From its Malaysian hub, AirAsia X – the long-haul version of the short-haul carrier of the same name – has quietly developed a big so-called "transfer market" in the past three years to carry travel-hungry Chinese to Australia and New Zealand via Kuala Lumpur.
Hub-and-spoke national carriers like Singapore Airlines and Malaysian Airlines have been doing that for decades and now AirAsia X, which celebrates its 10th anniversary in 2017, is starting to cash in on the unmet demand for travel from China to the south-west Pacific.
That's one of the major reasons AAX is asking for more capacity entitlements in the next Air Services Agreement between the Australian and Malaysian governments, which determines the number of weekly seats carriers from both countries may operate.
Australia has been a gold mine for airlines from the USA to the Middle East cashing in on unmet demand for outbound travel from Down Under to the rest of the world.
That's working in reverse for AAX, which is tapping into the foreign travel boom emanating from China.
In the past five years, AAX's total number of seats to and from Australia has grown from around 30 per cent to 45 per cent of its total operations.
At the same time, servicing the China boom now accounts for around 25 per cent of its seats in and out of Kuala Lumpur.
Together those two markets are nearly three quarters of AirAsia X's flying, presenting new travel possibilities for customers at both ends of the network.
Importantly for Australia, China is about to overtake New Zealand as the country's biggest source of foreign visitors. Already more than a million Chinese are heading to Australia each year.
After cutting back on Australian services about two years ago, AAX is now pressing the Australian government for new capacity entitlements so it can increase services to its Australian destinations Perth, Melbourne, Sydney and the Gold Coast.
It also wants to use the Gold Coast, currently served 11 times week from Kuala Lumpur, to expand its services to New Zealand, following the introduction of Kuala Lumpur-Gold Coast-Auckland services in March this year.
And it is looking to take advantage of an incentive scheme the Australian government introduced about 20 years ago, under which capacity restrictions are removed for any foreign airline flying to regional destinations outside of the four major cities, Brisbane, Sydney, Melbourne and Perth.
The airline's chief commercial (marketing) officer, Arik De, told a recent aviation industry conference AAX was actively considering Canberra, Townsville and Cairns as new destinations and may return to Adelaide, which it abandoned in 2014.
Singapore Airlines recently became the first foreign carrier to launch flights to the Australian and New Zealand national capitals, with four services a week from Singapore to Canberra and Wellington, beginning on September 20. Canberra has revamped its terminal facilities to encourage more foreign carriers to begin services.
As well, AAX is keen to begin flights to the Queensland capital, Brisbane, which it has so far shunned in favour of the Gold Coast, 80 kilometres to the south-east.
And the airline is examining the viability of a non-stop service between Kuala Lumpur and Auckland, after axing its first New Zealand destination, Christchurch, in 2012.
"Just recently we did announce Melbourne back to double daily flights, Sydney back to double daily, Perth back to double daily, AirAsia X chief executive Ben Ismail told AirlineRatings.com."And the biggest thing was the Gold Coast moving from daily to 11 times a week.
"We may look at some routes where we will go to three a day. We're not sure yet. That's something that we're analysing."
One of the problems outlined by Arik Do is that AAX can't increase Melbourne, Sydney and Perth to triple-daily flights from Kuala Lumpur without exceeding the current government capacity limit.
Ismail says Chinese demand for Australian holidays is one of the key considerations behind the need for more flights.
"China is our second-biggest market in capacity and revenue to Australia and if we can connect those two it would be great," he says. "And that's what we're doing. We fly to 18 Chinese destinations and that's something we want to build on to connect.
"We've seen a lot of (Chinese ) connections coming through. Predominantly, a lot of that traffic is going to Sydney, Gold Coast and Perth and there's a lot of connections to Melbourne from the Chinese."
Even though flying via an intermediate stop increases the fare, Chinese heading Down Under are lapping up the cheaper prices a low-cost carrier can offer compared with full-service carriers.
"I think the good thing is the price," Ismail says. "There's a lot of price sensitivity of what we offer in the market. It gives (Chinese heading for Australia) a lot of encouragement to go on us even with the one stop in Kuala Lumpur."
