Says Ripple Effect Prices LCC Out Of Leasing Market

AirAsia X was all set to begin operations in July. The new budget airline start-up was scheduled to start service from Kuala Lumpur to Europe and China. But a "minor technical issue" has delayed the company's launch until at least 2008.

The issue? They have no planes.

The original plan was to utilize leased Airbus A330-300s or Boeing 777-300s. However, the cost was deemed too high.

"We are looking at the cost structure... we want the right aircraft and we won't start until the right mix of aircraft is finalized," Raja Mohamad Azmi, AirAsia X chief executive and 20 percent shareholder, told Dow Jones Newswires.

Azmi places the blame for such exorbitant leasing costs squarely on Airbus, primarily on the company's failure to deliver the A380 superjumbo in a timely fashion. This has caused larger airlines to retain current and leased aircraft until orders are delivered.. thus squeezing out smaller carriers with less cash, according to CNN.

When AirAsia X does eventually purchase its own aircraft, the plan is currently for 15 widebody jets at a cost of around $850 million. Delivery of such an order probably will not take place until the end of 2008.

AirAsia X is owned, in part, by Tony Fernandes, primary shareholder of AirAsia, the largest budget airline in Malaysia. Kamarudin Meranum, executive director of AirAsia, holds the remaining 30 percent. AirAsia X has a 30 year franchise to use the AirAsia brand and web site for reservations.

The eventual goal of AirAsia X is to fly routes longer than four hours to places in Asia, Australia, the Middle East and Europe, starting with the United Kingdom and the Chinese cities of Guangzhou and Tianjin, offering fares in the $80 to $450 range according to The Asia Times.

FMI: www.airasia.com