3 November 2012
TEN years on after taking a chance to start a low cost airline, Tan Sri Tony Fernandes is sitting in a hotel room in the Westin Hotel in Busan, South Korea just after launching the Tokyo-Busan air sector that will be operated by his 49%-owned unit AirAsia Japan.
In a quiet surrounding, in contrast to his public persona and frenetic business empire, he gives an quick secession of interviews like he has done many times before.
For a man who is setting up affiliates across Asia, jet-setting to exotic destinations where the Formula 1 races are held and also appearing virtually every weekend on television while watching his Queens Park Rangers play, he is remarkably full of energy.
It was the same energy he had when he built AirAsia from two planes to 115 aircraft today, all along never wavering on the positiveness of his ebullient character. He is a man whose confidence never seems to fade.
In fact, he is now more energised and determined as he has delegated the rigmarole of day to day operations of the airline that he and his partner Datuk Kamarudin Mernanun built.
But it's never been easy street for Fernandes who has had to battle to get to where he is today, In recent times, he had to contend with issues like the recent selldown of AirAsia shares by the Employees Provident Fund where he and Kamarudin became the net buyers, the criticisms over his decision to move to Jakarta after a decade of building AirAsia from Kuala Lumpur, and the emerging competition that is more intense compared with a decade ago.
Aireen has taken over managerial and third party duties as CEO of AirAsia Malaysia.
But his biggest competitor is himself because he was the one that taught and showed others that the low cost airline model works in Asia. He drew up the blueprint for a low cost carrier in Asia and others are now reverse engineering his methods and are using the formula to compete with AirAsia.
Be it Jetstar, Scoot, Nok Air, or Lion Air, they are after the same market that AirAsia is vying for over the next decade of growth.
Competition is no longer in-country but across all geographies because Fernandes has moved AirAsia across new frontiers after branching out his empire from Malaysia to parts of Asean.
His game-plan now is to make AirAsia a truly Asian airline. Big markets such as India and China offer vast potential but the stakes are high. But true to his nature, Fernandes is dead set on making it work though it may take him a better part of the next decade to realize his vision.
The last decade
For the past ten years he has considered himself a “dreamer”, but his dream is now an empire that spans across five countries Malaysia, Thailand, Indonesia, the Philippines and Japan. Besides the airline business, Fernandes and his team has also ventured into the hotels, insurance, mobile services, sports and education business.
In his early days of being CEO of AirAsia, he was often seen at Subang airport, standing and watching passengers, sometimes helping to carry their luggage to check in travellers. It's not his comfort zone but his presence and visibility of doing the simple things made it clear he wanted to learn everything about the airline business and he was willing to do whatever it took to make it a success. He had his sceptics, as he and his friends were labelled as a bunch of music people dabbling in unchartered territory of the cutthroat and volatile airline business.
But today, AirAsia is the leading low cost airline in the region.
Success was gained through sweat and tears and there wasn't a red carpet treatment for Fernandes and AirAsia. The national carrier Malaysia Airlines (MAS) had given them a tough time, using their lobbyist network to shut them off lucrative routes and AirAsia had to start by plying to and from secondary airports.
But that and with its branding of “now everyone can fly” gave people a new perspective in travelling.
His favorite words when he started was “unfair competition” and he always felt AirAsia was being marginalized in the domestic market which was then controlled by incumbent MAS. He fought for landing rights, routes, with airports, airlines, regulators, and governments to get his way.
Had he not, “there is no way, no way at all that we would be where we are today. And it is my nature, I just cannot take what is given. That is the easy option, but easy options will never be the same as the tough ones,” he tells StarBizWeek.
From two aircraft, and a decade later, AirAsia has grown to own 115 aircraft. It has ordered 300 more, may lease a dozen more and wants to make a fresh order for 50 more.
After its first year of operations, the airline made a modest profit of RM29mil and carried 1.1 million passengers. As of last year, AirAsia chalked a net profit of RM564mil on the back of RM4.7bil revenue. It flew 30 million passengers and has cash of RM2.02bil, while load averaged 80%. For the third quarter 2012, analysts believe AirAsia will fly in RM1.24bil in revenue and RM225mil net profit.
The future
The original concept of AirAsia was that of an Asean brand but Fernandes is set to make it an Asian brand.
“We are on our final chapter of the dream I had a decade ago. We are truly an Asean brand now and the last bit is to be an Asian brand,” he says.
To him, there are loads of opportunities in Asia, be it South Korea, China, India, Myanmar, Cambodia or Indonesia. It is just about finding them and making them work. He is the type of guy who believes in organic growth and prefers to do that, though acquisitions will leap frog the airline.
He tried his luck with Batavia Air in Indonesia, but that deal turned sour. While he feels AirAsia Indonesia can grow organically, CAPA Centre of Aviation felt the Batavia Air deal would have done AirAsia good.
“It leaves AirAsia with a daunting task of having to rely on organic growth to increase its share of Indonesia's booming but crowded domestic market,” says CAPA, adding that AirAsia Indonesia is the sixth player there and deal with Batavia would have pushed it to be third largest player.
“AirAsia's position in the market, the group's overall position in Indonesia has been weakened as without the Batavia deal, AirAsia will likely struggle to meet its goal of becoming a significant player in the domestic market,” says CAPA.
Indonesia AirAsia carried only about 1.3 million domestic passengers in 2011, giving it only a 2% share of Indonesia's domestic market.
But Fernandes still believes AirAsia can grow organically in that market and the impending IPO of AirAsia Indonesia will bring a lot of goodwill to the airlines. The IPO is slated for early next year.
Still, he says: “I would never say never to acquisitions but it has to be at the right price and at the right time.”
He is scouting for opportunities in China, which he thinks is a tough market, and India, which he thinks is more “sexy” than China. In South Korea, AirAsia is in talks with smallish T-Way for a possible acquisition and in Cambodia, some groundwork has began.
He still has not forgotten how the deal in Vietnam went sour and is not keen on that market for now. Mynamar, a flavour among investors in recent times, carries the promise of hope, but again, that is a new market and every other player is trying to jump into it with no clear indication what the growth potential is.
To him, if he can get a footprint across Asia, he would have achieved a lot. Connecting the dots in Asia will complete quite a bit of the puzzle of his airline empire but it will take some time and precise planning is needed as competition across these markets are no longer the same as on the domestic turf.
He knows the Asia market is huge as it has been reported that Asia is the centre for air travel this decade as Europe suffers from is own financial problems and the United States has it own set of lethargy. The rising affluence in Asia is putting money into people's wallets and hence experts have forecast that the Asia-Pacific region will have 2.2 billion passengers by 2030.
And Fernandes wants AirAsia to reap that Asian potential.
Detailed 5-year plan
To tap this growth, he says he needs a very detailed plan. It's more comprehensive than what he's accustomed to.
“It is always on my mind but we are going to have a detailed plan. We have hired a lot of smart people, though we have a balance of some smart, some entrepreneurial and some just with the gut feeling. And all of them have come together.”
That plan will be the blue-print to tap Asia, and to chart the markets to tap into he needs more joint ventures, the aircraft requirements, map the actual network and routes, and have a more coordinated marketing plan. All of that will require money and that too is being studied comprehensively. And all this planning is happening in Jakarta, where he has a nerve centre for the group. Because AirAsia has grown in scale from its early days, there is a need to have more coordinated approach to planning.
Earlier this year he moved over 20 personnel to Jakarta and set up a planning office. This move has been criticized and he continues to get knocked for making that decision.
“People still think I have left Malaysia because of the (failed) share swap between MAS and AirAsia,” he says.
He handed the reins of the Malaysian operations, something he has been very passionate about because he founded and set up AirAsia Malaysia, to Aireen Omar.
Though he says he has handed the reins, those in the know claim the he is very much in control of the day-to-day operations. But it also leaves him with more time than previously. And his best tool is the iPad and Blackberry. Throughout the interview, he kept looking at the Blackberry to check his messages.
“I have relatively more time on my hands as I am not doing the day-to-day running of the Malaysian operations by being in Jakarta. I can move around and do all the deals I could not do earlier. I can now spend two days in Delhi and understand the market better,” he says.
The airline has over 300 aircraft under order and he says “we are never worried about aircraft financing, though there will be credit risk.”
He has plans to bring forward some deliveries to cater for future growth.
“We have brought 30-40 aircraft deliveries forward over the next three years and our orders for the 175 aircraft would be finalised. AirAsia X will be a big part of the future growth.”
Contrary to market belief that growth has stagnated, he says, there will be growth in Malaysia and it is both inbound and outbound. Those leisure destinations like Kota Kinabalu, Langkawi, Penang will continue to grow,” he says.
The competitors
Lion, Tiger, Scoot, Jetstar and soon to be launched Malindo Air are also racing to have a bigger footprint of Asia. Jetstar is tailing AirAsia wherever it goes and Scoot is giving AirAsia X a run for its money. Scoot is in markets where AirAsia X is. Jetstar and Tiger are in markets where AirAsia is.
Lion is the biggest Indonesian rival and has stretched itself to eat into the Malaysian market and beyond via Malindo Air. Malaysia remains the stronghold for AirAsia and since Malindo's birth in September, AirAsia has been offering free seats to discounted fares to lock in passengers after May 1. Now Malindo has changed its strategy to come to market one-and-a-half months earlier than earlier announced.
To Fernandes, competition is nothing new. AirAsia had navigated through that when it had just two aircraft. It fought to gain access into the Singapore market, it penetrated the Thai, Indonesian and Philippine markets and now has a foothold in Japan.
While competition from Jetstar, Scoot, and Tiger is not that intense at the moment, experts believe the one coming from Lion and Malindo is going to be intense, simply because Rusdi Kirana, the low-profile millionaire from Indonesia, is determined to expand his empire the way Fernadnes has.
“Despite its very small presence in South-East Asia's largest domestic market, AirAsia is still Asean's largest low cost carrier group. But Lion is already bigger in Asean than Jetstar or Tiger and has also overtaken AirAsia as the largest airline group in the intra Asean-market based on current capacity figures on routes within South-East Asia,” says CAPA.
While Lion is primarily a domestic operator, it is expanding its international network via Malindo, and clearly AirAsia is watching Lion closely to determine where AirAsia would place the 300-plus aircraft it has on order.
The other business
For AirAsia, Asia is the big market but Fernandes and Kamarudin are also into a lot more things than they were 10 years ago. He now has his fingers in football via QPR, has a passion for F1 races because he has a team that he hopes will beat Ferarri and Mercedes.
He has developed Tune Money to provide a form of financing, has Tune Insurance, which is revolutionising the way people need to be protected. It doesn't stop there. Tune Mobile offers mobile phone services and Tune Hotels cheap hotel rates. Fernandes is also involved in education.
Tune Insurance is slated for listing and so is AirAsia Indonesia and AirAsia X, the medium haul airline within the enlarged group which released its draft prospectus yesterday. The three listings Tune Group's insurance arm, AirAsia X and the budget carrier's Indonesian wing are expected to bring in proceeds of more than US$500mil (RM1.52bil).
But what he has in mind is yet another dream.
He wants to get into the medical business and he wants the AirAsia's brand name to be as well-known as Coca-Cola. He will achieve a lot if AirAsia becomes the airline of choice for travellers be it in the deepest regions of Asia to cosmopolitan cities and even developed cities across Asia.
“I want AirAsia to be like Coca-Cola ... that everyone knows AirAsia. We want to be the first airline people think of when they want to fly,” he says.
To get there, the airline spends between 2% and 4% of its budget on advertising and branding and Fernandes says that was critical, though he believes that “one thing airlines don't do well is spend wisely.''
[Source]
No comments:
Post a Comment