AirAsia X (D7, Kuala Lumpur International) has inked a one-year Profit Share Agreement (PSA) with its parent AirAsia (AK, Kuala Lumpur International) in relation to the transfer of two slots on the lucrative Kuala Lumpur International to Singapore Changi route, following an investor announcement by the two airlines on November 11.

As part of the PSA, both airlines agree to share 50% of the net operating profit on the services for the duration of the deal. The net operating profit is derived by calculating the total ticket revenue plus total ancillary revenue plus any other income received in connection with the Kuala Lumpur to Singapore route minus total cost of sales, operating expenses, and any other expenses incurred in connection with the sector.

AirAsia X will also return to AirAsia all incentives or rebates from Changi Airport accrued prior to the effective date, as well as 50% of any incentives or rebates accrued during the term.

Based on the one-year projected forecast, the carriers believe that the transaction will generate an estimated MYR2.42 million (USD0.58 million) in profit, taking into account all costs.

Effective from November 11, and subject to a further one-year renewal, the PSA will remain in force as long as AirAsia X's performance meets "mutually agreed expectations". If it does not, the slots will be returned to AirAsia. The 14x weekly slots are rated as being part of AirAsia's most profitable route.

AirAsia X intends to utilise downtime on its fleet of 24 A330-300s between 0800L and 1600L, where the aircraft cannot be effectively flown on long-haul services in that period. It is anticipated that the airline's average aircraft utilisation will increase by 0.2 hours as a result of the PSA.

According to the ch-aviation schedules module, AirAsia currently offers 59x weekly flights between Kuala Lumpur and Singapore. Flights AK707/706 and AK713/712 leave Malaysia after 0800L and return to its base by 1600L, so these rotations appear to be the most likely ones which will be transferred to AirAsia X based on the 0800L-1600L period where the A330-300s are available.

In addition, both carriers believe there is the potential to increase the number of connecting passengers into Singapore from AirAsia X's core markets of China, India, Japan, and South Korea, due in part to the increased capacity that the AirAsia X 337-seat A330-300s will offer over the 180-seat A320-200s of AirAsia.

The long-haul, low-cost carrier suggests that it only carries 1% of the total passengers between these markets. Due to the very strong demand between these markets and despite numerous existing direct and connecting opportunities, the airlines believe that they will increase the number of connecting passengers into Singapore, contributing to the load factor on the AirAsia X-operated services between Kuala Lumpur and Singapore.