the limited subsidies that the govt were giving them. No wonder they tried to dump the services onto airasia. From what I heard, MAS was just as resposible for the planes being returned to them in a bad condition, they never provided airasia with service histories and this forced airasia to change parts from one plane to another to keep them running. No wonder they were returned in worse condition, the whole thing backfired for MAS!

  5. Lets look at the issue properly. Until today Tony Fernandes and his good friend friend, Tan Sri Nor Yakop, dared not deny that the debts of RM110 million owed by Airasia (from 2002) was Airport Tax.

    I have been informed by the people in MAHB that the debts was of RM110 million was for Airport Taxes. For a start, how could a private company owed Airport Taxes, which it has already collected from its passengers when they purchased the tickets online. We all knew that Airasia was running very high since 2002 until March 8th. It was YB Wee, who kept pursuing this matter in Parliament that we suddenly heard Tony said the debt has been settled but the settlement sum sum is of “national secret”. What a buill shit!
    It is only a secret when there is hanky panky in the settlement. I can waqit to hear what the Minister of Finance had to reply to YB Wee’s Parliamentary question.

    I am certain that if YB Wee didn’t pursue this matter in Parliament, the debt of RM110 million had to be absolved by the rakyat i.e. written off most probably.

    I agree with YB Wee that those who have problems to pay their income tax or other taxes please call up Tan Sri Nor Yakop to negotiate for settlement.

  6. I know that the RM110 million airasia owed MAHB was mainly for airport taxes. Tony please stop bullshitting ok. MAHB provide no services. Services provided by another company. The Mp was right and he know his facts. Tony stop f…g around. Stop using your friend’s newspaper, the NST, to do propaganda for you. I thought that you want a “LEVEL PLAYING FIELD”.

    You only want a level playing field to mess around with the airport tax. I think that MAHB should stop allowing airline like aiorasia to collect airport tax on its behalf. MAHB should collect heir own airport tax.

    I am still very surprised how Airasia has the capability to owe airport taxes up to Rm110 million since 2002!!!!

    Tony should be awarded with the world’s best CEO! He is best best because his company can owe MAHB for the airport taxes that it has collected.

    Tony please teach other Malaysians to owe taxes too!

  7. Dear YB Wee,

    Please pursue the matter until the whole truth is made known to the rakyat.

    Airport tax has already been paid in cash/by credit card by passsengers to Airasia. Airasia is just a collecting agent. Presumably they may deduct a small fee for being the collecting agent but the rest they must pay immediately to MAHB. It’s just downright unconscionable and absolutely inexcusable for Airasia to hold on to the cash and presumably divert it for their own use.

    There was a posting that said MAS has preferential treatment over Airasia. That’s simply untrue. Because of the ‘cable’ that the latter has to the Badawi inner circle, it’s Airasia that has been receiving preferential treatment. The ‘settlement’ mentioned by Fernandes may well be one such instance. MAHB holding legal action back is another.

    Any settlement that involves the public bearing the burden would mean taxpayers paying tax twice. In the interest of transparency and accountability, this must be disclosed.

    I’m all for a level playing field but people who cry and shout for a level playing field in public but in private use their political connections to ‘unlevel’ the field in their favour and at the expense of taxpayers and the public are nothing but hucksters and ought to be exposed as such.

    YB, please do not let those hucksters within and outside the government get away with it in this Airasia-MAHB debt issue. The truth must be made known to the rakyat! And if the stinking mainstream media refused to carry any report of the matter, hey! there’s always the Internet.

  8. YB,
    We very like your guts and don’t let them go on this.

    Already air Asia announce their recent results and show profit of 9million. Actually it is bulshit. They actually make loss 48 milion. They still saying govt allowances (like our personal allowances for tax) given to them is profits so got 57million profit lah.

    So 48 million loss covered by 57 million bulshit profit, you get 9million profit lah.

  9. I fully agreed with you all. Airport Tax had to be paid to MAHB without negotiation. The reason being that the passengers have paid the Airport Tax in advance and Airasia is just an agent for MAHB.

    My question is: How could Airasia could owe airport taxes?

    The Airasia debt is another scandal for the BN under Bodohwi!

    YB Wee choo keong you must not left stones unturned. You must dig this airasia nonsense! As a Bumi I would not like to compromise based on race.

    What is wrong is wrong and there is no two ways about it.

    Tony should tell us whether the airasia’s debt was about the Air[port Taxes that it has collected on behalf of the Bodohwi government!

  10. Air Asia also owes others: Petronas (for fuel), Caterers and MAS. I dont thinks any other company would have gotten away with this. YB please check this “rumour” – that there is some pressure to Khazanah to force MAS to take over Air Asia!

  11. Valerie,

    You are spot on with what you have stated. I will not at all be surprised if there is a bail out plan somewhere!

    Of course, Airasia has yet to pay its debts with Petronas for fuel, caterer and MAS. We all know that. It is for that reason that we have to salute Tony Fernandes, who is a good friend of YB Tan Sri Nor Yakop (2nd Finance Minister) and Datuk Kalimulllah, to be able to owe MAHB for Airport Taxes since 2002 and MAHB was afraid to take action until YB Wee highlighted it in this blog and Parliament.

    Corporate boys should take a crash course from Tony Fernandes on how to taxes to MAHB since 2002 and Petronas both are GLCs and the GLCs were afraid to recover the debts.

    Tony Fernandes should have also been awarded CEO of the year in Singapore and he can also start to teach Singapore corporate boys how to owe taxes to Singapore!!!

    To me, I will fight for Tony Fernandes to get his “:level playing field” so that airasia can owe more debts and the GLC has no balls to touch airasia.

    YB Wee please pursue this matter until the truth prevail.

  12. Settling a debt in secrecy is a fantastic joke!! why such a secrecy? Too much discount eh?

    Tony, please do not be so selfish. please teach us simple Malaysian how to owe taxes. of course, mine is much easier because t is only about RM30,00o a year unlike airasia RM110 million. So RM30,000 would be so easier for you, Tony. please advise. If possible i would like to owe for at least 6 years like airasia owing MAHB airport tax since 2002.

  13. Come on Tony. Stop kidding us lah.

    The fact YB is able to penetrate your lies, now you say every thing settled but P&C. What, you think we stupid ah!

    Sooner or later we will expose you lies and abuse of government resources throgh your pally wally relationship with all the so called government officials who are supposed to take care of country’s wealth.

    Shame on you all.

  14. Wee

    Boleh demo investigate berapo banyok duit passengers yang cancel flight tapi AirAsia simpan(airport tax dsb). kalu nok claim balik,jangan haraplah sebab dapat sikit sajo dan kena pergi ke LCCT baru boleh claim.Soalannya kalu bayar melalui internet(credit card) kenapo tak boleh refund melalui credit card.

    Terima kasih

  15. nik class of 69

    Keno doh. Kalau kita cancel flight Airasia boleh rampas harga flight dan ia perlu refund airport tax sebab kita belum masuk ke dalam departure hall.

    I will take this up with Minister of Transport. By right, Airasia should give an automatic refund because Airport Tax is to be paid to MAHB and not Airasia.

    Thank you for reminding me. I shall pursue this for you, sdr Nik.

    I do not think majority of the MPs will support a bail out. I will definitely oppose a bailout of any private company by GLC or any other government organisation. Private company should remain private and run their business without any form of subsidy, direct or indirect.

    Thank you and other readers for joining us to discuss matters of public interests.

  16. Yes, YB WEE, please pursue the refund of airport tax of those, who have paid to Airasia and have canceled their tickets or didn’t fly.

    Thank you nik class of 69 for highlighting here. I am also one of the many victims. Airasia should do an automatic refund now before this matter hit the fans.

    Tony Fernandes, who always want us not believe that he is an extremely straight businessman, and I believe him wholeheartedly. Now that this matter has been highlighted, the Straight Tony Fernandes should now instruct Airasia to refund those Airport Taxes on forfeited tickets to its customers.

    It is as easy as ABC, all Airasia needs to do was to credit back those unused Airport taxes to its customers via the customers’ creidt records that it has.

    So let see whether the “Straight Tony Fernandes, will refund cost of the Airport Taxes.

  17. I am surprised why is Tony Fernandes is not teaching us how to owe taxes and at the same time gets all the benefits from the Sleepy Head government.

    There is no doubt that Tony Fernades is a genius in the aviation industry. Airasia can owe Airport Taxes since 2002 where no other airlines could not even dare to dream about it let alone do.

    Tony is damn selfish because he is not telling us the tricks.

    Since Tony is not helpful let me try to drop a simple question and I hope Tony will answer:

    Does knowing Tan Sri Nor Yakop, the Minister of Finance II, will help us to owe taxes with impunity? All I need is a yes or no answerlah Tony? If yes, the I will work on getting someone to introduce Tan Sri to me.

  18. Why is Tony Fernandes is so quiet? Ministry of Finance should not allow itself to be used by private companies or individuals at the expense of the rakyat.

    Why the Ministry had to lean over backward to entertain Airasia, when it didn’t give a damn about Pelangi Air, which is having the same problems as Airasia i.e. owing Airport Taxes.

    The Ministry of Fiance should have taken action against MAHB for allowing Airasia to owe Airport Taxes since 2002. Why was the so-called settlement between Airasia and MAHB had to be a secret? The Ministry of Finance should know that it is dealing with public fund and therefore, there can not be a secret when you are dealing with public fund.

    The Minister of Finance should also be sacked for not looking after the GLC like MAHB.

  19. As a businessman, if I took 110 M and invested it in a conservative investment at 6% compounded annually over 6 years, I would end up with around 9M! That buys alot of Mercedes and other toys.

    Why dont you ask Bank Negara for a copy of the payment AirAsia “secretly” is aleged to have made? I mean…after belongs to the people of Malaysia. Actually, if you read the words of TF..he said the amount owed was “setteled”. Again, as a businessman, I may tell one of my customers…”your debts are setteled” which may mean NO PAYMENT at all.

    If the finance minister cannot produce the actual audited transaction trail of payment from AirAsia to the Malaysian Treasury, then there should be reason for parlimentary removal and prosecution of the individuals involved.

    Lets take emotion out of it…and use the law to force either transparency or resignations and criminal prosecutions. Otherwise, how does anything ever get better?

  20. And on another matter. TF states in the BT, that the amount “settled” with the MAHB was subject to a non-disclosure agreement.

    While this may be the case privately, the amount paid to the government, if any, must be reflected in the AirAsia quarterly filing with the KLSE as an “extraordinary or other charge”. If AirAsia does not include the payment (if any) to MAHB in their next quarterly filing (it was not included in the 28 August 2008, apparently), then both AirAsia and their auditing firm will be in violation of Malaysian accounting standards as well as numerous other international accounting standards (Sarbanes Oxley) which they are required to adhere to since AirAsia has international institutional investors.

    Accordingly, I would suggest that the YB make a formal request of AirAsia regarding the payment (if any) made, and if AirAsia is not forthcomming with the details and does not include the amount (if any) in their next quarterly filing, the YB should initiate formal KLSE delisting procedures with Bursa Malaysia.

    Seriously, nothing ever gets better unless we demand change. We are only asking for an accounting of 110 Million RM owed to the beloved taxpayers of Malaysia.

  21. YB Wee,

    If indeed the said amount had been settled with MAHB and subject to a ‘NDA’, then this cannot be allowed. Continue to bring it up in the Parliament or get PAC involved to check into this as repayment MUST be reflected in the book. It cannot simply vanish into thin air.

    Why do it so secretly ? For sure there are biased decisions that are not pleasing and not to be known. The more they try to hide, the more the public wants to know as it is the tax payers that will ultimately suffers. We care not what ‘cables’ they uses but in business, do it with clear conscience and not try to con us with ‘creative accounting’ by taking the profits not from business but from tax payers.

  22. No Name you are absolutely right in your approach. We should insist on the Minister of Finance II, who is a friend of Tony Fernandes, to reveal what concession the Minister has given to Airasia.

    Non Disclosure Agreement, what a bullshit! Owing Airport Taxes for 6 bloody years and when it is settled Tony Fernandes said it is top secret due to the special agreement.

    I just could not believe that settlement of tax owing to the government can be secret. Tony, fort a start you are not supposed to owe any Airport Tax because the Airport Tax had already paid by the passenger to Airasia in advance.

    If there is any dispute it has to be between the passengers and MAHB and not Airasia, who is just an agent to collect the said tax.

    I hope that YB Wee will be taking up the points raised here and give Tony and his Airasia a good run for his money.

  23. Tan Sri Nor Yakop, the Minister Finance 2, should come out in the open and tell the public how much did Airasia pay MAHB on the Air[port Tax debts.

    Tan Sri Nor should also tell us why MAHB did not pursue the RM110 million airport tax debt for 6 years (since 2002).

    I remember I have read about airasia also owed MAS for services and Petronas for fuel. Tan Sri Nor, please don’t tell us that the Minister of Finance had to negotiate with Tony Fernandes before airasia pays!

    I hope that the Auditor General will look into the accounts of MAHB, MAS and Petronas.

  24. ahamd, I agree with you and the other bloggers.

    If TF/Finance Minister do not reveal the not just amount agreed…but what was actually paid….then all of us should check their Bursa Malaysia filing and their report to investors. Becasue if they do not show the payment, then that is violation of law and they can be forced to restate their report and the accounting firm/auditors can aslo face penalty.

    Having said that…if I was doing the books for them, I would attempt to mask the payment to MAHB in other amounts if I realyl wanted to hide it…but still….accounting regulations require that extraordinary charges be explained…and since the alleged 110M RM owed is more than their profit for last quarter…it has to be explained in their filing…I urge all readers to keep a close eye on the next financials from AirAsia.

    On another note, my concern for this is as an investor…I want to know as much about where my money is going. If you look at AirAsia stock, it is lower now than three years ago when they did their IPO. Yet all the “happy talk” from TF and company would paint a different picture. I mean, the reason his stock and value of his company is in the “crapper” is that most institutional investors outside of Malaysia done take him seriously. He speculates in Fuel Hedges, he orders hundreds of plans and then does not take them, he has been loosing money in Thailand and Indonesia since the start, and the only reason he makes money in Malaysia is becasuse aside from MAS, he has no competition. Look at Thailand, there are at least 4 LCC airlines there….they all have to compete….no so in Malaysia for AirAsia.

    What is sad to me is that AirAsia had the opportunity to be the shining star for Malaysia and the possibility of being a real aviation hub….but becasue of TF and all the “back room bargains” I think that “shining Star” has lost its twinkle.

    I really want Malaysia to succeed…and sometimes that means being tough on execs like TF to make them better.

    Sorry for the blah blah blah……just want things to be better!

  25. Dear All Readers/Contributors and Supporters

    Thank you so much for your comments/inputs on the subject on AirAsia’s settling its debt to MAHB. I shall pursue this matter in Parliament i.e. question Tan Sri Nor Yakop (Minister of Finance II) and the Prime Minister/Minister of Finance even though the debt was settled in secrecy! I shall be writing officially to MAHB too.

    Settlement of a debt of 6 years old between a listed company and a GLC like MAHB in “SECRECY” is unacceptable.

    Malaysians have a constitutional right to know on how and when RM110 million was allegedly settled by way of negotiation involving the Minister of Finance.

    Beside the details of the so-called settlement, I would like to know when the actual payment was made by AirAsia to MAHB. It must be noted that the word used in the news report was “settlement” and not “payment”.

    Lastly, I do value all your comments and they have been extremely helpful for my research.

    To my Muslim brothers and sisters, may I take this opportunity to wish you all “SELAMAT BERPUASA” and to the non-Muslim have a pleasant weekend.

    Lastly, a big THANK YOU for all your valuable views.

  26. Amazing! for 6 years Airasia was allowed to owe MAHB of airport taxes totaling RM110 million with former Minister of Transport and MPs not bothering about this debt. How could Airasia do it?

    No wonder Tony Fernandes received the award “CEO of the year”. Tony should have been awarded CEO of All Times because no other organisation can owe taxes to the authority with no problem.

    With Airasia’s example: Now Everyone Can Owe Taxes!”

  27. I hope that the Pakatan Rakyat will take up this issue in Parliament. We had to do something to stop such abuse. How can a company owed Airport Taxes since 2002?

    What were the officers in MAHB and Ministry of Transport/Finance doing all these while? Gaji buta?

    YB Wee, you must pursue this matter and not allow people closed to the administration to take advantage of the system.

    YB Wee you must make this Sleepy Head Government to demand for INTEREST on the sum owed by AirAsia. 8% interest on RM110 million or RM60 million as admitted by Tony Fernandes will come to many million Ringgit. Make AirAsia pays for the INTEREST as it has indirectly benefited from the debt.


  28. Interesting read for a common layman. Now the next question we got to ask ourself is that, ‘Will it be something like Transmile Bhd.’ in the near future… this we all got to wait and see… history will soon to be written, and we will live to see it. Cheers! And keep up the good work, YB Wee.

  29. Airaasia settled its debt with MAHB, my foot! Settled by the big mouth!

    My source told me that Airasia did not pay off its its Airport Tax debt with MAHB which Tony Fernandes has purportedly said that it has settled with MAHB.

    Tony Fernandes should stop talking and just pay up the airport taxes, which airasia has collected in advance, without further ado.

    Why the Minister of Finance had negotiate with airasia on airport tax debts which the passengers had paid in advance.

    It would appear that the Minister of Finance has a special interest in airasia!!

    The Sleepy Head is just a useless PM who allow such matter/debt tom carry on for 6 years. And until this date, the Sleepy Head is still not instructing MAHB to take immediate to recover the debts.

    The Sleepy Head must go and go now!

  30. I know that Tony used his mouth to settle the RM110 million airport tax debt to MAHB. From what I know Airasia has not settled the RM110 million or the RM60 million that Tony has admitted owing MAHB.

    What I do not understand like so many Malaysians is: Why must the Minister of Finance had to be involved in a private debt between a listed company and GLC?

    Hello! Tan Sri Nor Yakop, why are you so interested in Airasia? Please explain.

  31. Tony Fernandes is nothing but a con, a sham and a fake.

    From day 1, AirAsia did not make money as claimed.

    All this while Tony Fernandes has been fudging the books and manipulating the system as a crony to hoodwink the public and make a killing in the stock market personally.

    The high confidence level of AirAsia by the general investing public in the early years is a result of a clever blend of make-believe, image glossing and feel-good pandering.

    CEO of the year. What a laugh. Like Datukships that can be bought in a ‘willing buyer, willing seller’ situation that title of Tony Fernandes’ is paid for many times over with ‘you scratch my back and I scratch yours’ transactions.

    Today AirAsia is a hot potato and the radiation from the heat is terminal. Just watch Tony Fernandes wing a BAILOUT by getting his cronies force MAS to take it over.

    It will be another case of the rakyat and taxpayers getting sodomised one more time!

    Tony Fernandes. Now you can fry.

  32. Yes, why is the Minister of Finance is so concerned about airasia.

    Tan Sri Nor is a good minister, who cares about company. Unfortunately he cares for one company. I hope that he will care for thousand of companies and individuals that owed taxes.

    Tan Sri Nor the whole nation know why you are concerned about Airasia.

  33. YB, MAS has gone ahead to confirm orders for Boeing and willnot therefore bail them out. Understand that there is an order of still 80 units of airbus through a ‘broker’ with letter of guarantee from MOF. So how? who is going to bail out now? Rakyat again? Not another port klang please.

  34. yb,

    saya dulu beberapa kali cancel flight airasia sebelum tahu yg airport tax boleh direfund. selepas tahu boleh direfund, tak tahu nk minta refund di mana dan masalah besar skrg tak simpan intenary copy

    boleh tak minta refund melalui ic no?

  35. I had and would never fly LCC due these LCC people are all suicidal.
    See articles below.

    The Engineer.

    “I know Malaysians very well,” said Fernandes, a native of Malaysia. “If you put a fare low enough, they’ll risk their lives,” he said, as the crowd laughed. Conference of discount airlines

    Low-cost air carriers boast of doing better than industry

    Wednesday, September 24, 2008 6:50 AM By Marla Matzer Rose
    COLUMBUS DISPATCH LONDON, England – Airlines will continue to either fail or combine in response to higher oil costs, but low-cost airlines are here to stay, a panel of top airline executives led by Southwest Airlines founder Herb Kelleher told an industry gathering in London yesterday. Addressing the World Low Cost Airlines Congress, the outspoken Kelleher decried a “cartel” that he said has pushed oil prices artificially high. He estimates that 90 percent of the world’s oil is controlled by governments.At the same time, he said the shakeout the industry has endured this year is simply the “fruition” of the deregulation of airlines by the U.S. government 30 years ago.”I think it’s finally spinning itself out,” said Kelleher, who co-founded Southwest in 1971, before deregulation. He said the problems are marked by the coming of “more specialization, fewer carriers” and flight cuts in the industry.Countering those who think that low-cost carriers are most at risk in an economic downturn, Kelleher said that the major, so-called legacy airlines are the ones that have shown signs of struggle by adding fees, taking away services and cutting routes.”Legacy carriers have (cut capacity) 15 to 17 percent in markets where they compete against Southwest,” Kelleher said.This pattern has been witnessed at Port Columbus, where top carrier Southwest has held steady while airlines such as Delta and American have slashed service.As for business travelers, Kelleher said that most U.S. businesses are “cutting back dramatically on what they spend for transportation,” a trend that he said favors Southwest.Howard Millar, deputy chief executive and chief financial officer of leading European budget airline Ryanair, also insisted that strong low-cost airlines can capitalize on bad economic times.He said the conference, which attracted about 600 people, was evidence of that, because if people had tried 10 years ago to hold a conference of so-called low-cost airlines, “men in white coats” would’ve come to take them away.”People trade down. Low fares are here to stay,” said Millar, who is second in command to CEO Michael O’Leary at the Irish carrier.Despite his optimism about low-cost carriers, Millar sees tough times ahead in the industry.”Airlines are going to fail this winter,” he said. “They don’t generally go out of business in the summer. The fact that several airlines did means they’re going to be struggling even more in the winter.”Millar predicted that in 10 years, Europe will have just three major carriers – based in Germany, France and Britain – and just two low-cost airlines, Ryanair and United Kingdom-based EasyJet.Tony Fernandes, CEO of AirAsia, said a key difference between his airline and Southwest is that while about 85 percent of the U.S. population has flown, he has an emerging, untapped market of hundreds of millions of people in Southeast Asia.Kelleher quipped in response that he is going to start flying in Asia.Fernandes said oil costs are just the latest challenge his 6-year-old airline has faced. “We’ve had SARS, bird flu, tsunamis, earthquakes,” Fernandes said.He said that while other airlines cut advertising or flights in the wake of such threats, he decided to step up.”I know Malaysians very well,” said Fernandes, a native of Malaysia. “If you put a fare low enough, they’ll risk their lives,” he said, as the crowd laughed.All three men said it would be hard for a true low-cost carrier to join with a major airline to offer shared flights because of differences in business culture and operations. Kelleher said he has had several discussions with legacy carriers over the years, but the talks all ended when it became apparent that “they wanted us to become like them.”Even as the executives gave bullish outlooks for their companies, they stressed it’s a tough business.Kelleher, who was also accepting a lifetime achievement award at the conference, said the airline industry is historically risky and prone to losses. He said anyone who went into the “one surviving bank” today looking for money to start an airline would probably get thrown out onto the street.Asked whether he was planning to start another airline, Kelleher joked: “If the thought entered my mind, I’d buy a pistol.” Source:

    AirAsia to privatise?
    Monday, 13 October 2008
    The proposed delisting of Malaysia’s AirAsia has prompted questions on how the carrier’s major shareholder Tune Air will fund the privatisation and planned aircraft purchases. Malaysia’s Star newspaper estimates it will cost AirAsia parent Tune Air about MYR2.2 billion to delist AirAsia. AirAsia also is expanding and taking delivery of more aircraft at a time when experts are warning that the “next 12-18 months will be extremely difficult for Asia Pacific carriers.” The Association of Asia Pacific Airlines has predicted that some airlines will not survive the current crisis and it is extremely cautious about the prospects of the airline industry in 2009. Since the oil spike, about 26 airlines – including some low-cost carriers in Asia – have gone bankrupt. AirAsia has ordered 175 aircraft with 50 more under option. To date, AirAsia has taken delivery of 45 A320s, with six more coming later this year, 14 next year and 24 in 2010. Funding has been arranged for 60 aircraft purchases until June 2009. The newspaper says an unnamed analyst who tracks Airasia stock says the carrier needs about MYR4 billion to fund aircraft purchases from July next year to December 2010. Another unnamed analyst was quoted saying he believed banks might be more reluctant to finance aircraft purchases due to funds squeezes and pressure on aircraft values. “AirAsia would have to bear higher interest costs on future loans to reflect rising credit spreads … a weaker ringgit will make US dollar-denominated acquisitions more expensive than previously anticipated,’’ he wrote in his report. -Jack Handley

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