AirAsia was established in 1993 and began operations on 18 November 1996. It was originally founded by a government – owned conglomerate, DRB-Hicom (Diversified Resources Berhad- The Heavy Industries Corporation of Malaysia Berhad). On 2 December 2001 the heavily-indebted airline was bought by former Time Warner executive Tony Fernandes’ company Tune Air Sdn. Bhd. for the token sum of one ringgit (about USD 0. 26 at the time) with USD 11 million (MYR 40 million) worth of debts.
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Fernandes turned the company around, producing a profit in 2002 and launching new routes from its hub in Kuala Lumpur, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as MYR 1 (USD 0. 27). In 2003, AirAsia opened a second hub at Senai International Airport in Johor Bahru near Singapore and launched its first international flight to Bangkok. AirAsia has since started Thai subsidiary, added Singapore itself to the destination list, and started flights to Indonesia.
Flights to Macau began in June 2004, and flights to mainland China (Xiamen) and the Philippines (Manila) in April 2005. Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai Airasia. In August 2006, AirAsia took over Malaysia Airlines’ Rural Air Service routes in Sabah and Sarawak, operating under the FlyAsianXpress brand. The routes were subsequently returned to MASwings a year later, citing commercial reasons.
AirAsia’s CEO Tony Fernandes subsequently unveiled a five-year plan to further enhance its presence in Asia. Under the plan, AirAsia proposes to strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Vietnam, Indonesia, Southern China (Kunming, Xiamen, Shenzhen) and India. The airline will focus on developing its hubs in Bangkok and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia.
With increase frequency and the addition of new routes, AirAsia expects passenger volume to reach 18 million by the end of 2007. On 27 September 2008, the company had on its list 106 new routes to be added to its then- current list of 60. The number of old routes discontinued has not been publicly disclosed. On 2 April 2012 Air Asia had their first flight from Sydney to Kuala Lumpur. In August 2011, AirAsia agreed to form an alliance with Malaysia Airlines by means of a share swap.
The alliance was struck down by the Malaysian government, in effect voiding the agreement of both airlines. By early 2013, AirAsia had seen a steep increase in its profitability. The year-on-year comparison had shown a 168% increase in profits as compared to 2012. For the quarter ending 31 December 2012, the airline’s net profit stood at 350. 65 million ringgit (US$114. 08 million). Despite a 1% rise in the average fuel price, the airline had recorded profits of 1. 88 billion ringgit for the full financial year 2012.
In February 2013, AirAsia submitted an application to the Indian Foreign Investment Promotion Board, through its investment arm, AirAsia Investment Limited, to seek approval for commencing its operations in India. AirAsia wanted to take up a stake of 49% in the airline, which was the maximum allowed by the Indian government at that time. AirAsia initially invested an amount of 50 million United States dollars in the airline. The airline wished to begin operations from Chennai and expand it’s network in South India, to where AirAsia already operated flights from Malaysia and Thailand.