Annual Report 2019

Management Discussion & Analysis (CONT’D) BUSINESS REVIEW AIRLINES Despite irrational pricing by competitors in Malaysia, a drop in inbound Chinese tourists, and strengthening of the THB, we grew our capacity by 14% and flew a total of 83.5 million guests in the year, 14% more than in 2018. A highlight was to welcome our first Airbus A321neo aircraft, which offers a 27% to 31% increase in seat capacity while providing more than 10% in fuel savings. At the same time, we are gaining greater support from airports across the region for our low-cost business structure. In September, AirAsia Japan began operating at the new low-cost carrier (LCC) Terminal 2 in Chubu Centrair International Airport. In Malaysia, after some years of terse negotiations with Malaysia Airport Holdings Berhad (MAHB), we are beginning to see a willingness to collaborate and iron out operational issues. Working groups have been formed as we seek further cooperation in accommodating our needs as an LCC, and to enhance the passenger experience, not just in klia2 but all over the country. Overall, it was a positive year for our Airlines business with particularly remarkable improvement in the Philippines and Indonesia. AirAsia India also strengthened its position as it awaits being licensed to fly international. AirAsia Malaysia A key achievement for AirAsia Malaysia was to gain further ground within the country, ending the year with no less than 60% of the domestic market share. That this was achieved on the back of stiff competition and irrational fares made it all the more heartening. AirAsia Malaysia also welcomed the new Airbus A321neo aircraft in November 2019, enabling us to meet demand for popular routes with greater seat capacity, while potentially introducing exciting destinations that are a five-hour flight away, leveraging the engine’s enhanced fuel efficiency. AirAsia Thailand AirAsia Thailand was affected by dampened tourism due to the strong THB. Using the lull as a window of opportunity, the team embarked on an ongoing route and capacity rationalisation programme, which contributed to a strong load factor of 85%. AirAsia Indonesia After a challenging 2018, AirAsia Indonesia soared to greater heights in 2019 with a significantly stronger presence domestically. A key achievement was the opening of Lombok as a new hub, after Jakarta, Medan, Surabaya and Bali. The decision to focus on Lombok followed the spate of earthquakes that affected tourism to the island. Lombok is now connected to Perth, creating a unique route to tap into the Western Australia market which has been contributing significantly to Bali for many years. We believe Lombok’s success can be replicated in other destinations across the country. Having identified the need for more connectivity in East Indonesia, this will be given priority going forward. AirAsia Philippines Our associate in the Philippines delivered robust performance in 2019, despite a series of earthquakes throughout the year. It successfully grew its network to cover, among others, Osaka, its first destination in Japan. We are currently in discussion with key authorities, advocating expansion of domestic airports to overcome various constraints and to enhance efficiencies in slot scheduling. This would enable us to meet our target of flying into more tertiary cities. Welcomed our first Airbus A321neo aircraft boasting 31% increase in seat capacity 84 MORE THAN JUST AN AIRLINE >