An AirAsia plane at an airport in Perth, Australia. The chief executive Tony Fernandez has unveiled big plans for the carrier. AP
An AirAsia plane at an airport in Perth, Australia. The chief executive Tony Fernandez has unveiled big plans for the carrier. AP

AirAsia CEO aims to put airline on a new trajectory



Tony Fernandes, the co-founder of AirAsia, is seeking to transform Asia’s biggest budget airline into an asset-light, digitally focused firm after the $1 billion sale of its leasing business, in an effort to foster sustainable growth.

AirAsia, which pioneered budget air travel in Asia along the lines of Ryanair in Europe, is now building a sprawling empire that includes a payments company, logistics firm, food and beverages brands and a loyalty programme.

Leveraging the profusion of customer data from its 65 million-plus passengers, the focal point of the strategy is a digital push that exceeds in scale that of regional budget airlines like Indonesia’s Lion Group and Cebu Pacific of the Philippines.

AirAsia will also be going head-to-head against flag carriers such as Singapore Airlines, which is ramping up investments in digital technology.

The goal is to offset the volatile earnings from the cyclical airline business.

“The biggest asset is our data,” Mr Fernandes said. “And we’re going to monetise that data over a series of joint ventures in three kinds of pools.”

That includes turning its loyalty programme points into a more formal currency through an initial coin offering, building a bigger logistics business and growing its content offering.

In the near term, however, analysts say the move by one of Airbus’ biggest global customers to part-lease its current and ordered fleet of 500-plus planes could hurt its profits and leave it exposed to the risk of higher lease rates.

“The leasing arm was a stable low-risk business,” said Ngoi Se Chai, a partner at Hong Kong-based Oaklands Path Capital Management. “Now that that’s sold, earnings will come down and become more volatile. I think they sold something they shouldn’t have sold.”

While the sale proceeds from the leasing business will be used to reduce debt, the bulk will be paid out as special dividends, potentially limiting the upside in a stock that has more than quadrupled since hitting a seven-year low in late 2015.

“The amount of money generated from this exercise could almost wipe out AirAsia’s entire debts, so it would appear a positive move,” said Shukor Yusof, founder of consultancy Endau Analytics, but he noted it faces risks associated with higher leasing rates.

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Leasing had accounted for around 20 per cent of AirAsia’s revenue, with a similar share earned from non-ticket items like baggage fees and food sales.

The aim is to lift revenue from so-called ancillaries by 12 per cent this year.

AirAsia plans to launch remittance and lending products in South East Asia, through its BigPay debit card and mobile app in Singapore after the recent launch in Malaysia, BigPay’s group CEO Chris Davison said.

But for now, the company’s non-flying revenue lags global low-cost leaders like Spirit Airlines in the United States and Ryanair and Wizz Air in Europe that receive 40 per cent of revenue from ancillaries, said Jay Sorensen, president of US-based consultancy IdeaWorksCompany.

He said AirAsia’s food, in-flight Wi-Fi and loyalty programmes were good offerings but its approach in pricing add-ons was not maximising revenue because it only offered two bundled choices rather than three.

“The best practice today is to present three choices at the same time, based upon a good, better and best model.”

The digital push is front and centre as Mr Fernandes restructures AirAsia into a listed group that oversees stakes in multiple airlines in Malaysia, Indonesia, Thailand, Philippines, India, Japan and soon Vietnam and China and digital ventures rather than having the listing based on its Malaysian airline.

Combined, AirAsia forecasts the digital businesses will account for 7.6 per cent of revenue this year, nearly half of its ancillary sales.

Former CEO Aireen Omar, who became deputy group CEO in January, is overseeing the non-airline businesses in a single entity that will ultimately seek a US listing.

Corrine Png, CEO of research firm Crucial Perspective said AirAsia could triple its share price if it can successfully collect and monetise its Big Data.

“AirAsia’s current valuations are low as investors see it as a cyclical airline,” she said. “However, as its long-term revenue and earnings growth prospects improve, equity investors will start to value AirAsia like a growth stock.”

BULKWHIZ PROFILE

Date started: February 2017

Founders: Amira Rashad (CEO), Yusuf Saber (CTO), Mahmoud Sayedahmed (adviser), Reda Bouraoui (adviser)

Based: Dubai, UAE

Sector: E-commerce 

Size: 50 employees

Funding: approximately $6m

Investors: Beco Capital, Enabling Future and Wain in the UAE; China's MSA Capital; 500 Startups; Faith Capital and Savour Ventures in Kuwait

Milestones on the road to union

1970

October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar. 

December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.

1971

March 1:  Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.

July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.

July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.

August 6:  The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.

August 15: Bahrain becomes independent.

September 3: Qatar becomes independent.

November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.

November 29:  At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.

November 30: Despite  a power sharing agreement, Tehran takes full control of Abu Musa. 

November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties

December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.

December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.

December 9: UAE joins the United Nations.

MATCH INFO

Newcastle United 2 (Willems 25', Shelvey 88')

Manchester City 2 (Sterling 22', De Bruyne 82')

How to wear a kandura

Dos

  • Wear the right fabric for the right season and occasion 
  • Always ask for the dress code if you don’t know
  • Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work 
  • Wear 100 per cent cotton under the kandura as most fabrics are polyester

Don’ts 

  • Wear hamdania for work, always wear a ghutra and agal 
  • Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
Cryopreservation: A timeline
  1. Keyhole surgery under general anaesthetic
  2. Ovarian tissue surgically removed
  3. Tissue processed in a high-tech facility
  4. Tissue re-implanted at a time of the patient’s choosing
  5. Full hormone production regained within 4-6 months
German intelligence warnings
  • 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
  • 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
  • 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250 

Source: Federal Office for the Protection of the Constitution

Game Changer

Director: Shankar 

Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram

Rating: 2/5