Almost four years on, what has happened to AirAsia’s Langkawi base?

AirAsia has not yet opened a base at Langkawi nearly four years after unveiling an ambitious expansion plan for the Malaysian resort island. In early 2015, the airline forged a landmark agreement with Langkawi Airport to reduce charges by 70% and unveiled plans to open a base at Langkawi, stating it would have five aircraft based at Langkawi within five years.

Highlights:

• AirAsia has not yet followed through on a 2015 promise to open a base at Langkawi;
• AirAsia is Langkawi's largest airline but currently it only operates two international routes from Langkawi;
• The resort island should be able to support more international services.

However, as we enter 2019 the LCC group has still not based any aircraft at Langkawi. It also has only launched one of the eight international routes it promised to add. AirAsia originally stated in 2015 that it would launch services from Langkawi to Guangzhou, Hong Kong, Bangkok and five other unnamed international destinations.

Guangzhou was launched in early 2016. Guangzhou and Singapore (which has been served for several years) remain AirAsia's only international destinations from Langkawi. It did also briefly serve Shenzhen from Aug-2017 to Apr-2018, but the route is no longer flown.

AirAsia is still the largest airline group at Langkawi, accounting for over half of current seat capacity. In addition to the Guangzhou and Singapore services, AirAsia operates domestic services into Langkawi from Kuala Lumpur, Johor Bahru and Penang.

AirAsia Group's Malaysian subsidiary currently operates 102 weekly flights from Langkawi, including 65 to Kuala Lumpur (Kuala Lumpur-Langkawi is AirAsia Malaysia's fifth largest route). Langkawi is the AirAsia Malaysia's seventh largest airport after Kuala Lumpur International (KUL), Kota Kinabalu (BKI), Kuching (KCH), Penang (PEN), Johor Bahru (JHB) and Singapore (SIN). These are all bases for the airline, while Singapore is AirAsia's largest international destination.

CHART - Langkawi is the AirAsia Malaysia's seventh largest airport market and the largest it serves in Malaysia where it does not have a baseSource: CAPA - Centre for Aviation and OAG (data: w/c 14-Jan-2019).

While AirAsia has a 52% share of total seat capacity in Malaysia, its share of international seat capacity is only 39%. It is clear that Langkawi Airport has not had the international traffic growth envisioned when the deal with AirAsia was forged in 2015. Langkawi only handled 240,000 million international passengers in 2017, according to Malaysia Airports data (Langkawi is part of the Malaysia Airports portfolio).

In addition to AirAsia, international services are operated by Malaysia's Malindo, China Southern, Scoot and TUI. Malindo operates charters to China, China Southern competes against AirAsia on the Guangzhou route, Scoot operates from Singapore and TUI has a seasonal low frequency service from Birmingham and Manchester in the UK. China Eastern also previously operated seasonal services to Langkawi.

Malaysia has big aspirations for developing tourism on Langkawi, which is known for its beaches and scenery. While the island has experienced significant tourism growth, supported by more domestic flights (which carry domestic tourists as well as foreigners who access the island via Kuala Lumpur) there is potential for more rapid international growth.

AirAsia blames airport infrastructure challenges for not meeting its promises for international expansion. AirAsia Malaysia CEO Riad Asmat told CAPA TV in Oct-2018 that "my challenge right now is not putting planes there [at Langkawi] and not finding routes; it's more actually the infrastructure that is made available to my operations, which is very limited at the moment. There needs to be a realisation of sorts, they need to help build that aspect so we can grow and at the same time tourism grows and everyone benefits."