AirAsia Returns To Profit 1 Year After Flight 8501 Crash, Plans New Strategy

AirAsia, Southeast Asia's biggest budget airline, is stepping up flights to second-tier cities as it recovers from a crash that killed all 162 people on board a plane in December 2014. AirAsia CEO Tony Fernandes, often compared with Virgin airline's Richard Branson because of his brashness, may also have to find a way to improve service, a challenge for low-cost carriers, as competition heats up.

A new service from Wuhan, in the central Chinese province of Hubei, to Kota Kinabalu — which, while a destination for mountain climbers, isn't even a Top 10 Malaysian city — is an example of AirAsia's new thrust, according to Nikkei Asian Review. There will also be flights from Langkawi, Kuala Lumpur and Penang, all in Malaysia, to Guangzhou and Shantou in China and Yangon in Myanmar, the report said.

There will be more routes in India, Indonesia, the Philippines and Japan, Fernandes told Nikkei in an interview in Singapore.

That will be a change from 2015. The airline cut the number of flights by a third in the fourth quarter and reduced the number of planes serving its main markets of Indonesia, Malaysia and Thailand, Nikkei said. Still, the number of passengers flown rose 11 percent.

"I am not going to go crazy on capacity," Nikkei quoted Fernandes as saying.

As a result, AirAsia reported net income of 554 million ringgit ($136 million) for the fourth quarter, its first profit in nine quarters, on Feb. 29. That prompted AllianceDBS to rate the company's stock a "buy" and Maybank to say the airline was at an "inflection point," Nikkei said.

But AirAsia may need to work on its services to increase those profits. The airline is losing its edge, according to the Asian Correspondent, as some competitors offer up to 15 kg (33 lbs) of free baggage and larger and more comfortable seats. Australia also fined the airline for what it called deceptive pricing on its booking website, forcing a change that the carrier hasn't implemented in other countries. In addition, a "culture of frugalness" has resulted in poor service, the report said.

The official investigation into the crash of Flight 8501 into the Java Sea on a flight from Surabaya, Indonesia, to Singapore blamed a technical problem and the flight crew's reaction to it.