AirAsia head predicts consolidations in air industry

Tony Fernandes, the head of Malaysia-based AirAsia, Asia’s most successful discount air carrier, has predicted a series of consolidations in his sector.

He said on Sunday that many operators who got into the low-cost airline business because it looked like an easy way to make money are now finding it a much tougher go.

Oil prices are rising due to high demand, limited refining capacity, and processing bottlenecks. Jet fuel was being traded in Singapore last week at $70.47 per barrel.

Leasing costs, too, are higher as demand outstrips supply. Rates to lease the kinds of aircraft used on short- and medium-haul routes like those the no-frills carriers fly most often have increased by as much as 40 percent in the past year.

There are already signs that Fernandes might be correct. Last week Valuair and Jetstar Asia, both no-frills air carriers based in Singapore, said that they were in talks that might lead to a merger.

Valuair, which has been flying since May of last year, has been trying to subtly change the image of low-cost air carriers by adding longer routes and offering in-flight meals.

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