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April 4, 2008

US slowdown a blessing in disguise for AirAsia

Malaysian budget airline AirAsia Bhd is optimistic about travel demand as it sees the US economic slowdown shifting passengers to low-cost airlines, reported Reuters

Fernandes sees the US recession benefiting the low-cost carriers. “When the recession comes, one of the first things people cut is travel and entertainment. So if you're flying on a full service airline, you're probably going to trade down.”

“An airline industry is incredibly political. But one has to be optimistic,” AirAsia’s Chief Executive Tony Fernandes was quoted as telling reporters on the sidelines of an industry forum in Bangkok. Low-cost carriers in Asia had proven to be more resilient than those in America and Europe, he added.

AirAsia, the region’s largest budget carrier, has expanded aggressively since it began its low-fare, no-frills flights in December 2001.

Airlines in Asia Pacific, which have had two banner years, are bracing for a possible severe downturn this year as the credit crunch and high oil prices keep passengers from flying.

However, AirAsia’s Fernandes said it finds rising oil prices less of an issue than high airport charges in some countries.

The region's airlines are buying larger planes, and staff shortages would make life more difficult for the industry, the Center for Asia Pacific Aviation (Capa) said in a report earlier this year. The Sydney-based aviation consulting group forecast the downturn to take place in early 2008.

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