Positive thinking the best navigator

TONY FERNANDES

By BOONSONG KOSITCHOTETHANA

Tony Fernandes and AirAsia, the budget carrier he created that revolutionised Southeast Asian air travel, have been the subject of scepticism all along for their knack of flying against a headwind.

When AirAsia was launched, at the time when airlines worldwide were struggling desperately from the fallout of Sept 11, 2001, the worst time in the history of civil aviation when nobody wanted to fly, aviation analysts said the Malaysian entrepreneur had gone "crazy''.

They predicted the airline would soon perish miserably, also partly due to the fact the concept of low-cost carrier would not be accepted by travellers in the region, the market where it wanted to capture.

As it turned out, AirAsia not only survived but also became a thriving airline. One year after the launch, AirAsia broke even and cleared all its debt of 40 million ringgit. Its initial public offering (IPO) in November 2004 was oversubscribed by 130%.

Subsequently, it has gone through one crisis after another intact - from the 2003 Sars crisis and bird-flu outbreaks to December 2004 Asian tsunami - all of which scared tourists away from Asian destinations.

Throughout its six-year operation, the fledgling carrier has carried over 55 million passengers and expanded its fleet from just two modest Boeing 737-300s jetliners to 72, most of them part of the 175 A320-200s it ordered from the European planemaker Airbus.

AirAsia, along with its Thai and Indonesian sister carriers, operates over 105 routes, more than 400 international weekly flights.

Within the next four years or so, it is destined to be the largest airline in the region.

With the perfect storm of global economic recession blowing ferociously now - the global airline industry was predicted by the International Air Transport Association (IATA) to lose US$5 billion in 2008 and $2.5 billion in 2009 - AirAsia believes it could ride out the storm this time round, with even stronger growth.

While IATA director-general Giovanni Bisignani described the 2009 outlook for the industry as "bleak'', AirAsia has not cut back on its operations as other airlines have. Indeed, it continues to press on with the expansion.

For instance, its sister carrier, Thai AirAsia, will add two new routes, from Bangkok to Bali and Guangzhou, on Jan 20, 2009.

"I don't think any airline in the next few months will announce new routes,'' Mr Fernandes told the Bangkok Post.

"The fact that we are doing it, 90% of the people would say we are crazy. All my life, everyone says we are crazy. They predicted a downfall for AirAsia.''

The British-trained 44-year-old executive suggested that the critical part of AirAsia's success and its ability to weather crises lies in its perception on how to react to a crisis.

It is important to be optimistic and proactive even at a time of hostile environment. He noted: "People would say that's foolish. It is smarter to be pessimistic and cut down and conserve. The best way to deal with the recession is to grow and being proactive.

"If every company takes a negative view, we are going to sink into a much bigger crisis. But if some company says no, we are going to fight this crisis, to create demand and more jobs, it helps.

"I think it is the responsibility of a corporation as well to play their parts, to keep the economy moving.

"In a crisis, you can sit there and do nothing and see the whole thing crumble, and spend $100 million to rebuild the firm when the economy comes back.

"Or you can make less profit, but keep everything intact. So when the things come back, you are in the best position to benefit''

Mr Fernandes is a strong believer that a value proposition can always not only defy a market downturn but also revive demand growth, citing two examples.

First, AirAsia's traffic through Suvarnabhumi Airport was restored to 80% of the previous level two weeks after Bangkok's international gateway resumed operations following an eight-day closure by anti-government protesters.

Its long-haul subsidiary, AirAsia X, managed to sell 25,000 seats in a recent sale campaign featuring discounted fares to mark the inauguration of its Kuala Lumpur-London route which will not start until March 2009.

About half of the advance sales on the route came from the United Kingdom, where the recession has already been strongly felt.

"It shows that if you give value - removing fuel surcharges - you can still keep demand.''

Even in the midst of a crisis, a good value proposition and innovation prove to be effective survival, and even growth, strategies.

Innovation also plays a crucial role, during not only the good time but also the bad time, in propelling growth. "The key is the innovation of new routes and new products - selling things on the website, selling insurance, duty-free goods on board, and so on.''

But the bottom line for a company to weather any storm is the need to work hard and cutting costs. The latter is particularly difficult for AirAsia as "we are already low-cost''.

Mr Fernandes views that other stakeholders in the industry like Airports of Thailand Plc, which operates Thailand's main airports, could play a role in battling the slump in passenger traffic at the time of crisis by introducing what he terms as a low-cost strategy.

By that he means lower airport service charges for airlines, enabling them to reduce costs and offer attractive deals to travellers, as well as putting in place a terminal dedicated to budget carriers at Suvarnabhumi or using the old Don Mueang airport for the operation.

"If Thailand has low-cost airports at places like Bangkok, Chiang Mai and Phuket, you can get another 10-15 million passengers [a year] to Thailand,'' he pointed out, adding that low-cost passengers spend just as much as typical tourists and contribute to the revival of tourism to Thailand.

On the seizure of Suvarnabhumi and Don Mueang airports by People's Alliance for Democracy (PAD) from Nov 25 to Dec 2, which effectively stopped all commercial flights through the capital, Mr Fernandes had the following to say:

"For me as a businessman, it is very dangerous using a strategic asset as a political weapon because a lot of people's lives get affected. It (the blockage) is like creating a massive heart attack, blocking the major artery.

"In face of the global crisis, you don't need another whammy. You need everyone working together [to get out].

"I hope in the future, they (political movements) will use other means (to make a political statement). I think politicians have to look at people's lives first,'' he concluded.