February 25, 2015 / 5:03 AM / 3 years ago

Malaysia's AirAsia X to cut costs, may defer plane deliveries: Acting CEO

An AirAsia X Airbus A340 passenger jet arrives on its inaugural flight from Kuala Lumpur to Paris Orly Airport in this February 14, 2011 file photo. REUTERS/Charles Platiau/Files

KUALA LUMPUR (Reuters) - Malaysia’s AirAsia X Bhd (AIRX.KL) will cut flights on unprofitable routes, reorganize staff and defer some aircraft deliveries to turn around the loss-making long-haul budget carrier, the airline’s acting chief executive said on Wednesday.

“Capacity reduction and cost-cutting within the organization would be two strategies this year,” Benyamin Ismail, the acting Chief Executive Officer of AirAsia X said in a telephone interview. Squeezed by intense competition in Southeast Asia’s crowded aviation business, the airline has lost money for the last five quarters.

Ismail was speaking after the long-haul arm of Asia’s largest budget carrier, AirAsia (AIRA.KL), reported its fourth-quarter net loss widened, hit by a weaker ringgit and charges from fuel contracts that sent shares sliding to an all-time low. Benyamin was named acting CEO for an indefinite period after former chief Azran Osman Rani resigned following a management reshuffle last month.

At 0230 ET, the shares had bounced back to be down 3.2 percent on the day, while the benchmark index was down 0.5 percent.

Hit with three disasters last year - the disappearance of Malaysian Airlines flight MH370, the same carrier’s MH17 shot down over Ukraine, and the crash of the QZ8501 jet operated by an AirAsia X affiliate in Indonesia - demand for air travel in the region has dampened, Ismail said.

But he expects business to pick up again in 2015, as the airline rolls out new promotions and fares to attract passengers. Ismail said the company is focused on returning to net profit in 2015, without disclosing a numerical target.

“In low-cost airlines, as long as you offer good fares, people will travel,” he said. “For AirAsia X there was slowness in January because we did not go out with marketing promotions or aggressive advertising out of respect for the families of those involved in the QZ8501 crash.”

EARLY PROMISE?

Kamarudin Meranun, the CEO of the AirAsia X Group of carriers, said in a separate interview that there were no plans for additional fund-raising after a $109 million rights issue that was announced in January in a move to bolster AirAsia X’s balance sheet - now closely watched by analysts.

“The key thing is the first six months. I‘m optimistic...the first quarter looks promising based on the early numbers,” said Meranun.

The official said he was hopeful that, after a setback earlier this year, approvals from Australian authorities for flights between Bali and Melbourne would be secured by mid-March. The plans were delayed when the airline failed to get clearance from Australia last time around.

Ismail said the airline may look at deferring some plane deliveries and selling slots to potential buyers. “If there are reasonable and keen buyers for those aircraft, we may sell the slots,” he said.

AirAsia X will also assess capacity requirements based on plane orders and deliveries coming up in the next few years, he said. This would include looking again at orders for Airbus Group’s (AIR.PA) A350 and A330neo jets, Benyamin said.

The carrier has 10 A350s on order and also ordered 50 A330neo aircraft last year. Ismail declined to give specific details but said the airline would focus on using A330neo for its operations.

The A350 was developed by the European aircraft maker at a cost of 11 billion euros ($13.5 billion) and is designed to compete with Boeing Co’s (BA)N> 787 and 777 models.

Editing by Kenneth Maxwell

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