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Global Management Forum 2018

AirAsia considers buying Mitsubishi's delay-plagued jet

'We hope Japan supports us well, too,' CEO Fernandes says

Plans for the first deliveries of the MRJ have been pushed back fives times, from an initial goal of 2013 to the current target of mid-2020.

TOKYO -- AirAsia is thinking about purchasing jets from the struggling aircraft business of Mitsubishi Heavy Industries, chief executive Tony Fernandes told the Nikkei Asian Review on Nov. 6.

The Malaysia-based budget carrier looks ready to throw its support behind the Mitsubishi Regional Jet, Japan's first passenger plane project since the 1960s, which faces financial strain after repeated delays. At the same time, AirAsia is seeking support from Japanese regulators to obtain more slots at Japanese airports.

"I had a talk last week with Mitsubishi in Tokyo, since we are looking at MRJ planes," Fernandes said on the sidelines of the Nikkei Global Management Forum in Tokyo. "If AirAsia buys the MRJ, that is huge for Mitsubishi, as we are the No. 1 customer for Airbus."

Mitsubishi Aircraft, the Japanese engineering group's aviation unit, has delayed deliveries of the MRJ five times from the initial target of 2013. The current goal is mid-2020.

Mitsubishi Heavy announced it would inject $1.9 billion of capital into the jet program, seeking to resolve the unit's excess liabilities. ANA Holdings, Japan Airlines and other airlines have already placed MRJ orders.

"We have been supportive to Japan," Fernandes said, stressing AirAsia has offered travelers budget options in a market once dominated by the full-service ANA and JAL. "So we hope Japan supports us well, too."

AirAsia CEO Tony Fernandes, speaking to the Nikkei Asian Review on Nov. 6, said an order from his company would be "huge" for Mitsubishi. (Photo by Ken Kobayashi)

AirAsia's Japan subsidiary is based in Aichi Prefecture, where the MRJ is under development. Fernandes said his company would decide how many jets to purchase depending on the price. The carrier is "waiting for Mitsubishi to make an offer."

Fernandes' group is currently awaiting deliveries of 100 Airbus A330neo widebody jets, which are expected to start at the end of 2019. The company has been planning to purchase smaller planes to serve airports on islands around the region. The MRJ, which can seat 70 or 90 passengers, is considered a fit for this.

Since it started out with two planes in 2001, AirAsia has grown to serve more than 130 destinations in 25 markets across the Asia-Pacific region. Its Japanese subsidiary, though, currently plies only one route -- connecting Nagoya and Sapporo -- due to a holdup in Japanese regulatory approval.

"We will grow as quickly as we are allowed to grow," Fernandes said. He may be hoping that ordering the MRJ would encourage Japanese authorities to open more doors for AirAsia.

During the interview, Fernandes also mentioned his intention to turn AirAsia into a digital company. "We have 90 million people flying with us and I want AirAsia's platform to be used for more than just buying flight tickets," he said. "Our customers are quite savvy."

The group last month announced a collaboration with Google Cloud. The plan is to integrate machine learning and artificial intelligence into AirAsia's business and culture, driving a transformation into a travel technology company.

Fernandes said he envisions three pillars: e-payments, an online travel and lifestyle portal, and logistics. The group has already launched BigPay, a payment service that now counts about 500,000 customers. It has also placed 12,000 sensors on its aircraft and started building an algorithm that would break down weather patterns, predict delays, and help arrange more efficient aircraft parking.

A portion of the portal, called BigLife, is expected to launch in December.

As in the airline business, competition is fierce in e-payments and online travel agent services, but Fernandes sounded confident.

"People are laughing at me for competing against AliPay and Grabpay," Fernandes said. "But as long as the product and the marketing are good and we can provide the services that they can't, there is a market for us. This is how we grew AirAsia."

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