AirAsia Looks to Be an Unlikely Online Travel Agency Competitor

AirAsia.com is becoming a richer online travel platform by the day and is key to CEO Tony Fernandes’ plan to ramp up e-commerce and ancillary revenues this year.

The platform generated more than $4 billion (RM16 billion) in AirAsia’s online flight ticket sales last year, Fernandes revealed. The group is increasing its efforts to sell additional travel-related services such as hotels, tours, insurance and more to the millions who fly the airline.

The focus on AirAsia.com and ancillaries comes as “exceptionally high” fuel cost, aggressive capacity increase, lower average fare, closure of Boracay, and the prolonged chain of natural disasters in Indonesia last year eroded AirAsia Group’s fourth quarter earnings, released this week.

The group reported a net operating profit of RM98 million ($24 million) in the fourth quarter ended December 31, 2018, compared with a net operating profit RM550 million ($135 million) in fourth quarter 2017.

Net profit for financial year 2018 rose 9 percent to RM1.7 billion ($417 million) over 2017. This is attributed to factors such as growth in domestic market share in the Philippines and Malaysia, increase in ancillary revenue and reduction in staff costs.

Giving his outlook for 2019 in a statement, Fernandes said, “We intend to transform AirAsia.com into a platform of choice for all [guests] to fulfill any travel needs. We believe that this platform has enormous potential and will generate a significant increase in revenue for the group.”

He said AirAsia.com is “in fact one of the largest revenue generating platforms in Asia today.”

‘True Transformation’

His “true transformation” of the AirAsia website and mobile app has started, with a revamp unveiled in late January that underscores its change from being just an airline booking site.

A few simple examples: On AirAsia.com, passengers in Singapore can buy tickets to Gardens by the Bay or, if going to Hyderabad, purchase a private transfer from the Hyderabad airport to their hotel. They could also book a two-day package to Krabi including flight and hotel, or buy a bottle of perfume on the website and receive it on-board or collect in airport.

Customers can also plan and book a customized itinerary, choosing top destinations in Asia and Australia, adding restaurants, spas, tours and attractions, and completing the booking online within minutes.

These are powered by Vidi, formerly Touristly in which AirAsia acquired a 50 percent stake  in 2017, and AirAsiaGo, the consumer-facing website of the AAE Travel joint venture between AirAsia and Expedia, which now fully belongs to Expedia.

AirAsiaGo continues to be powered by Expedia, featuring air tickets from the carrier, hotels from Expedia, and packages of the two bundled together.

AirAsia said its mobile app alone has 3.3 million monthly active users. Latest features include a chatbot, Ava, who responds to guest enquiries in eight Asian languages; an interactive map that helps iOS users decide where to go by pinpointing all AirAsia’s destinations on a single page; and fast airport clearance for those who enroll.

“We will be adding more mobile app features in the months to come so it is no longer just a flight booking platform, but your complete travel companion,” said deputy group CEO for digital, transformation and corporate services, Aireen Omar.

Last month, AirAsia also opened a technology center in Bengaluru, India, which will have 35 engineers working on custom-built solutions for AirAsia website and app to provide “frictionless” journeys for guests.

Total Ancillaries Value

AirAsia.com aside, AirAsia Group makes a lot of money from traditional airline ancillaries, to the tune of RM2.1 billion ($515 million) last year, an increase of 7 percent over 2017.

Ancillaries such as baggage fees, seat selection and inflight food & beverage were among top earners. Baggage fees rose 7 percent to RM987 million ($242 million), while seat selection increased 18 percent to RM164 million ($40 million). And perhaps an indication of how good AirAsia’s airline food is, passengers spent RM143 million ($35 million) on food and beverage onboard last year, an increase of 8 percent.

Wi-Fi may be the next big ancillary. “We have installed 65 aircraft with Rokki Wi-Fi,” said Fernandes. “All our planes will be fully Wi-Fi enabled by the end of 2019, which will bring in more ancillary revenue.”

Meanwhile, Fernandes said he would no longer ink any new joint ventures in Southeast Asia.

“We foresee Vietnam to be the last piece of our joint ventures in ASEAN within the foreseeable future. This JV will enable us to connect ASEAN passengers to North Asia, namely China, Korea and Japan as we draw passengers closer from one country to another while growing our market presence and our low-cost franchise across the region,” said Fernandes.

The joint venture is expected to start operations in August, according to reports.

At any rate, AirAsia is already present in the key markets of ASEAN, with Myanmar being the only possible interesting addition for it. But visitor arrivals to Myanmar last year grew less than 3 percent last year, with backlash over the Rohinya crisis being a factor for the stagnation.