Round-trip airfares from Hong Kong to Bangkok for $200-$300? The same to Kuala Lumpur for $300-$400. Impossible? It would certainly seem so, given that the established local carriers typically charge as much as $2,000 for similar runs in economy class. Yet, such affordable fares may be a reality in Hong Kong by the end of the year, as the no-frills, low-cost airline phenomenon reaches the SAR, having stormed the west. The accelerating pace of regulatory reform in the region's aviation industry makes such pricing possible. In recent weeks, the Thai and Malaysian governments have agreed to deregulate air services to and from Hong Kong, giving unlimited access to the SAR from anywhere in the two countries for their carriers, in return for similar rights for Hong Kong airlines. That was music to Tony Fernandes, chief executive of Kuala Lumpur- based AirAsia, a two-year-old no-frills carrier with operations in Malaysia, and Thailand, where it has a joint-venture, AirAsia Thailand, with Shin Corporation, the family firm of Thai Prime Minister Thaksin Shinawatra. 'Those deals are great news' for AirAsia, he said, because they opened the door for it to fly to Hong Kong - one of the most important travel markets in Asia - from some of the most popular holiday destinations in Southeast Asia, in Thailand and Malaysia. Mr Fernandes said AirAsia would look at launching a Hong Kong-Bangkok service first, before attempting to link the SAR with Kuala Lumpur, he said. 'I think Bangkok will be the preferred [route] first, since it is closer to Hong Kong,' Mr Fernandes said. 'Hong Kong to Kuala Lumpur is a bit farther away. We'll try to work the economics of the routes so that we can price at least 50 to 60 per cent, on average, below the regular market fares. 'But Phuket, Langkawi, Kota Kinabalu and Kuching [in Sarawak] are also possible points. We may surprise some people with some new routes that have not been done before.' Mr Fernandes said his airline would 'do great things for Hong Kong tourism'. Restaurants and shopping would benefit, he said. 'Hong Kong and Singapore are the 'glam' cities in Asia, in my opinion ... and [with cheaper air fares] tonnes of people [from Southeast Asia] will want to come up here.' Mr Fernandes said AirAsia was not widely-known in Hong Kong - yet. 'But this time, when I arrived in Hong Kong, the taxi driver who picked me up did know a bit about AirAsia,' he said. 'He asked me: 'When is AirAsia coming to Hong Kong?' and said that he had always wanted to go to Malaysia for a holiday, but couldn't afford it. 'That was a real buzz for me, for a Hong Kong taxi driver to tell me he really wanted to go to Kuala Lumpur. Obviously, this guy couldn't afford to fly on Cathay Pacific. But I bet that if he picked up a newspaper and saw a $300 to $400 round-trip fare to KL, he'd be able to say, 'Yeah, let's go, let's go for the weekend'.' Mr Fernandes said a $200-$300 round-trip fare from Hong Kong to Bangkok was feasible, given AirAsia's ultra-low cost base. He said he didn't know when AirAsia would begin operations to Hong Kong. 'But we won't come unless we get a good deal,' Mr Fernandes said. 'Hopefully, it can be done by the end of this year. It is feasible.' The move depends on costs. AirAsia flies twice a day from Singapore's Changi Airport to Bangkok, after securing what Mr Fernandes called a reasonable deal from the city state. 'The key to whether or not we can start Hong Kong services is airport charges,' he said. 'It's the same reason why we don't like Changi. My God, Chek Lap Kok charges for everything.' Mr Fernandes said he recently met Hong Kong Airport Authority (HKAA) commercial director Hans Bakker, and formal negotiations would begin soon. He said initial talks with the authority began on Wednesday. Mr Fernandes said he was getting a 'warmer attitude from airports' than he did just a year ago. 'Two years ago, people would stick two fingers up at me,' he said. 'But now people have learned a bit more about the low-cost airline business and are seeing us as complementary, not cannibalising.' Although low-cost carriers returned less in direct-use charges, lounge rentals and fees to airports, they also contributed to their bottom lines in other ways, Mr Fernandes said. 'Our passengers tend to come to the airport earlier,' he said. 'They're going to buy souvenirs, because they're in a holiday mood. And they'll probably buy something to eat as well, as they know there's no food on the plane, unless they pay for it. 'I think the way that Hong Kong is developing its airport fits into our strategy. There are shops and restaurants at every key location within the terminal building. So, there's been a warmer attitude [to us] from the Airport Authority ... and a real drive to make things happen.' For the AirAsia-Chek Lap Kok relationship to work, the HKAA will have to rethink some of its charging structures for landing and parking, the airline boss said. 'We'll need some changes. We can't use the air bridges at the airport terminal because that will take too long for us. We park our plane, the passengers get off and walk to the gate. This way, we minimise turnaround times - land and take-off again as soon as possible. No buses, either.' Cost-cutting will be critical for low-margin AirAsia's profitability at Chek Lap Kok. Compared with its domestic routes to smaller, cheaper, regional airports, AirAsia's Bangkok-Singapore service costs the airline about 20-30 per cent more to operate per available seat-kilometre. 'Still, our costs are so low that we're able to make money on that route, even offering air fares that are 50 to 60 per cent below market and with 12 other competitors,' he said. Mr Bakker was coy about the extent to which the HKAA would help AirAsia lower its operating costs at Chek Lap Kok, but said it would welcome the airline to Hong Kong. 'Of course, we welcome more airlines, more passengers and more cargo to Hong Kong International Airport,' he said. 'We will do everything we can to accommodate them.' Referring to AirAsia's specific needs for faster turnaround times, Mr Bakker said Chek Lap Kok was a flexible airport, 'so, in principle, anything is possible'. He said Amsterdam's Schiphol Airport hosted low-cost airlines such as Easyjet, without having to offer reduced charges. 'The major difference is in the turnaround time,' he said. 'They work together to make much better use of assets.' In its first two years, AirAsia has turned the region's aviation industry upside-down, with its consumer-focused strategy and ultra-low airfares. Full-service airlines such as Singapore International Airlines (SIA), Thai Airways and others are now rushing to launch no-frills, low-cost airlines of their own. 'In some ways, we're flattered that airlines like SIA, who are really admired, are going to mimic us,' Mr Fernandes said. 'To be honest, two years ago, people laughed at us ... so, we've certainly started something. But I'm not worried about competition. My enemy is cost.' AirAsia has also made the news for its disputes with Singapore's Ministry of Transport (MOT), which frowned on the airline's Kuala Lumpur-bound flights from Senai Airport in Johor Bahru, across the causeway from Singapore. Earlier this month, the Singapore government also shut down a bus service it said was illegally operating between the city state and Senai. The stories mirror Chek Lap Kok's concerns about Shenzhen Airport stealing Hong Kong traffic, but Mr Fernandes said AirAsia got a 'reasonably good deal from' the Singapore MOT to use Changi for its Singapore-Bangkok services. 'We've had a hot-and-cold relationship with Singapore,' he said. 'We've caused some friction with the MOT ... that we had not intended. But our business is chasing the lowest costs, and Senai is the lowest-cost airport. On the other hand, the [Singapore] Ministry of Tourism has been very supportive of us, as well as some Singaporean companies. Singtel and DBS have been a large part of our success. So, it's a bit of a Jekyll-and-Hyde situation.' Even if the airline paid lower charges on the Kuala Lumpur-Changi route, AirAsia's Malaysian clientele couldn't afford the fare. 'The MOT would be happy if we agreed to fly from Changi to Kuala Lumpur, rather than from Johor. But we can't,' Mr Fernandes said. 'When we fly from Kuala Lumpur to Johor, the domestic airport tax is M$12 (HK$24.60) per passenger, as opposed to M$100 for international flights if we flew directly into Changi. For a family of four, that's M$400, a lot of money for people in our market.'