SINGAPORE: Capital A, the parent of budget carrier AirAsia, has taken the first step towards bringing flying taxis to the masses in Southeast Asia while taking another leap towards transforming its brand.
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“Urban Air Mobility is a new concept. Therefore, the focus is on creating and enabling an ecosystem and the building blocks for future development and growth,” said Ling Liong Tien, chief safety officer at AirAsia.
AirAsia Aviation Group signed a memorandum of understanding in February to lease a minimum of 100 VX4 electric vertical takeoff and landing aircraft from Avolon, a leasing company based in Ireland. Avolon ordered the VX4s from British developer Vertical Aerospace.
A team formed by the three companies will hold its first meeting this month in Kuala Lumpur, aiming to deliver the VX4s in 2025.
To launch the business, the air taxis will need type certificates, along with specialised aviation rules and infrastructure for landing, takeoff and parking. Vertical Aerospace is in the process of obtaining type certification in Europe. The company plans to initiate test flights as soon as this month.
In Singapore, the government has designated an air mobility hub at the Seletar Aerospace Park for testing flying taxis.
Under AirAsia’s model, the operation will start as a link between Kuala Lumpur’s city centre and Kuala Lumpur International Airport, which will reduce the hour-long trip by car to a mere 17 minutes.
The fare is expected to cost less than US$50 per person if four people share the same air taxi.
American Airlines has invested in Vertical Aerospace. Japan Airlines signed a deal reserving the right to lease up to 50 electric vertical takeoff and landing aircraft, or eVTOLs, from Avolon.
But both Japan and the US are in the process of writing regulations for air taxis, while Southeast Asia is playing catch-up in the air taxi game as demand for the service could soar in a region plagued by traffic congestion.
By 2050, 161,000 air taxis will be in service around the world, according to Munich-based consultancy Roland Berger, with the Asia-Pacific region accounting for 51%. AirAsia appears to be the first major airline in the Asean region to make the leap into air taxis.
“Our aim is very clear – to have (VX4s) fly all over Southeast Asia,” said Capital A CEO Tony Fernandes. “We made Asean smaller with the A320. We go even more local with the advent of VX4.”
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AirAsia has led the way in the region’s low-cost carrier business and includes operators based in Indonesia and Thailand.
It will use that network to expand the air taxi business throughout Southeast Asia. But besides type certification and infrastructure, recent financial struggles also pose a significant challenge to the strategy.
Stiff competition among Southeast Asian budget carriers had caused earnings in the industry to plateau before the fallout from the pandemic. AirAsia has turned in net losses for three straight years through 2021. The group switched to a holding company structure rebranded as Capital A in January.
The company’s negative net worth deepened to roughly RM6 billion, putting the group at risk of being automatically delisted. Fernandes forecast a return to profitability in 2023 in an interview with Nikkei Asia, expressing his view that the red ink will persist this fiscal year.
Capital A sought RM500 million in government-backed loans, but the plan was rejected last month by the state-owned financier Danajamin Nasional.
Capital A was unable to meet conditions for the funding, which included a loan guarantee by Fernandes, Danajamin Nasional said. The company is hunting for financing from another bank.
AirAsia switched its name to Capital A to reflect the determination to transform into a digital company that pursues new growth through its vast portfolio of mobility businesses.
The digital arm is rapidly expanding. In 2020, the group entered the meal delivery business, then launched a ride-hailing service last year. E-commerce and logistics operations are scaling up, and Capital A is testing a drone-based delivery service.
Capital A has launched a superapp that serves as a one-stop shop for its services. Air taxi booking and payments will be integrated into the platform.
The capital crunch will limit Capital A’s ability to expand market share and earning capacity in ride-hailing, a sector known for brutal price competition. But the air taxi business has a relatively high barrier to entry and will provide Capital A fertile ground to flex its aviation expertise.-NIKKEI