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June 16, 2008

Asean no-frills giant sees growth amidst fuel price hike

AirAsia, the region's largest low-cost carrier, said Sunday that despite surging fuel prices it will not scale back growth plans and will press ahead with an ambitious route expansion programme.

"We will continue to put on new routes. As long as we can make a profit from our operations, we will not hold back our growth plans," chief executive officer Tony Fernandes told AFP.

"I am taking a contrarian view. There is a limit to how much I can cut costs. If I cut my routes, where is my growth going to come from? In our case, we still can make money from our routes," he said.

Airlines worldwide including Virgin Blue, Qantas Airways and US Airways have cut back their growth plans and axed loss-making routes to weather spiralling fuel prices.

AirAsia recently launched three new routes -- one to Kuantan in central Pahang state, Malaysia and to Haikou (China) and to Hong Kong.

"By year-end we will fly to south India, new destinations in India and mount more flights to Singapore," the aviation tycoon said.

Fernandes also said the carrier's new A320 Airbus jets were more efficient.

"Our operational cost has come down due to the Airbus's better fuel burn," he said.

The Kuala Lumpur-based carrier's fuel cost represents 50 percent of total operational costs.

Fernandes said the carrier has frozen the hiring of new staff who are not related to fleet growth, but that it would not reschedule the delivery of the A320 Airbus aircraft.

The carrier has to date received about 67 A320s and is phasing out its old Boeing 737s. It has agreed to buy a total of 175 aircraft. Each A320 aircraft carries a catalogue price of $60 million.

Fernandes remained upbeat about the carrier's performance amid economic uncertainties due to escalating food and fuel prices worldwide.

"We are seeing a slight increase in passenger volume. Our business is still good. I expect our revenue to be better than budgeted in 2008," he said.

In May, AirAsia said its net profits defied escalating fuel prices to leap 86 percent in the first quarter.

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