How CEO Tony Fernandes and AirAsia are looking to redefine the role of an airline in a post-COVID world
Tony Fernandes, CEO and cofounder of AirAsia
- Headed by Tony Fernandes, budget airline AirAsia has this year accelerated the rollout of its non-airline offerings
- Key to the company's transformation has been the launch of a digital travel and lifestyle platform and superapp
- New digital products and services include e-commerce, last mile delivery, digital payments and an expanded rewards program
- Fernandes believes non-airline revenues will eventually match and then surpass airline revenue
- Because of his work, Business Insider named Fernandes to our annual list of the 10 leaders transforming supply chain in Asia.
- Visit Business Insider's Transforming Business homepage for more stories.
Under the leadership of co-founder and CEO, budget flyer AirAsia has been disrupting the Asia airline industry since operations first began in 2001. The Malaysian company was last year named the world's best low-cost airline at the Skytrax World Airline Awards. This was the 11th consecutive year it had picked up the award.
Despite its pioneering success, AirAsia has in recent years been implementing strategies to pivot toward a unified, all-in-one digital travel and lifestyle platform. Business Insider looks at how Fernandes and AirAsia are looking to redefine the role of an airline in a post-COVID world.
Moving from budget airline to digital travel and lifestyle platform
AirAsia has from the outset put digital and innovation at the heart of its operations. It was, for example, the first airline in the region to focus on selling tickets directly online through its own website, and today around 85% of its customers book directly through its website.
From 2018, the company saw the potential to drive new revenue streams by building an ecosystem of businesses, all anchored on travel and all leveraging off each other. The arrival of COVID-19 and the subsequent downtime of flights provided the company with the opportunity to fast-track this digital transformation strategy.
"As I always say you have to evolve or you die in this industry," said Tony Fernandes. "The decision to pivot into a digital travel and lifestyle platform actually commenced in 2018, well before COVID-19 hit. One silver lining of the pandemic was that it allowed us to focus on and fast-track our digital transformation by growing our non-airline businesses which not only provides new revenue streams, but also creates new job opportunities for our staff to be upskilled and pivot into new roles within the company."
The airline saw digital transformation as a natural progression. Pre-COVID-19, the company's website had 60 million monthly visitors, which adds up to a powerful database of loyal customers.
"I've always been a firm believer in the digital revolution," adds Fernandes. "Today, data is king and we realised we had a huge opportunity to extend our own assets and leverage our strong brand in Southeast Asia with our own big and rich data."
Expanding the AirAsia product offering
To facilitate the company's digital transformation, the AirAsia Group split its operations into two main divisions - the airline itself and the digital businesses under AirAsia Digital. Under the digital banner, the company now has four key offerings:
- airasia.com In October, AirAsia re-launched the airasia.com brand around the central concept of enabling its customers to fly, to stay, to shop and to eat, all from the convenience of one platform. There are now 17 lines of business available on the app including airasia food (meal deliveries), airasia fresh (groceries) and airasia shop (retail), powered by AirAsia's logistics arm Teleport. In addition, there is airasia Health, which promotes medical tourism, Islam-compliant service IKHLAS, SNAP (flight and hotel bundles) and more.
- Teleport AirAsia's cargo and logistics division has transformed into a major Southeast Asian e-commerce transportation provider. The entity first focused on a cross-border e-commerce delivery service, leveraging AirAsia's flight networks to enable businesses to conduct cross-border trade anywhere in Southeast Asia within 24-hours. Adapting to post-COVID reality and recognising customers' preference for home delivery orders, Teleport pivoted once more to concentrate on last-mile deliveries, transporting parcels, restaurant orders and fresh produce from airasia shop, airasia food and airasia fresh. Teleport now has over 5,000 delivery partners, with deliveries available across 70 cities.
- BigPay AirAsia's digital payment service started out life as a simple debit product but now offers money transfers, with remittances available in 10 countries including Malaysia and Singapore. The company says that loans, marketplaces, insurance and wealth products are all in the pipeline, and that BigPay is on track to become Southeast Asia's first virtual bank. BigPay has received a provisional license for lending and users will soon be able to apply for fast loans at low interest rates. BigPay is also targeting key digital licences in the Philippines and Thailand. The payment service currently has 1.2 million users.
- BIG Rewards Already one of Southeast Asia's largest travel and lifestyle rewards platforms with over 35 million members, BIG Rewards has evolved from an airline loyalty program to a broader lifestyle rewards service, offering points redemption on a range of dining, shopping and entertainment deals. The platform includes BIG Xchange, the first airlines points exchange platform, which allows BIG Members to convert credit card loyalty points from participating banks into BIG Points.
Digital transformation already beginning to pay off
As a result of its accelerated digital transformation, AirAsia says it has seen significant growth in terms of customer base, as well as revenue and other key metrics, for all non-airline business divisions in 2020. According to 2020 third-quarter results, the non-airline subsidiaries grew by 182% and almost all non-airline business divisions are now profitable.
The company says it expects non-airline revenues to contribute up to 50% of total AirAsia Group revenues in the next three to five years and gradually overtake the airline revenues in the longer term.
"As I always say, never waste a crisis," says Fernandes. "We have lived through many before and this will be no different. We will use the opportunity to extend our assets and leverage our big and rich data and go places we have never been before. For AirAsia, nothing is off the table anymore. We will consider any opportunity that makes commercial and viable sense. We are already selling flights for other airlines, including our competitors on airasia.com and providing last mile deliveries."
In terms of the future, AirAsia says demand for travel is still huge and that people still want to fly. Noting the pent up demand for travel, the company says it is already seeing with strong demand for our domestic flights in its key markets of Thailand, Indonesia, Philippines, Malaysia and India.
Given that during an economic downturn, low cost airlines are generally more popular, AirAsia believes it is in a strong position to recover faster than many of its competitors. The company points out that 50% of its traffic is domestic short haul, while the majority of its customers travel for leisure rather than business, both advantageous for fast recovery. In addition, many of its key international markets are in COVID-19 Green Zones, areas that are likely to reopen first.
"Air travel is here to stay and it will bounce back," says Fernandes. "I do believe we have weathered the storm. The worst is over. Our comeback is the best part of the story and I see this as a never ending story. No virus will kill the spirit of AirAsia. We will continue to innovate, adapt, recover and come back stronger."
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