Air Asia ex: low-cost carrier suspends Maldives operations due to “challenging” conditions

Air Asia X has announced it will be suspending all operations to and from the Maldives from March 1, citing “challenging business conditions” both in the country and in the wider region.

“Despite our efforts, external factors such as the depreciation of Asian currencies against the US dollar and the chronic lack of hotel room supply in Maldives resulted in cancellation of thousands of bookings by travel operators,” said Azran Osman-Rani, CEO of AirAsia X – the low-cost carrier of the AirAsia Group.

“As part of our strategy to operate more efficiently, the airline will deploy our aircraft to routes with the right level of demand to be financially viable.”

“We have been very grateful for the huge support rendered by Male Airport, Maldives Tourism and relevant authorities and would like to put on record our appreciation for all the cooperation that has been given to us,” concluded Azran.

Today’s decision comes just months after the brand expanded its services to the Maldives, with regular flights between Kuala Lumpur and Malé via Colombo announced last September. The airline has said that the Sri Lankan service will continue.

Air Asia has subsequently written to all of its customers offering the re-routing or refunding of pre-booked flights that will be affected.

The Maldives tourism industry currently contributes around 30 percent of the country’s GDP, with visitors to county passing the one million mark in 2013 – growing by 17 percent compared with the previous year.

Neither the Tourism Minister Ahmed Adeeb, the President of the Maldives Association of Travel Agents and Tour Operators Mohamed Khaleel, nor the Secretary General of the Maldives Association of Tourism Industries Ahmed Nazeer were answering calls at the time of press.

The most recent government figures – from July last year – show the operational bed capacity of the industry to have been just under 24,000 in the first seven months of the year, with an occupancy rate of 80 percent.

The Maldivian Rufiyaa currently follows a pegged exchange rate with the US Dollar, with a 20 percent band on either side of a central rate of 12.85 rufiyaa to the dollar. After the managed float was introduced in 2011, the official rate quickly rose to the maximum rate of 15.42 rufiyaa to the dollar where it has remained.

Soon after the Maldivian Monetary Authority (MMA) figures showed the government had printed over MVR1 billion (US$ 64,516,129) in the past year, MMA Governor Dr Fazeel Najeed tendered his resignation.

Before departing last month, Najeeb called upon the state to reduce expenditure and to stop printing rufiyaa, which he argued was exacerbating the country’s perennial dollar shortage.

President Abdulla Yameen’s new government has looked toward the tourism industry for new sources of revenue to finance this year’s budget.

The People’s Majlis last week agreed to hike Tourism Goods and Services Tax (T-GST) from eight to 12 percent in November, approved the immediate reintroduction of the discontinued US$8 bed tax, and will now require resort lease extension payments to be made within two years.