Mar 1, 2013

Thailand - Fernandes explains how low-cost flights became his religion

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AirAsia has come a long way from being a debt-ridden airline in 2001 into a successful budget carrier with more than a hundred planes. Chief executive Tony Fernandes gives us his views on the airline's future.

What are the goals you have for AirAsia?

I have some pretty lofty goals. My people think I am crazy, but 10 years ago, if I said to you - coming from the music business - that I wanted to build an airline with 125 planes, you'd probably have asked what drugs I was taking.

I want AirAsia to be one of the greatest companies one can work for. Everyone says put customers first, but my motto is put employees first. If the employees are happy, they will look after the customers anyway. I've lived an amazing life and I live so many of my dreams. I want to be able to give my staff the chance to live their dreams as well. No 2 is maybe an impossible dream, but you have to dream. I hope one day, AirAsia will be as well-known as Coca-Cola. It's tough, but you've got to have some ambition.

What were the biggest obstacles in the early years of AirAsia?

Lack of money was one. The airline industry is very regulated and is really close to governments. You invariably compete with airlines owned by the government. It was tough to break in, and getting support from the government, getting the route rights and also avoiding unfair competition to put us out of business was difficult. Malaysia Airlines could put us out of business because they were subsidised by the government at the time. So to get through to the government and say we should have a level playing field was tough, but we got there.

How did you survive the early days against Malaysia Airlines and Singapore Airlines?

I am not quite sure, to be honest. I look back at the time and wonder, "How the hell did we do this?" When I leave the office, sometimes very late, 12 or 1 in the morning, I look at our planes and sit back and think, how did we do it?

I think we were just very aggressive in marketing. We were very old-fashioned businessmen who focused on cash. We simplified the airline business and so created a niche. Airline business is so complicated.

For me, it's very simple. I move people from A to B, one class - all first class - at the lowest possible price. I try to keep the business simple. I think we survived because we created a business that wasn't there and the other guys took time to react to it or didn't take it seriously.

On top of that, we had two very key ingredients. We have amazing people. Asian companies don't realise that the real strength of an organisation is not the owner or the CEO, but the team. The team goes all the way down to the guys who carry the bags as well. We have a real "can do" spirit, and you can't put that on the balance sheet.

One thing we are good at is building a brand. Ten years ago, nobody knew AirAsia. Now, I arrive in London and people talk to me about AirAsia, not knowing who I am. So I think that's where we've outdone other low-cost airlines. We've built a very strong brand, which we are now monetising.

What impact will the Asean Economic Community have on the airline industry?

I am a big, big fan of Asean. I moved my office to Jakarta. I am a big believer in Asean. I love what's happening. I think Thailand is going to be a big driver. I think an airport like Don Mueang will be a big driver for SMEs [small and medium-sized enterprises], which will be a driver for the AEC. I think SMEs will drive Asean integration quicker.

I am a fan of having more things Asean. One Asean air-traffic-control system would be a godsend. One Asean aviation authority, so Thai pilots could fly in Malaysia and Malaysian pilots could fly in Jakarta. The freedom of movement and labour would make our cost structure much better.

I think for the Asean Economic Community to be a real community, we have to have good connectivity, so I hope that more open skies will evolve and each of us can own more in each airline. I am a big believer. It's very important.

I think airlines like AirAsia will be a big enabler of the AEC. We are one of the few Asean brands. [Former Asean secretary-general] Dr Surin [Pitsuwan] helped me and I put the Asean logo on the plane. I've been a big supporter of Asean. There are not many Asean brands, and the common man may not realise how important Asean is going to be. Asean hasn't done a great job of marketing itself.

I think as everyone gets fixated with China and India, we are sitting on a gold mine here of 700 million people. AirAsia has built its business not out of China or India, but out of Asean. I hope the AEC will create more Asean brands going forward.

What are the biggest challenges in running an airline business today?

I think governments are challenges. In the music business or in the hotel business, you can just move on and do things, but in the airline business, there are lots of regulations. If I want to open a hotel in Bangkok, it's very easy, but if I want to start a route, there are so many approvals. So you are not in control of your destiny as much. You have to deal with airports as well, who don't always see things your way.

There are a lot of unique challenges like that.

Is there still room for other entrepreneurs who want to start an airline business in Asia?

I think there is, but I think it's tough. I started this airline with my partners when the oil price was [US]$30. We built a huge infrastructure when there were no other low-cost carriers. I think it will be tough for someone coming in now, with oil at $130, not many planes available to buy in the market because all of us have bought enough for the next five years and new competition already in place.

Whoever starts a new airline will have to deal with Nok Air, Jetstar, Tiger, AirAsia, Ryanair, Cebu Pacific, etc. It's tough, but airlines are a funny business in that it attracts capital because it's sexy. I am sure there'll be people who'll try, but it will be tough.

Will you be able to drive your ticket prices even lower?

Yes, that's my goal. If people ask what's my religion, I would say low cost. Low cost equals low fares. A big part of that is airports. A big part is air-traffic control so we burn less fuel. I believe we can, and I believe the AEC will be a big part in reducing costs. For instance, air-navigation charges - it's very expensive to fly over Vietnam and Cambodia, but it's very cheap to fly over Thailand and Malaysia. If we have a common system and we allow people flying within Asean to have less air-traffic cost, we can reduce the fares. I believe we can. It's my goal.

I thought of the tagline "Now everyone can fly", but I think we are only halfway there. If I can say in five year time, we got fares low enough that every man in Asean can fly, then we, as an airline, as a community, have done something great.

_ Tony Fernandes' interview on Nation Channel's "Mong Rao Mong Lok" programme was aired on Sunday. The first half of was published in The Nation yesterday.

Veenarat Laohapakakul

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