AirAsia picks up stake in Sri Lanka's HolidayAir

A new Sri Lankan no-frills airline has brought in Malaysian budget carrier AirAsia on board as an investor and plans to launch operations from March 2007. HolidayAir, which has been waiting in the wings for more than a year to launch mainly regional flights, will finally take off in March, its chief executive officer Arjun Ruzaik said. He said the airline hoped to open its office at the Colombo International Airport next month and launch the first flight on March 10. Initially it plans to fly to Cochin, Calicut, Trichy and Trivandrum in India, and within 24 months fly 16 to 20 routes in Asia and the Middle East, including Malaysia, Thailand and Singapore as well as the Maldives. HolidayAir will have only one A320 aircraft, but within two years when the airline gets going to other destinations, it will have eight aircraft. A consortium of local and foreign investors has come on board of the airline with a US$20 million investment. "A consortium headed by Sri Lanka's Asia Capital will be investing locally, while there is a consortium of Malaysian investors and we have also tied up with a leading regional airline," said Ruzaik.

He declined to comment on the Malaysian investor or the regional airline concerned. But airline sources said that Malaysia's AirAsia headed by aviation dynamo Datuk Tony Fernandes has acquired a near 50 per cent stake in the company. Three Sri Lankan companies, HolidayAir together with Deccan Air and Expo Air, were granted approval to fly to four destinations in India late last year by the Civil Aviation Authority (CAA), but the latter two dropped out of the race after a much publicised battle. HolidayAir is expected to give Sri Lanka's national carrier, SriLankan Airlines, a run for its money with low-cost operations and much cheaper tickets. Another new state-subsidised airline, Mihin Air, also due to start in the February/March period, will also eat into SriLankan's gradually eroding profitability. Mihin Air is banking on the lucrative Middle East sector, where thousands of Sri Lankans fly every year to work, with cheaper tickets.

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