AirAsia is banking on tourism growth within Southeast Asia to establish its latest airline -- AirAsia Cambodia -- with inaugural flights getting underway on Thursday.
The aviation industry in Southeast Asia in the second half of this year still looks promising as the number of inbound Chinese tourists ramped up across the region, especially in Thailand, said Tony Fernandes, chief executive of Capital A, the parent company of AirAsia, the largest low-cost carrier in Southeast Asia by fleet.
He said airlines still face headwinds from a surge in fuel prices due to geopolitical conflicts, combined with the strong United States dollar against local currencies, which creates a greater burden as airlines expenses are paid in greenbacks.
"However, we're not worried about the sluggish economy as demand for air travel in Southeast Asia remains very strong."
Mr Fernandes said average airfares have increased by 25% compared to those seen prior to the pandemic.
He believes no airlines will start a price war in the short term, as everyone has learned a bitter lesson from the pandemic.
"Airfares might go down if central banks in the region cut their interest rates, which might happen in 2025" said Mr Fernandes.
Meanwhile, AirAsia Aviation Group, the aviation arm of Capital A, signed a joint venture agreement with Sivilai Asia to establish AirAsia Cambodia, a new low-cost airline in Cambodia.
Vissoth Nam, chief executive of AirAsia Cambodia, said during the launch of the first domestic flights on Thursday that it marked a new chapter for Cambodia's tourism industry.
He said the AirAsia network would help foster economic activities through more robust tourism and business opportunities.
"The launch of our domestic flight is concurrent with with Cambodian government's efforts to attract more tourists to Siem Reap through the promotion of the Visit Siem Reap 2024 campaign," he said.
Cambodia attracted 5.43 million international tourists in 2023, up from 2.27 million in 2022, according to Cambodia's Ministry of Tourism.
The airline has two aircraft operating from its hub at Phnom Penh International Airport, serving domestic routes to Siem Reap and Sihanoukville, and has plans to increase the number of aircraft in the fleet to five by the end of this year.
AirAsia Cambodia will announce new international routes within the next quarter, which could be direct flights to Kuala Lumpur, Bangkok, along with cities in China.
In terms of the long-term plan, the carrier aims to have 25 aircraft within five years, but will carefully gauge travel demand before expanding.
"The problem right now is the aircraft shortage. We must negotiate with Airbus regarding deliveries," Mr Fernandes said.
AirAsia Cambodia aims to carry 1.8 million passengers this year, with the majority being domestic travellers initially.