Indonesia AirAsia X, a long-haul offshoot of the Malaysia airline group that goes by the same name, has finally gained clearance to begin flights between Melbourne and Bali's Denpasar later this month.
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The entry of the budget airline will heap more competition on Jetstar and Virgin Australia on routes to Bali, which has become a loss-maker for the latter.
Virgin's losses from its international operations widened in the first half due in large part to the intense competition on routes to the popular tourist destination.
Indonesia AirAsia X had begun selling tickets as early as October for the launch on Boxing Day of five weekly return flights between Melbourne and Bali using Airbus A330 aircraft. But while it had approval from Indonesian regulators, it had not gained an air operator's certificate from the Civil Aviation Safety Authority.
The delay to gaining approval here resulted in its Malaysian parent re-routing passengers on flights via Kuala Lumpur, or offering refunds or credits for other flights. The sale of tickets without final permission to fly enraged many passengers who had bought cheap promotional fares for the new route.
However, CASA confirmed on Wednesday that it had issued an air operator's certificate after Indonesia AirAsia X demonstrated that "it meets all applicable safety requirements".
The airline said it now expected to begin flights from Melbourne to Bali from March 17.
It is controlled by Kuala Lumpur-based AirAsia X, which replaced its chief executive Asran Osman-Rani several weeks ago in the midst of large losses. Its main competitors are Jetstar and Singapore's Scoot.
AirAsia X is an offshoot of AirAsia, the airline group founded by Malaysian entrepreneur Tony Fernandes.
The group suffered a major setback on December 18 when Indonesia AirAsia Flight QZ8501 crashed en route from Indonesia to Singapore, claiming the lives of all 155 passengers and seven crew on board.
AirAsia has adopted a similar strategy to Jetstar in expanding throughout Asia by setting up affiliate airlines such as AirAsia Indonesia, in which it has a minority stake to get around regulatory barriers.
The long-haul offshoot AirAsia X has also expanded aggressively on routes to Australia over the past few years, flying to five Australian cities, including Sydney and Melbourne.
But in a bid to stem losses, it axed flights between Adelaide and Kuala Lumpur last month.
Indonesia AirAsia X's late launch of flights comes as Virgin searches for ways to curb losses on routes to Bali, which include the retiming of flights to the island holiday destination.
It has also led to speculation that Virgin' wholly-owned budget offshoot, Tigerair Australia, will eventually take over some services to Bali from its parent.
