AirAsia Zest realigns operations amid overcapacity in PH market

MANILA – AirAsia Zest has realigned its operation because of over capacity in the domestic market.

In a disclosure to Bursa Malaysia, AirAsia Berhad said its Philippine unit has revised its route plan, reducing the number of aircraft to 14 in order to “remove excess capacity from domestic routes while building more international routes out of Manila and Kalibo.”

“Kalibo, with the famous Boracay Island, has been positioned as a hub to enter into Southern China and Korea which are lucrative international markets,” AirAsia said.

The airline is supposed to end this year with a fleet of 16, with the Malaysian parent firm providing the two aircraft that its Philippine affiliate will use.

According to a source from AirAsia Zest, the airline suspended its Bacolod and Iloilo flights last year and will reduce its Davao flight frequency to six flights a week from seven.

The source said AirAsia would focus on international flights, which is more profitable, adding that the airline has a pending application with the Civil Aeronautics Board to increase its Macau flight frequency to daily flights from the existing three times a week.

AirAsia Zest recently launched new flights from Manila to Miri and Macau, from Cebu to Kuala Lumpur, and from Kalibo to Shanghai.

AirAsia Zest’s domestic passenger count fell by 3.5 percent to 1.99 million in 2013 from 2.06 million in 2012.

AirAsia Zest however enjoyed a 94 percent increase in international passengers to 617,188 last year from 324,237 passengers in 2012.

AirAsia Inc holds an 85 percent economic stake and a 49 percent voting interest in Zest Air, which in turn owns a 15 percent stake in the former.

AirAsia group owns 40 percent of Philippines AirAsia Inc. The remaining 60 percent is held by Marianne Hontiveros, Michael Romero, Antonio Cojuangco and former ambassador Alfredo Yao.

The Centre for Asia-Pacific Aviation (CAPA) earlier warned of overcapacity in the Philippine domestic market because of “too many” low-cost carriers, resulting in losses for budget airlines other than Cebu Pacific.

The Philippines’ has a penetration rate of 84 percent, higher than Thailand’s 58 percent, Indonesia’s 57 percent, Malaysia’s 49 percent and Vietnam’s 29 percent.

As a result, Air Asia Inc and Zest Airways Inc merged last year, while Cebu Pacific acquired Tigerair Philippines.