Bangkok--26 Nov--CAPA In a highly symbolic and momentum-building move, Singapore and Malaysia have agreed to fully liberalise access on the Singapore-Kuala Lumpur route from 01-Dec-08 — one month ahead of the official ASEAN capital cities open skies deadline. "That Singapore and Malaysia could agree to open up one of Asia’s most closely protected routes sends a clear signal that it’s time for the region’s governments to get out of the way of the expansion of aviation," said Derek Sadubin, Chief Operating Officer of the Centre for Asia Pacific Aviation. The Singapore-Kuala Lumpur route will also see one LCC entrant from each side operating two daily services from 01-Feb-08. It is a small allocation of capacity, but a massive breakthrough for the LCC sector, particularly AirAsia which has lobbied for many years for access. Singapore and Malaysia will meet again in Jan-08 to consider easing restrictions on routes to other cities in Malaysia. AirAsia simultaneously increased its firm order for A320 aircraft from 150 to 175 and boosted its options back up to 50. This will give AirAsia, the Centre for Asia Pacific Aviation’s Airline of the Year for 2007, a guaranteed flow of new aircraft over the next seven years with which to expand across the liberalising ASEAN region. The carrier’s increasing fleet of efficient new A320s have helped it deliver record levels of profitability in its first quarter ended 30-Sep-07, despite soaring fuel prices. Net profit margin rose to an industry leading high of just under 40% - virtually unheard of in the airline sector - thanks to rising yields (+10%) and falling costs (-3%) to just USD 3.00 cents per ASK — the lowest unit costs of any airline globally. The outlook is optimistic in terms of easing access barriers, but clouded by rising fuel prices. Critically, AirAsia’s hedge position expires at the end of the year. Its associate airlines in Indonesia and Thailand will be worst affected, as they operate older aircraft (including B737s transferred from the Malaysian operation as new A320s deliver). However, AirAsia is confident in managing the higher fuel price environment by increasing revenue from ancillary income and maintaining high load factors. AirAsia will also deliver new A320 equipment to the associate airlines in coming quarters, to help them cope with fuel price rises. Underlying demand remains “strong” for the current quarter (to 31-Dec-07) and yields are expected to be ahead than the same period last year. But fuel costs (already 51% of the total), will be higher than initial budgets, (assuming fuel prices remain at the current level) and will “negatively impact on our ability to maintain profit margins achieved in the same period last year”, according to the carrier.