AirAsia Take on the Filipino Industry

Asia’s largest low-cost airline, AirAsia Berhad, is out to rock the Philippine airline industry.

AirAsia chief executive officer Tony Fernandes was in Manila on Thursday to formally announce that his Malaysia-based airline has formed a joint venture with Filipino businessmen to form AirAsia Philippines, a local airline that will go head-to-head with local airlines, including Lucio Tan-led Philippine Airlines, Gokongwei-led Cebu Pacific Air, and other players.

AirAsia Philippines is a joint venture among AirAsia Berhad (40% stake), and Filipino business personalities, including Antonio Cojuangco, Marianne Hontiveros, and Michael Romero. The Filipino partners will each have a 20% stake.

The new venture, Fernandes said, aims to improve access to the Philippines, an archipelago that is reached by a fraction of tourists who visit Asia.

“The Philippines is starved of connectivity,” remarked Fernandes who said he had to use a spare AirAsia plane to Manila for the Thursday press conference. “It is painful to come to the Philippines. There is a massive amount of connectivity that is required here.”

More players in the airline business, he said, will bring down costs, and ultimately, lower air fares. “Your OFWs will benefit, too.”

The AirAsia Philippines officials said they hope to start operations in August or September 2011.

Initial plans include expanding their regional routes and increasing the number of short-haul flights, or destinations that are less than 4 hours away. Domestic flights are also in the drawing board.

AirAsia Philippines will take over the current operations of AirAsia, which is considered a foreign airline subject to strict bilateral air rights made available by the Philippine government and other destination countries.

The Malaysian airline has been operating at the Diosdado Macapagal International Airport in Clark, Pampanga since April 2005 but has failed to expand operations due to regulatory restrictions.

Fernandes, who has envisioned that AirAsia will dominate the Asean skies, said it has taken them years to roll out their plans mainly due to regulatory restrictions.

AirAsia Philippines is the third cross-border joint venture of the budget carrier, next to Indonesia AirAsia and AirAsia Thailand.

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