SINGAPORE, June 28 — In this series, TODAY’s journalists meet the people behind the headlines.
In this instalment, senior journalist Wong Pei Ting speaks to Tony Fernandes, the chief executive officer of AirAsia Group, which in March launched a food delivery service in Singapore as part of ambitions to become Asia’s next “super app” to rival Grab and Gojek.
In June, the Malaysian budget airline made a call for interested fresh produce and grocery merchants to join the platform as it also wants to go into grocery delivery.
These moves generated curiosity as many airlines, dealing with the impact of grounded flights during the Covid-19 crisis, have taken temporary measures to cut losses. Why did this airline imagine it could break into the delivery sector? Still, AirAsia may prove to be a trailblazer. Another airline, Cathay Pacific has just unveiled plans to sell products other than air tickets to its customers, in an effort to generate fresh revenue.
Speaking to TODAY over video conferencing platform Zoom from his office at Wisma Tune in Kuala Lumpur, Malaysia on Tuesday (June 22), Fernandes, 57, talks about why he is not daunted by the challenge, and how he managed to convince his board that it would work.
Excerpts of the interview are edited for length and clarity.
Pei Ting: How have you been coping with the ups and downs of managing the airline business in the last year and a half?
Tony: We are still alive, and that’s already a victory, I suppose. We haven’t got a big benefactor like Temasek (Holdings, the parent company of Singapore Airlines) or people like that, so it’s a commendable effort. Number two, we know that the end is in sight — in a matter of months we are going to start seeing travel resume.
So, yeah, I’m okay. I’ve taken the positives out of Covid. We’ve been able to spend more quality time at home. I’ve lost some weight. I have re-engaged with my body, and tried to look after it better. I have had more time to think. Strategically, we have pivoted our business. I’m a better human for sure.
Pei Ting: What did you do differently this season?
Tony: I can’t say I read a book. I’ve picked up a book, read a few pages and put it down, unlike you, who have a lot of books behind you. Your books are all over the place. I have a little bit of a disease — OCD (obsessive-compulsive disorder), where your bookshelf would drive me nuts.
Pei Ting: No wonder your bookshelf is so neat (read: empty).
Tony: I was not going to read much anyway, but I think I am more reflective. I’ve had time to read — I read a lot, just not books — and I watched more documentaries than I’d ever had before and I’m more learned as a person. I’m more patient as a person.
Pei Ting: Let’s talk about the new territory that AirAsia is moving into. An airline going into food delivery is unheard of...
Tony: I always thought we were more than an airline. I always said that. But now I’m officially saying it, that AirAsia Group is no more just an airline.
We have an engineering company, we have a joint venture with SATS, which is an aviation services group, called GTR. We have a restaurant and food group called Santan, which will soon be opening in Singapore. We have three digital companies: AirAsia super app; a fantastic logistics business called Teleport, and finally BigPay.
So while our roots were in an airline, we are now a digital lifestyle company. I’ve just named our new tagline as “A way of life”, as opposed to AirAsia aviation, which is “Now everyone can fly”.
Pei Ting: Can you tell us more about how the idea came about and how it gained steam?
Tony: The roots of this idea is in my first or second job, with Richard Branson at Virgin Group. AirAsia was actually going to be called Tune Air. And Tune was gonna be my brand builder — Tune Hotel, Tune Talk, Tune Insurance, et cetera. Virgin started with Virgin Records, but started owning an airline, gyms and spacecrafts. That’s the genesis. It was always in my mind. The biggest decision I had to make was naming the airline AirAsia. Now AirAsia is such a big brand that I’m dropping Tune, and everything became ‘AirAsia’. It’s harder, because the word ‘Air’ is in there. But, you know, there’s Air Jordans, so we can create a lifestyle from ‘Air’. (Laughs)
So that’s the genesis. And now, we’re the first super app that’s underpinned by travel, as opposed to being underpinned by food, or ride hailing.
Now, I was really ahead of the game if I can praise myself one second. We were the first digital company in reality online commerce. The genesis of this has been in my mind for a long time, and now Covid has allowed us to really focus.
When you have 240 planes on the ground, then you begin to think and move your strategy faster.
Pei Ting: Can you give us a sneak peek into the boardroom conversations? On the one hand, AirAsia, like many other airlines, announced workforce cuts and struggled as planes were grounded. On the other hand, we are talking about creating a super app, which comes at a cost.
Tony: Yeah, you can stand still and die, or you can use cash wisely.
We have been very frugal. We’ve used our underlying assets, which is our data and our brand to go build these other businesses. I think your question is how did you persuade the board to make these investment decisions when cash was limited. Quite easy, because if you’re just an airline, you’re less sexy, right? But if you have businesses that have potential to be bigger than the airline, then the paradigm shifts. It’s not easy to persuade a board to do that, but I’m lucky that I have a visionary board.
Pei Ting: What made you believe that an airline would be able to succeed in this endeavour? I read about your “rich database” of 60 million customers. How does that give you an upper hand?
Tony: We’re good at brand building. We’re a brand that people like. I mean, not everyone loves me, or loves our brand, but we’re more lovable than any of those digital brands that don’t understand humans.
And we have the beautiful position of not having to build anything. I didn’t invent food hailing, so we save a lot of money by emulating all of them. We don’t have to spend the hundreds of millions that they took to develop all of this, because the tech is out there already. We add our own unique AirAsia sauce to it.
And I dare say we have better data than all of them because when you fly on a plane, you’re spending a bit more money. Our rewards programme is hence slightly different. We built 19 years of loyalty. On ride hailing, I think you can make up your name. You don’t even know if it’s a real person. There’s a slightly different data profile there.
Pei Ting: Is the goal for the superapp to be a long-term strategy for AirAsia or is it a stopgap measure to tide over the pandemic?
Tony: This is a long term relationship. This isn’t something just because the airline business is down, we decided to go build a digital business. It was always in my plan that we were more than an airline, and Covid has accelerated that. And I dare say, not Covid as much, but great companies such as Grab, Foodpanda, Expedia and Agoda have given us confidence to go and do that.
Pei Ting: So is AirAsia going into ride-hailing as well?
Tony: For sure.
Pei Ting: What are your priorities now?
Tony: Travel. Can we compete with Booking.com and Expedia? 100 per cent. I own the flight, they don’t. By building all these ancillary services, you’re going to open my app more.
Travel is my number one. Two is the delivery business. Three is financial services — serving the underserved — giving you decent loans, giving you the ability to invest. Four is health — integrating online health solutions, keeping medical records in one place, online pharmacy, for example. Five is education. We’ve been educating our staff all these years. We’re training cabin crew to become data scientists now. We took dispatch boys to become pilots. And then, finally, content.
Pei Ting: I wonder how sustainable is unlimited free delivery and one-cent meal promotions, which are the app’s main draw currently.
Tony: Oh, I had been giving free seats for 19 years. Ask Amazon how sustainable Amazon Prime is. Pretty sustainable. Ask Netflix — all you can watch for S$12. Pretty sustainable.
Pei Ting: What’s the secret then? The business cost would have to go somewhere.
Tony: When I retire, come to my Harvard Business School lectures for a small fee. (Laughs) I ain’t gonna tell TODAY. Otherwise, tomorrow, Cathay will be announcing the same thing, and Singapore Airlines will become an Amazon super app. They are all trying to do it, right? Everyone has got their rewards programme. But culture plays a big part.
Pei Ting: How, and why, was Singapore picked as the next stop for AirAsia Food outside of Klang Valley?
Tony: I love it. It took me eight years (to start flying from Singapore). It’s my biggest challenge in life. Is it love from a romantic standpoint, or is it love from a challenge standpoint? I leave you to guess. But, for eight years, I couldn’t fly in Singapore, and I never gave up.
Is it the biggest market? No. Is it better to go somewhere else, like Bangkok first? Maybe. The question is asked by my staff, ‘Why Singapore?’ And I say, it is because if we can succeed in Singapore, we can succeed anywhere.
You’re the most developed of any Asean country from a technological standpoint. You’re the most demanding consumer. You’re never happy because you’ve been spoiled. Everything is provided for you on a platter, because the Government spoils you. I love it because you’re tough. You want the best and you don’t want to pay for it. That’s the school of hard knocks.
And Singapore is a home of Asia media. Anything that happens in Singapore gets reported around the world. It’s the United Kingdom for Europe — a story in the UK is going to be more syndicated worldwide than a story in Germany. So what we do in Singapore gets replicated everywhere.
Pei Ting: It has been close to four months since AirAsia Food’s foray into Singapore and more than a year since its entry into Kuala Lumpur. Has the gamble paid off?
Tony: In Singapore, we’re doing 500 orders a day. That’s incredible for us. We haven’t spent a cent. We’re just building it organically. We have hundreds and hundreds of restaurants signing up with us, so it has paid off.
Pei Ting: If the commission you charge is far lower than the dominant players — GrabFood, Foodpanda and Deliveroo — why haven’t more merchants come on board?
Tony: We don’t want thousands of merchants. Why don’t I do business class, and first class, and everything? Because I want focus. Why don’t I have six girlfriends or just one wife? Harder to focus, right? So let me get the right number of restaurants that deliver good quality to them. For my delivery model, I’d rather go to one restaurant and pick up 20 orders than take one order from 35 restaurants. Quality not quantity is what we’re after.
And getting the system right. It’s about efficiency. I actually do ride and deliver, so I understand the business. So work with less, deliver more business to them, and have standardised processes. I know very clearly that the model is an AirAsia model: Less is more. Consistency is what we are after.
Pei Ting: Turning back to aviation, what is your prognosis for the industry in the next year or two? What else can airlines do to stem losses and prepare for the eventual return of air travel?
Tony: What will recover faster? Domestic travel. I am already in a much better position than a full service airline that relies on business traffic. Business traffic is going to be changed forever. I don’t think it will recover to the levels they had. Package holidays are going to change forever. Do you want to be on a bus with 50 strangers? I don’t think so anymore. I think there will be much fewer conventions. Travelling distances will be shorter. I think you are more likely to go to Phuket than you are to Los Angeles.
And so, as an airline, low cost carriers will become stronger. At the upper end, I think private jets are going to grow dramatically. There will be a new category of above first class travel — 20 in a smaller jet flying, not flying to the big Changi airport, but flying to Seletar.
So I think airlines that rely on business traffic and airlines that rely on long haul travel will struggle for a while. They will have to right-size. — TODAY
