LONDON — Airbus and AirAsiaX celebrated the first airline order for the A330neo on Tuesday with a kiss. Airbus CEO Fabrice Bregier leaned in for the smooch on the cheek of AirAsia Group CEO Tony Fernandes as Mr. Fernandes announced his order for 50 A33-900neo jets in Farnborough.
The order is worth $13.7 billion at list prices, the largest order thus far for Airbus’ newest jet, launched yesterday at the Farnborough airshow outside London.
“I went to Airbus about 17,365 times and said ‘build the neo,'” said Mr. Fernandes, whose request had been repeatedly been rebuffed by Airbus executives. “But we kept persisting” he said, and wound up helping to convince Airbus to launch the jet. Mr. Fernandes, whose conglomerate of Asian carriers is one of the largest A330 operators in the world, had been seeking the neo for some time.
The deal came together in under two hours, according to Mr. Fernandes, who cut short his vacation in Capri to finalize terms. Thus Mr. Fernandes found himself in Farnborough on Tuesday, where ultimately not one, but three kisses between himself, Bregier and Airbus COO John Leahy sealed the memorandum of understanding.
AirAsia Group is already one of, if not the, largest Airbus customer, having ordered 630 airplanes already. It has 38 current generation A330 jets on order already, which Fernandes said could be converted to neos in the future.
AirAsia X’s order for the A330neo has been hailed by some as a further validation for the long haul, low cost model, but whether the purchase actually implies that is unclear. While Norwegian Air Shuttle have managed to launch a trans-Atlantic low cost operation using Boeing 787 Dreamliners despite regulatory issues and reliability challenges on the 787, AirAsia X were unsuccessful in operating low cost, long haul services.
The budget carrier ended service to its only two true “long haul” destinations of Paris Orly and London Gatwick in spring 2012, and none of its 21 destinations are outside the Asia-Pacific region (in face Mr. Fernandes noted during the press conference that he does not consider his carrier to be long-haul, but mid-haul).
AirAsia X do operate to five destinations in Australia, and the air route between Asia and Australia is the one medium haul market where low cost services have enjoyed success over an extended period of time.
But AirAsia X also dropped service to Abu Dhabi, Cristchurch, Male, and Tehran, all of which are longer than flights to Australia.
The challenges AirAsia X faces on long haul, low-cost service are familiar; the lack of a true premium cabin, lucrative frequent flyer program, or corporate contracts makes it hard to generate the revenue required to overcome the high costs of operating a wide-body aircraft.
The A330-900neo will certainly offer lower costs than AirAsia X’s existing A340-300s or A330-300s, and one might argue that AirAsia X was unable to succeed on long haul routes because it had the wrong airplane. But if AirAsia X is only just receiving the correct airplane for low-cost, long haul service, then the A330neo order is not a validation but rather a second attempt.
Whether or not the airline makes another go at long-haul routes, it will be able to put the A330-900neo to good use on its regional routes within Asia, especially to the Chinese mainland. Indeed many observers have pegged the market for flights between 1,000 and 3,000 nautical miles (1,151 – 3,452 miles) as the core competency of Airbus’ new re-engined aircraft.
The present day A330-300 nearly matches the seat-mile economics of rival Boeing’s 787-9, and the A330-900neo should hold an advantage (in both cases including capital costs). While the A330neo order may not portend long haul success, it should crystallize the regional success of AirAsia’s long haul (in name only) arm.