Sunday, May 2, 2010

Full interview with Group CEO AirAsia Tony Fernandes

Tony Fernandes

AGE: 46


Joined Epsom College, UK in 1977.

Graduated from the London School of Economics in 1987.


 Starting 1987, became Financial Controller, Warner Music International London

 In 1989, moved to Virgin Communications London as Senior Financial Analyst

 Became the youngest Managing Director at Warner Music Malaysia in 1992

 Vice President, Asean, Warner Music South East Asia in 1999

 Bought ailing AirAsia in 2001 for 25 cents to pursue his dream of starting a budget airline

Did you know:

In 1997, Fernandes was conferred the Darjah Sultan Ahmad Shah Pahang (DSAP) which carries the title Dato’ as recognition of his services rendered to the betterment of the nation and community .

AirAsia is a sponsor of Oakland Raiders NFL

Fernandes has established five budget Tune Hotels offering "5 star bedding at 1 star prices" – with more to be launched.

Face-To-Face With Tony Fernandes Group CEO AirAsia

On the Fast Track

When he founded AirAsia in 2001, Tony Fernandes did not seem a perfect candidate to take on the legacy carrier establishment. He had little experience running an airline and could hardly have chosen a less propitious time to make his move; the industry was reeling from the aftershocks of terrorism. But in the past nine years, Fernandes and his partners, who moved to aviation from the music industry, have turned their Kuala Lumpur-based carrier into the largest budget airline in the region. When they bought it, AirAsia was a tied to the Malaysian government and carried a $12 million debt. The purchase price was a token 25 cents – plus a pledge to settle that debt within two years. Mission accomplished, and ever since AirAsia, which is now publicly traded, has been upending the region’s business practices. Fernandes has doggedly opened new destinations, tapping first-time travelers with rock bottom fares. AirAsia operates with two affiliates -- Thai AirAsia and Indonesia AirAsia. Between them they have served more than 82 million passengers with a fleet that has reached 84 aircraft. Although 14 Boeing 737s are flown, they are being phased out. The carrier has planted itself firmly in the Airbus box with a fleet of 70 A320s and another 175 on order, plus options for 50. Looking beyond Southeast Asia, Fernandes brought his budget carrier game plan to long-haul flights with AirAsia X, started with Virgin Atlantic founder Richard Branson as a minority partner. It may be a budget carrier, but there are lie-flat beds in business class, even if they take up space from economy. Its fleet includes six A330-200s and two A340s. Its order book is equally impressive: 25 A330-200s and 10 A350s (plus five options). In all, AirAsia and AirAsia X serve a network of 130 routes covering 70 destinations. He’s begun serving China and is now focused on opening up India. But he also has an eye on the US market, although he expects to take another year jumping the regulatory hurdles and selecting routes and aircraft appropriate to such services. He has a flair for promotion and relies on a variety of forums, which includes making AirAsia a principal backer of the Lotus F1 Racing Team. It was at a F1 race in Sakhir, Bahrain where Contributing Editor Neelam Mathews caught up with him. His remarks have been edited for space.

AW&ST (neelam Mathews): How does it feel to be Asia’s largest carrier?

Fernandes: We have proved so many people wrong. Nobody thought we could do it.

AW&ST: Have you come close to the point where you are bigger than your brand?

Fernandes: I don’t know…. I’m not sure I can answer that question. Ultimately, [I think} one cannot be bigger than the brand. The brand will outlive me, [just as it has] Branson of Virgin Atlantic and [EasyJet founder] Sir Stelios Haji-Ioannou, in the end.

You are now the principal of the Lotus Racing Team revived after 16 years. How is the business of racing similar to aviation?

I am thrilled to be just a sponsor. It was my life’s dream. I never thought F1 was a business, until now. Like aviation, it has to be monetized. There are similarities with an running aviation business. Both involve massive egos, are highly political and need big efficiencies to succeed.

How do you view the future of the two airlines?

AirAsia and AirAsia X are run by CEOs. I’m the glue that sticks them together. I want to emphasize that to continue driving AirAsia X, the two should be unified and break the conventional rule that long-haul and short haul low cost carriers do not mix.

So when will they be merged?

I can’t say too much on the merger until it’s formalized.

You have ordered 15 A-350s? Was this a sage choice?

We believe that right now there is no plane that really can do long-haul effectively in the Airbus family. The A-340 is rubbish. The A350 was the only choice at that time. Now there is the variant of A330-200 long-haul which may suit us better. So we have to wait and see.

So you might change the order?

We’ll have to wait and see.

Any chance of looking at the A-380?

I don’t like anything with four engines. Its too expensive.

What is your biggest success story?

The fact that we were able to survive in the first year. We went through SARS, a tsunami and Post 9/11. We’ve been through so much pain that we managed to tide over. That’s why we are so well trained in F1, because we survived pain and managed crisis well.

One would think that being allowed to fly to Singapore, where there was so much opposition to you, would be on top of your list. Do you hope to start an AirAsia in Singapore one day?

I don’t think they will allow it. Their two airlines are very weak so we will not be allowed to start there. They don’t need a third one.

What about an AirAsia Middle East?

No, we do not want to spread ourselves too thin.

What value does sports sponsorship get for AirAsia?

Look at [it as part of] our sales turnover, by branding AirAsia with t-shirts, hats and ancillaries. I can do AirAsia ticket credit cards, bank accounts, etc. It all comes out of branding. People want to be associated with your brand. When someone tells us we have no idea what we are doing, (I’d say) they have no idea.

Recently, you announced a cooperation agreement with Jetstar, a budget subsidiary of Qantas. It was to be in areas of joint purchase of new aircraft, ground and passenger handling services and maintenance. What has come of it?

Yes, it will be in all those areas and more. It will be in cross areas- for revenue streams. You’ll see a combination of a lot of year’s work in the next three months. Wait and see.

You lost a great deal when you exited fuel hedging last year.

It was a good decision. We got out 18 months ago and oil is still below the price [we exited at]. We were hedged at $90. Many airlines are still there. This time, we have hedged for a shorter period. We don’t want to take a long term view of oil [given the market’s volatility].

What is your experience of Indian airports?

Indian airports are of two types. The private parasites who are doing a job. They put in money and want a return. But the danger is nobody is regulating their return. They look for short term profits as opposed to long term development. Then there are the government airports where people get paid a salary where they do not do much work. Airports are always a problem in Asia.

You have planned 148 weekly flights to India by the end of 2010. What is next?

In India we will continue to do what we are doing and push airports to be more responsive. I waited for seven years for this. You asked me when will you do it - we did, it we hit it! [However], we have just scratched the surface. I should be doing 600 flights to India. Look at Trichy [South India]. Everyone laughed at me when I started to fly there. Now we are planning a thrice daily. Nobody could do it before. It just shows what a tremendous opportunity there is in India. By end of 2011, we will have added 30% more flights to India over 2010.

Do you expect all these people to head for Malaysia?

We will start flights to India not only from Kuala Lumpur but from Jakarta and Bangkok. We will also fly beyond [these destinations] - to Bali, Phuket and Australia. There is a huge Indian diaspora there. Malaysia has a population of 24 million. I have generated 24 million passengers. The Indian diaspora is vast and spread out. Traffic will be two-way as there are a lot of guys running around to India from Australia.

Should the Indian rules allow it , would you consider setting up an AirAsia India?

Yes, one day. For the moment I have my work cut out.

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