AirAsia X lowers fares as it moves from Melbourne Tullamarine to Avalon

    Malaysia’s AirAsia X has set a 5-Dec-2018 date for the launch of services at Melbourne Avalon Airport and is offering return fares to Kuala Lumpur starting at only AUD150 including taxes.


    Highlights

    • AirAsia X is moving its double daily Melbourne Tullamarine-Kuala Lumpur service to Melbourne Avalon Airport in early December;
    • AirAsia X is trying to stimulate demand in the untested Avalon market with return fares starting at only AUD150 return including taxes;
    • AirAsia X plans to pass on savings generated from Avalon’s much cheaper costs to consumers but base fares will clearly increase from the current AUD12 each way once the initial promotional period ends

    AirAsia X and Avalon Airport forged a landmark deal in Feb-2018 that will result in AirAsia X moving its two daily flights to Melbourne Tullamarine once Avalon completes construction of a new international terminal. AirAsia X recently announced its two Tullamarine flights will move to Avalon on 5-Dec-2018, at which point the small new terminal will be ready.

    Avalon’s traffic should increase by over 50% in 2019, driven by the new flights from AirAsia X. Avalon is currently only served by Jetstar, which operates 49 weekly departures using 180-seat A320s.

    AirAsia X will deploy 377-seat A330-300s, which will generate 10,556 weekly seats. Jetstar currently has 17,640 weekly seats at Avalon – including 13,680 to/from Sydney, 2,520 to/from Gold Coast and 1,440 to/from Adelaide.

    Avalon handled 800,000 passengers in 2017. Avalon will likely handle a similar number of passengers in 2018 as Jetstar’s capacity at Avalon has been flat and the AriAsia X flights do not start until the last month of the year.

    Jetstar has served Avalon since Jun-2004, a few days after it commenced operations. Jetstar was the first airline to operate scheduled passenger services from Avalon Airport, which was purchased by Linfox from the Australian government in 1997, and has been the primary tenant of the domestic passenger terminal since it opened.

    The AirAsia X service is Avalon’s first international service. Other domestic airlines besides Jetstar have served Avalon over the years but their services were short-lived. For example, Tigerair Australia served Avalon in 2010 and 2011, while Jetgo Australia briefly served Avalon in 2016.

    AirAsia X has committed to serving Avalon for 10 years. Avalon was able to woo AirAsia X by offering significantly lower fees;  AirAsia X is essentially operating to Avalon for free.

    AirAsia X will also be able to turn around its evening flight significantly faster, which is important for any LCC. AirAsia X’s evening flight currently sits at Tullamarine for 3h40mins due to slot constraints. At Avalon the same flight will be timed and will only be on the ground for 1hr15min. (The turnaround time on the morning flight will be nearly identical as AirAsia X currently does not have issues doing a quick turn on this flight at Tullamarine.)

    Avalon is helping market the new Kuala Lumpur service, which is expected to mainly carry passengers heading to/from Melbourne, although Avalon is also hoping some arriving passengers will start their holidays in the nearby Great Ocean Road.

    SkyBus now has services from Avalon Airport to Geelong and the Great Ocean Road. SkyBus also provides a shuttle service linking every Avalon flight with Melbourne. As Blue Swan previously reported, SkyBus is adding capacity at Avalon with new double decker buses to meet an anticipated increase in demand driven by the new AirAsia X flights.

    See related report: SkyBus expands at Avalon Airport with new depot and larger buses

    In addition to Malaysian visitors, AirAsia X now carries on its Australia flights significant number of visitors from other Southeast Asian countries and China.

    Avalon and AirAsia X also hope to attract local Melbourne area residents to drive to Avalon, where parking is cheaper and more convenient than Tullamarine. However, cheaper air fares will be the biggest drive as AirAsia X has promised to pass on the savings generating from operating at Avalon to the consumer.

    Return fares from Avalon to Kuala Lumpur are currently available from AUD150.50 including taxes. Very low fares are also available to several destinations beyond Kuala Lumpur

    The base fare on the promotional AUD150.50 return ticket is only AUD12 each way. The tax component of AUD126.50 includes AUD87 in airport departure tax from Avalon, AUD17 in taxes or fees from Kuala Lumpur International Airport, AUD22 in arrival tax at Avalon and a 50cents regulatory service charge.

    The taxes are only AUD4 more on AirAsia X’s Tullamarine flights, including AUD89 in airport departure tax (compared to AUD87 for Avalon) and AUD24 in arrival tax (compared to AUD22 for Avalon). However, AirAsia X’s costs of operating at Avalon are significantly less, enabling it to offer lower base fares.

    Naturally the AUD12 base fare is promotional and not valid for peak periods. Base fares for Melbourne Tullamarine-Kuala Lumpur flights currently start at AUD140 each way.

    The question becomes will the difference in Avalon versus Tullamarine fares be sufficient to attract passengers to Avalon (which is located 55km from Melbourne’s central business district) after the initial promotion ends? While AirAsia X will no longer offer any flights from Tullamarine, Malaysia Airlines is continuing to operate from Tullamarine to Kuala Lumpur and often offers very low fares in this market. There is also significant competition in most of the other city pairs that AirAsia X is now selling from Avalon.

    Time will tell if AirAsia X’s gamble on Avalon – and Avalon’s investment in AirAsia X – is a winner.

    Example of the promotional AUD150.50 all-in return fare

    Source: www.airasia.com