AirAsia injects competition with Philippine joint venture

AirAsia Philippines, in which he will hold a 40 per cent stake, should begin flight operations in August next year using either Clark or Subic -- two former US military bases near Manila -- as its base, the Malaysian said.

"We do expect to be profitable straight away," Fernandes told a news conference without giving fleet, destination or capitalisation details.

He said internal funds would capitalise the joint venture, in which Filipino investors led by Antonio Cojuangco, a cousin of Philippine President Benigno Aquino, hold a combined 60 per cent, the minimum local equity stake set by law.

"Many of the routes that Air Asia Philippines will be going to are already being exploited by other Air Asia companies, so the set-up cost for Air Asia Philippines is very low," Fernandes said.

This will allow the joint venture to offer low fares compared with its rivals, he added. Local competition includes surging budget carrier Cebu Pacific Air and loss-making flag-carrier Philippine Airlines (PAL).

"Cebu Pacific has done a fantastic job," Fernandes said, praising its equally low-cost, no-frills model but saying there was more than enough room for the AirAsia group to grow.

"I think PAL could have, I'm sure, done a better job," he added.

Kuala Lumpur-based AirAsia has set up similar joint ventures in Thailand and Indonesia and has previously announced plans to set up a unit in Vietnam.

However, Fernandes said Thursday that AirAsia was now giving priority to the Philippine joint venture before proceeding with the Vietnam project.

The flashy 46-year-old tycoon, who also heads the Lotus Formula One team, said that just a tiny segment of the Philippine population of 95 million people were currently making use of air travel, giving the project huge potential.

Marianne Hontiveros, a Filipino music industry executive, will be the AirAsia Philippines chief executive, with Cojuangco as chairman.

"We need tourism badly in our country, and we have so much to offer," Hontiveros told the news conference.