TICKY FULLERTON, PRESENTER: The Aviation Outlook Australia Pacific conference wrapped up in Sydney today, attracting several players that have taken to the skies in our region recently.

One of those is AirAsia X, the Malaysian-based low-cost carrier which started flying out of Australia to Kuala Lumpur in April.

Low traffic out of Europe has caused the airline to drop its London flights and focus hard on connections across the Asia region.

I spoke to AirAsia X chief Azran Osman Rani.

Azran Osman Rani, welcome to the program.

AZRAN OSMAN RANI, CEO, AIRASIA X: Thank you for having me.

TICKY FULLERTON: Well it's day two of the conference. You've had a chance to speak to many of the players. What's the mood down there?

AZRAN OSMAN RANI: Well, I think it's probably mixed. Some people are concerned about the situation in Europe and some of the domestic issues with the mining sector, but at the same time I always see a lot of opportunities coming out from times like this, certainly as people become more price conscious, looking for value.

There's always inherent demand for travel and I've always said when we went through with Australia 2008, 2009, 2010, there's been a crisis after crisis, but travel's generally been very resilient.

TICKY FULLERTON: Well the low-cost carrier model certainly seems to be the most successful in the Asia Pacific region. How fast are you in fact growing?

AZRAN OSMAN RANI: Well, you know, Australia, interestingly, now represents about 30 per cent of our business for AirAsia X and while we're expecting to double our fleet by the end of 2014, we also expect to maintain that 30 per cent ratio for Australia. So effectively we're looking to double our presence in Australia over the next 2.5 years.

TICKY FULLERTON: And what about profitability?

AZRAN OSMAN RANI: It's been a challenge for us for the first half of this year because Europe really dragged us down, but since we've stopped flying we've returned back to a positive cash performance in the month of June and the second half of this year looks much better because there's also the respite in fuel prices that's helping us a bit.

TICKY FULLERTON: Now you of course got to Australia ahead of Scoot, Singapore airline's budget carrier. I'm looking at Scoot's deals on the website today, $149 one way Sydney-Singapore. How sustainable is that, lovely as it is for Australians?

AZRAN OSMAN RANI: I don't know what their cost structure is, but for us what's important is making sure that you have a really low-cost position, because otherwise simply dumping prices if your cost is high is going to be a challenge.

But I think the other bigger point is people ultimately are not going to get on a plane purely for the sake of price, but it's the range of destinations and frequencies that you offer that really will compel people to travel.

And I think what we offer is a wide range of destinations across South-East Asia, a lot of connecting frequencies to Bangkok, Phuket, Singapore, Bali, you know, Langkawi, Penang, so many places, and I think that's probably what hopefully set us apart.

TICKY FULLERTON: AirAsia X also, I understand, operates the world's lowest airline unit cost. Now, is this also because you say you've got the highest aircraft utilisation or are there other reasons?

AZRAN OSMAN RANI: 50 per cent of that unit cost difference does come from the ability to extract more output from the aircraft. One part is aircraft utilisation, flying 17 hours a day as opposed to 12, 13 or 14 hours a day and the other part of course having more economy seats because we don't take up as many - as much real estate on the plane for first class, business class and big galleys.

TICKY FULLERTON: Yes, it's pretty tight in there, isn't it?

AZRAN OSMAN RANI: Yes, but other parts also includes labour productivity, airport turnaround productivity - all these things contribute to the cost difference, going direct to consumer using online marketing.

TICKY FULLERTON: And presumably you also make your money very much out of the add-ons, the cost of, you know, having your seat allocated to you and food and all that sort of thing.

AZRAN OSMAN RANI: To the consumer they look at an all-in price and we have to make sure that we still offer a compelling value even with all the add-on prices. But the ancillary model actually is a key way that drives down cost because a lot of, for example, food and beverage alone, right? If you offer it to everyone, there tends to be a high degree of wastage, especially for late-night flights. It requires a lot more labour cost to serve to everyone as opposed to the people that only want the meals and the way the meals are packaged.

TICKY FULLERTON: Now, you'll know of course that Tiger Airways, which is a third owned by Singapore Airlines, their Australian arm got into quite a lot of trouble here last year and in large part I think it was around safety issues, pilot training, pilot experience. Are there lessons for you and other airlines here?

AZRAN OSMAN RANI: We're focused on continually engaging with the key aviation regulators. You know, we spend a lot of time making sure we share data, meet regularly so that they understand the model.

We've had some very good productive sessions with the regulators in Australia and they continue to express their confidence in our model and continuing to allow us to fly here. So, I think engagement is key rather than keeping everything to yourself.

TICKY FULLERTON: And presumably transparency over the balance between cost and safety.

AZRAN OSMAN RANI: Exactly. That's exactly it.

TICKY FULLERTON: Let me ask you about the Chinese market because looking at a low-cost airline like Spring Airlines, a Chinese airline, that is hoping to move from 13 to 100 A320 planes by 2015. That sort of growth is remarkable. Is that a safe bet in China?

AZRAN OSMAN RANI: With China, I think there's tremendous potential because a lot of aviation tends to be concentrated so far in the three big cities of Beijing, Shanghai and Guangdong. And one of the key things I think for us is making sure that we have or take advantage of a multi-hub approach.

So rather than starting from one country and trying to reach out to the world where basically you're still providing a flight based to one country, but you can connect the destinations that you fly through through many points. So, for example, you know, besides Kuala Lumpur we've got hubs in Bangkok and Phuket, Bali and Jakarta, Manila, Japan and so the new ones that we're opening up and that means we can fly into China from multiple points.

So this is what I think will be how the LCC landscape will evolved in Asia Pacific.

TICKY FULLERTON: Azran Osman Rani, thank you so much for joining us.

AZRAN OSMAN RANI: Thank you for having me.