And then even before the dust had settled on those cancellations came news that it was also stopping its Christchurch service which it launched amid much fanfare last April.

In press statements following announcements of the cancellations, the airline explained the scrappingof the four loss-making international routes was part of its strategy to improve operating cost efficiencies and to focus on its core markets of Australasia, China, Taiwan, Japan and Korea. (read story)

The move, which left about 30,000 passengers in limbo, generated so much negative publicity that AirAsia Group CEO Tan Sri Tony Fernandes had to come out to defend AirAsia X, saying the move as “purely business”  and not, as being bandied around, to accommodate and establish a business strategy with national carrier, Malaysia Airlines. (read story)

A politician also jumped into the fray. He was quoted in an online news portal as saying Malaysia Airlines’ (MAS) huge financial losses could be “a result of carrying AirAsia X passengers (those affected by the axed flights) for ‘almost’ free.” He even lodged a police report against MAS’ top management “alleging that there may have been “criminal elements” involved.” (read story).

In an interview with WIT, AirAsia X’s CEO Azran Osman-Rani (pictured left) brushed aside this allegation, clarifying MAS did not carry the affected AirAsia X’s passengers for free. “We paid MAS in full for flying them to the destinations that we have suspended.”

Brushing aside the reports and comments as “hearsay” made by individuals with an agenda, he acknowledged the route cutting exercise was not popular but had to be done as part of the airline’s network realignment strategy.

He reiterated AirAsia X was not shrinking its business but was instead committed to more routes and revenue growth.

“Our development plans were hampered as the government didn’t approve the routes we wanted. We had the planes but could not fly to the routes we requested for, so when a destination was available we flew there instead of leaving the planes idle. For example, if we had been given Sydney earlier we wouldn’t have flown to Christchurch.”

The airline has just increased flight frequency from Kuala Lumpur to Taipei (Taiwan) and Perth (Australia), and launching new services to Sydney (April 1) and Tokyo.

Azran, however, declined to disclose which new destinations AirAsia X was planning to add to its network. He was just as coy on the airline’s much speculated IPO, replying that it would be revealed when the time is right.

The airline’s strategy is to establish an optimal network. “In business we need scale, and we could achieve this in Australia, China, Taiwan and Japan. Late last year we got all the routes we wanted to fly to, and this realignment exercise is to have the best network and a sustainable one for AirAsia X. We are doing this to survive in a tough environment and to put us in a position of strength.”

Most of the airline’s current routes are doing well, even new ones. Azran cited Sydney as an example. “Sydney is one of our best new routes, and the response to its service incredibly high.” (Sydney is a much-prized route for the airline, having fought years for it.)

Azran said the airline’s market share in both Europe and India was small. Europe was not sustainable as most of the economies are down, currency weak and outbound travel slow. Added to these woes are the implementation of the Emissions Trading Scheme and the escalating Air Passenger Duty taxes in UK.

On the outlook for Europe, Azran noted that the economy is not going to improve in the short term. He does not foresee AirAsia X returning to Europe anytime soon.

As for India, the airline is hopeful in reinstating services once the structural issues – visa restrictions between India and Malaysia, and increased airport/handling charges – can be resolved. These issues are not conductive to the low cost model, he maintained.

Azran also dismissed suggestions that AirAsia X is moving away from longer flights or that the low cost long haul model does not work, saying it is not about distance but about economics.

“We are doing well as we are managing costs and adhering to our values. When you are successful people want to chop you down.”

The proof, as they say, is in the pudding. And the pudding for AirAsia X is the encouraging average passenger load factor at 80.1% for 2011 (+3.6% from 2010) – the highest for the almost five-year-old airline. Passengers carried last year totalled 2.5 million (1.9 million in 2010). Total revenue was RM1.9 billion. a 45% over 2010’s.

Azran is confident the numbers will be higher this year. He attributes AirAsia X’s strong performance and its continued growth to a number of factors:

•  A strong brand, which is recognised and received globally.

• An efficient feeder network that is unrivalled, spanning major destinations in the ASEAN region and Asia from its hub in Kuala Lumpur.

•  High aircraft utilisation, with the regions fastest turnaround time at only 25 minutes.

•  On time performance – 88% in 2011

•  Reliability with its fleet of wide body aircraft

•  Affordable fares

•  Good customer delivery, which has won it Skytrax’s World’s Best Low Cost Airline for three consecutive years.

•  Dedicated team

“The brand and our network are our greatest advantage,” said Azran.

Technology is also a driving force, which puts AirAsia X ahead of its contemporaries. It is the first airline in the region to go online with a wide range of distribution channels to make booking and travelling easier.

The airline is adopting a direct-to-consumer channel that accounts for over 90% of its sales.

It has moved most of its services, which previously were handled by its staff, online. Examples, self check in via the web/mobile and AskAirAsia, which is an online one-stop help and information centre.

The airline is working with travel agents as they still form an important part of the equation, said Azran. About 5%-6% of the sales come from the travel trade, reaching 20% in some markets.

“There is a segment of travellers out there who still want agents to create a good package for them that incorporates multi-destinations with AirAsia X’s network.”

Despite its heavy focus on technology, the airline has no plans to reduce its current staff strength of 1,200. “Our staff is trained to be multi-tasker, one day a member may be checking in customers, tomorrow he could be helping to plot the flights’ path.”

Benefits from the AirAsia-Expedia joint venture?

“It’s still too early to gauge the actual benefits, but we do see them coming. As Expedia is the world’s largest OTA, it has wide reach. People who have not tried flying with AirAsia X may see us on its Expedia website and have access to our products and services. It can also create bigger itinerary with our products.”

On challenges ahead in a tough environment of continually rising fuel prices, uncertain global economies and competition, he said that top on his list is to have “the strongest brand awareness and acceptance.”

The others are to:

•  Maintain the ability to be the lowest cost operator

•  Continue to push online reliability and new innovations in both products and services

•  Cook up new ideas to be ahead of the game

•  Push the envelope

“Ultimately it is the AirAsia culture, our people and our creativity that will propel us ahead despite trying times,” added Azran.