Nearly two decades ago, low-cost airlines barely existed. Today, they account for more than half of total capacity in Southeast Asia, allowing many people to fly for the first time. This boom can be traced back to one charismatic businessman: Anthony Fernandes, better known as Tony.
A former Warner Music executive, Fernandes bought then-ailing AirAsia from the Malaysian government for RM 1 in 2001 and turned it into Asia’s first low-cost airline.
From a company with only two jets, 250 employees, and millions of dollars in debt, he has flown AirAsia to new heights – today, it has 220 planes, employs 20,000 people, and carries 65 million passengers annually. AirAsia has been named the world’s top budget airline for eight consecutive years and this year, it became the first such to get US authorities’ green light to fly to American airports.
It wasn’t a smooth journey. During a recent fireside chat with Catcha Group CEO Patrick Grove, Fernandes shared some of the valuable lessons he learned along the way.
Leverage the power of the internet and new technology
When he acquired AirAsia, Fernandes admitted he was scared of failing. “I wasn’t scared of failing on my own, I was scared of letting down 250 staff. If we failed then they’d be out of jobs.”
Like any firm that’s just starting up, AirAsia always found itself short on cash – Fernandes had to bug his CFO everyday. “I never thought further than the next week because we really didn’t have much cash. We had no experience and we had two planes against much larger competitors. It was scary.”
Fernandes tried to raise money, applying for a mortgage and approaching banks for credit, but to no avail. He was a guy who had just left the record industry and suddenly decided to start an airline; it wasn’t exactly a convincing story.
“The internet was our savior,” he said.
It let AirAsia sell tickets way in advance, giving it cash to roll until it grew big enough to get approved for a loan.
It also allowed the company to sell tickets directly to customers, skipping traditional distribution channels and cutting costs.
Fernandes said ecommerce now accounts for a large percentage of AirAsia’s business, earning the company a little more than US$1.5 billion in revenue last year.
Like in the early days, ecommerce has proven to be a lifeline for AirAsia in recent years, with competition in the industry growing much tighter and resulting in a significant decline in air fares. A large portion of its business comes from ancillary goods and services sold online. That’s everything from checked baggage, preferred seating, in-flight meals, and WiFi, to hotel and rental car bookings, and redemption of miles.
Build a good product people will buy
Yet it wasn’t easy to hook people to the internet in the beginning. “The internet was there but no one got a credit card, no one used it,” noted Fernandes.
It was a challenge but nothing a good product couldn’t take on. “I knew Malaysians very well. If you put in a good deal, they’ll find a way to buy it. They’ll use their grandmother’s card in America, whatever, right? We will find a way.”
Even the SARS outbreak of 2002 didn’t weigh them down. At the time, as travellers became cautious of flying, Fernandes saw the opportunity to build their brand. “I went to my marketing team and said, ‘triple your advertising now!’ They asked me what drug I was taking,” he laughs.
“Because no one else was advertising, I said, ‘drop the fares.’ I knew Malaysians very well – if you bring the fare low enough, they’ll risk their lives.”
Look where no one else is looking
While AirAsia initially focused on conquering Malaysia – “you gotta be good to your own country first” – it saw a massive opportunity in the rest of Southeast Asia when no one else did. “Everyone was focused on India, China.. and I thought there’s 700 million people here, why doesn’t anyone want to do that?” Fernandes recalled.
What they did was gain first-mover advantage and started flying to destinations no one serviced. “We went to Bandung – no one went to Bandung, no Indonesian airline, nobody. Now we have 32 flights a day to Bandung and a lot of airlines fly there.”
From ASEAN, AirAsia expanded to India, then to China. It also currently flies long-haul under the AirAsia X brand to places like the Middle East, Australia, and Europe.
Chances don’t come often. Grab them
Not everyone knows this about the AirAsia boss but he’s an accountant by training. Before entering the recording and airline industries, Fernandes was an accountant at British tycoon Richard Branson’s companies. Branson owns Virgin Group, the parent firm of airline Virgin Atlantic – it was a sign of what was to come.
Fernandes failed to land the job originally. He was “a really bad accountant” who knew how to create music “so I wrote to every record company and they all told me to go to hell. Virgin offered me an interview, I went along. They also told me to go to hell.”
Luckily, as he was making his way out, he saw Branson come in. “I thought should I just be this shy Malaysian and just smile and walk off, or should I, like, take the opportunity, take the chance?”
They started talking and after seeing something special in him, Branson gave him the job. Years later they were inseparable, having set up AirAsia X together.
“If there’s a lesson to take away – chances don’t come very often so if you get it, grab it,” Fernandes advised.
Apart from owning an airline, which was his childhood dream, Fernandes is also passionate about football. That’s why it came as no surprise when he purchased his own football club, Queens Park Rangers, in 2011. It turned out the business is just as tough as the airline.
“But hey, you only live one life and I’ve taken the approach – I want to live my life to the most. If I get hit by a bus tomorrow… I would have lived a great life. I wouldn’t have regrets.”