AirAsia’s Tony Fernandes Talks Digital Transformation in Unique Skift Interview – Skift
Tony Fernandes, CEO of AirAsia Group, was ready to face the skeptics of the company’s recent move to a “travel-based digital lifestyle company,” and the doubters sound all too familiar.
“Every airline has screwed us,” Fernandes said in a one-on-one interview with Skift on Mondayand remembered his purchase of AirAsia for less than $ 1 almost two decades ago. “Everyone laughed at us. Who are these twits from the music business? I’m sure the digital folks are saying who these airline twits are. We will see.”
Fernandes promoted the alleged digital DNA of AirAsia, the first airline in Asia to sell airline tickets online.
“So we’re not virgins in this digital thing,” said Fernandes.
Monday was a remarkable day for AirAsia. After the company launched the AirAsia.com app as the “Aseans Super App” last week and gave AirAsia.com the first slogan “For Everyone”, it offered “Storewide discounts” on most of its products.
In the late afternoon, after about three hours of sales, Fernandes, who had just returned from the Malaysian Treasury Department after participating in credit discussions that he said had “come on well,” counted about 1,000 grocery deliveries and 400 fresh grocery orders in the first three hours of the action.
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With AirAsia downturn in Covid-19, with AirAsia Malaysia operating at 45 percent of pre-pandemic capacity in August, the closure of AirAsia Japan and the impending opportunity to sell its stake in AirAsia India, Fernandes expects the number of Grocery Deliveries A Monday morning was no small matter. AirAsia Digital, formerly known as RedBeat Ventures, with the AirAsia.com platform, logistics and e-commerce services, as well as financial services and loyalty programs, could be a lifeline for the group.
Here are some takeaways from the interview:
Is that a pivot or a lean?
Fernandes is all-in with AirAsia Digital for its SNAP Air Hotel packages, food delivery and financial services, arguing that the e-commerce side of the business could account for 50 percent of the Group’s business in five years.
Cross-selling versus head to head with Expedia and booking
When asked how AirAsia Digital would compete with companies like Agoda, Expedia or the Trip.com Group in terms of customer acquisition and marketing, Fernandes was blunt. “We’re not. We can’t. And we won’t try.”
Excluding AirAsia.com’s new mobile app, SimilarWeb counted 4.6 million AirAsia.com visitors on the desktop and mobile web in September. Fernandes said the strategy is to convince airline ticket bookers to book hotels and rental cars as well.
While other airlines could use online travel agents as their primary selling point, AirAsia.com generates about 70 percent of the airline’s bookings, Fernandes said, adding that AirAsia will market through its own channels.
“This is not a zero-sum game,” Fernandes said, which means there will be multiple winners and if Covid is removed from the picture the e-commerce category would still grow.
An Expedia joint venture, then build your own
It’s a page from the online travel agency playbook sometimes used: Collaborate with a Company, End the Partnership, and Create Your Own Imitation.
Expedia Group and AirAsia had a long-standing, exclusive joint venture in the Asia-Pacific region that recently ended, although AirAsia still sources hotels from Expedia, among other things.
Fernandes freely admitted that he had “some of the best tutors” in the Expedia group chairman Barry Diller and former CEO Dara Khosrowshahi and that AirAsia has gained extensive experience in the joint venture.
“And then we said, ‘Look, we can do this ourselves,” said Fernandes.
Data theater or the real?
As in the early days of his airline business, when he heard about an attractive low-cost flight model from Herb Kelleher, Michael O’Leary from Ryanair, and Stelios Haji-Ioannou from easyJet, Fernandes saw an opportunity in the online travel agency business model.
“When I started 19 years ago I thought we had a great business model,” said Fernandes. “Now that we are starting this digital journey, I think we have a great data model that we can use to catch up with incumbents.”
Fernandes argued that one of the airline’s competitive advantages lies in its amount of data, including that taken from rewards programs and co-branded credit cards. “It means knowing your customer for 19 years,” he said. “It has very high resolution data, KYC (Know Your Customer Data).”
But sometimes companies like Expedia Group have been promoting their data savvy for years, but it turns out this was often more rhetoric than reality. For example, Peter Kern, CEO of Expedia Group, said at the Skift Global Forum last month, “I told the company, ‘I think we have a more complete record of the world’s travelers than anyone, but we never had it on a place, ”Kern said. “[The data] had started in several places. You couldn’t teach your machines or use AI against the data etc. “
Fernandes said AirAsia did not invent the online travel agency or grocery delivery business, but is learning from the incumbents and has its data under control. “We learn from everyone and in the last few years – we talked about it for two years – we have put our data into position. All the buckets are in one place with the help of Palantir and Google. “
AirAsia doesn’t need as many hotels as booking
As with his marketing strategy, Fernandes’ vision of AirAsia as an online travel agency is a twist on the largest in its class, where Booking.com had 2.58 million properties at the end of last year, including 460,000 hotels.
“Less is more to me,” said Fernandes. “I don’t need 50,000 hotels. I need hotels where they make a difference for us. So we relate where we are strong. “
Changing customer behavior is difficult
AirAsia Digital makes a big bet that it can change consumer behavior, turning flight bookers looking for a deal into hotel bookers or even fashion buyers.
“Our ethos is the same,” said Fernandes, referring to the schizophrenic role of a low-cost carrier and a financial technology company. “We are valuable whether we sell watches or whether we sell airline tickets.”
He added, “We’re not going to sell Hermes on our website.”
Pointing to Grab, the leading super app in Southeast Asia that was currently offering amusement rides, and Amazon, which got its start selling books, argued that businesses can move forward.
“Amazon is leading the way,” he said. “They have sold books for many, many years. Now they are selling Cloud Space. “
Fernandes was reminded that Amazon has made several abandoned attempts to travel and that some companies look simple to outsiders but don’t turn out to be so. He countered that Amazon could make it while traveling if it has ample travel resources but too many other lucrative businesses to handle.
When asked if there is a risk that AirAsia and AirAsia Digital will not have the necessary focus, Fernandes said that they operate as nearly independently run companies so focus is not an issue.
He argued that AirAsia had already sold things like groceries and duty-free goods, but so far it had mostly done so on flights.
“We’re a delivery company – we just did it in the air,” Fernandes said. “All e-commerce companies have used us to move boxes. Now we’re only doing the last mile, it’s a natural extension. “
Path to profitability?
AirAsia Digital lost $ 11 million in the second quarter, but Fernandes said all digital companies were in the black with the exception of financial services. “Except for our fintech business, they all make money,” he said. “That’s where most of the casualties come.”
Other superapps are losing hundreds of millions, he said, adding that AirAsia Digital’s BigPay is losing money only because of the exchange fee. Otherwise, Fernandes said: “We’re in a pretty good position.”
AirAsia Digital branches out as the airline looks inward
While AirAsia Digital is focused on myriad e-commerce services and products, the airline itself is losing its Japan business and India may soon follow suit.
Fernandes noted that the airline group has a presence in Malaysia, Thailand, Indonesia and the Philippines and said: “Our strength has always been in Southeast Asia. We will continue to focus on that. “
For the future, Fernandes speculated that domestic travel would pick up again first, followed by regional travel, continental travel and then intercontinental travel.
“For us, the majority of our trips are regional, so we hope this is the sweet spot there,” he said.
The AirAsia Group makes the most of the fact that a digital lifestyle brand will also be their sweet spot – regardless of the naysayers.
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