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Scott Jagow: British billionaire Richard Branson launched his new low-cost airline in the U.S. called Virgin America this week. Today, he jetted off to Asia for his next big deal. Sam Eaton reports.
Sam Eaton: The Virgin Group has bought a 20 percent stake in a low-cost, long-haul Malaysian airline.
The new partnership will be called AirAsia X. Its aim is to adapt the budget airline model to longer routes, but that’s a tough combination.
Low-cost airlines are thriving in Asia where demand for short, regional flights between secondary cities is surging, but airline consultant Mike Boyd says once you apply that business model to longer intercontinental flights, profits are harder to come by.
Mike Boyd: You’ve got to put 200-250 people on that airplane to make any money. And if you can do that you’ll be fine. But that means you have to fly out of places where there are a lot of people who have demand to go to Europe, or have demand to go to Sidney or have demand to go to Los Angeles.
In other words hubs like Singapore and Kuala Lumpur where major international carriers already have the upper hand.
AirAsia X plans to begin flights to Australia as early as next month.
I’m Sam Eaton for Marketplace.
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