Rising costs spell doom for AirAsia expansion plans

Rising costs spell doom for AirAsia expansion plans

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AirAsia to clip a few wings as rising costs make expansion difficult.

Low-cost Indonesian carrier AirAsia has withdrawn its plans to open new international routes from the Archipelago. The plans have been cancelled due to the rising input costs in the airline industry and the weakening of the Rupiah against the US Dollar.

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Tony Fernandez the CEO of the AirAsia Group said that the aviation industry in Indonesia is facing tough challenges in 2014 due to the depreciation of the Rupiah, higher airport taxes and the absence of improvements in the capacity of the airports.

Fernandez said “AirAsia has tried to develop many international routes but the airport tax keeps going up so we have to cancel routes”. The CEO was talking at the sidelines of the ‘Invest Malaysia’ 2014 conference in Kuala Lumpur on June 9, 2014.

The demand and scope for the growth of the aviation industry is huge in Indonesia, however, airport infrastructures are not yet ready to support this potential growth.

Earlier reports stated that state run airport operator PT Angkasa Pura II, officially increased the passenger service charges which is known as the airport tax at three airports in Sumatra.

The CEO also said that the Malaysia based airline had decided to rationalize its routes as it stopped many services in Indonesia in a bid to up efficiency measures.

Photo Credits: Livemint