Price war looms as first AirAsia flight hits Sydney

This morning’s arrival of the first AirAsia X flight in Sydney from Kuala Lumpur marks the beginning of a mega-competition for Australian hearts and minds from the region’s biggest low-cost carriers.

AirAsia X is celebrating its arrival in Sydney “after years of trying (and plenty of tears)”, according to its media chook food this morning, a reference to more than two years of backroom fighting with the Malaysian Government, which had earlier banned the low-cost carrier from going head-to-head with Malaysia Airlines to protect it from price competition.

But the way was smoothed after AirAsia founder Tony Fernandes bought a share of Malaysia Airlines last year.

However, AirAsia X, AirAsia’s long-haul affiliate, was also desperate to get into Sydney before the launch of the new Singapore Airlines budget carrier, Scoot Airlines, which will start flying daily to Sydney from Singapore at the end of June.

In fact, AirAsia X will have a prized “first mover” advantage of nearly three months to entrench its position before Scoot’s arrival, during which time, while still being the price leader most of the time, it will be charging up to 50 per cent more than Scoot’s introductory offers for a seat to South-East Asia.

It’s not until Scoot arrives in Sydney on June 26 that AAX pares back fare levels to match it, with fly-only rates on both carriers (AirAsia X to Kuala Lumpur and Scoot to Singapore) for about $200 one-way. That's a fraction of the prevailing rates starting at around $950 return.

At the same time, however, AirAsia X is charging up to $500 one-way for a ticket from Melbourne to KL.

The seats on both carriers are a super-squeezy nine-abreast in the AirAsia X A330s and 10 abreast in Scoot’s B777-200s.

Scoot will also be flying five days a week from the Gold Coast to Singapore on top of AirAsia X’s five a week to KL.

Jetstar flies only to Bali and Phuket in South-East Asia out of Sydney, with Thailand priced from around $380 one-way.

Jetstar is pushing connecting services to its add-on Asian destinations, such as Kuala Lumpur, Phuket, Bangkok and Ho Chi Minh, from Melbourne through its daily Melbourne-Singapore A330 service.

Meanwhile, Scoot appears to be competing only for point-to-point Sydney-Singapore travel as it does not have any formal marketing relationship or connectivity with Singapore Airlines (SIA), its full-service subsidiary Silkair or budget carrier Tiger Airways, of which SIA owns 33 per cent.

In fact, Tiger’s Australian boss, Andrew David, told me last month there’d be no way Tiger Australia would go out of its way to help Scoot by trying to provide any sort of connectivity for the carrier in Australia.

So that means, initially at least, Scoot will be competing in Australia without any sort of Asian network, while AirAsia X has AirAsia’s giant Kuala Lumpur-based network and stand-alone subsidiaries in Thailand and Indonesia.

With this flood of new competition out of Queensland and New South Wales in particular, there’s no doubt that point-to-point travel will be nominally much cheaper.

But remember these are low-cost airlines that don’t make most of their profit out of ticket sales per se, but out of optional add-on “ancillaries”.

Just be careful you don’t end up getting sucked into a cheap headline price to find you’re up for squillions for extras.

Are you planning to travel to Asia with one of the budget airlines in the next few months? Have you found the best value with one of them or are you finding it is taking more and more time shopping online for the details? Does "brand" play a role in your choice?

FOOTNOTE: is reporting that Malaysia Airlines and AirAsia X  have signed a “re-accommodation agreement” following the cancellation of four AAX routes to Mumbai, New Delhi, London and Paris. AAX will use excess capacity on MAS flights to carry AAX passengers stranded by the route axings as it begins to tackle its “extensive financial problems”, ATW says.