AirAsia CEO Looks to Disrupt Again, This Time in Online Travel

Who will be the biggest online travel agency in Southeast Asia in future? Traveloka? Expedia? Agoda?

If you have not added AirAsia to the usual suspects, now’s a good time. As we’ve said before, online travel agencies will face competition from an unlikely source: AirAsia. Now its CEO Tony Fernandes has made it clear that the company’s future lies in being “more than just an airline.” And a lot of that has to do with “disrupting the disruptors” in today’s online travel space.

So if not an airline, what will AirAsia be? A tech player that happens to own an airline? “Yes, yes, yes,” Fernandes told Skift in an interview this week.

AirAsia has quietly been observing the disruption in the online travel and fin-tech space and believes its future is in travel e-commerce, he said.

See AirAsia CEO Tony Fernandes at Skift Forum Asia

It sees that without so much as lifting a finger, or spending the millions that the big bad online travel players do on marketing and customer acquisition, it can rake in huge sales. Last year, sales of AirAsia tickets alone, on AirAsia.com, amounted to $4 billion (RM16 billion).

What if it opens the platform to be a full online travel agency that sells not just AirAsia tickets but other airlines?

What if it starts being “bloody awesome” at selling hotels and pushing deals, which it never did before?

‘Monster Machine’

After 18 years in business, the proverbial pot of gold is not so much that AirAsia is now the largest low-cost carrier in Southeast Asia, but that the airline has gifted him a huge customer base and data, and a brand synonymous with value, which he can use to build other businesses, said Fernandes.

“I’ve 65 million monthly active users of AirAsia.com, why am I not monetizing that?” he said.

In comparison, Traveloka has 22.2 million and Expedia 60 million, according to AirAsia figures. Yet, Traveloka has a valuation of $4 billion, Expedia $17.9 billion and AirAsia, $2.3 billion.

“We looked at why investors started investing in OTAs and we suddenly thought, we have better data and reach than many of them. So we’ve been building the right people, systems and infrastructures for our platform business. And now we’re ready to unleash our monster machine.”

This is an ecosystem of AirAsia.com, AirAsia’s e-wallet and credit card BigPay, and a loyalty program that will enable customers to earn and burn points faster.

On April 8, AirAsia will relaunch the AirAsia.com website and mobile app, dropping the preference currently given to AirAsia flight booking, as is the norm with airline websites.

“We never advertised hotels, holidays; we were that bloody awesome flight company. Now we’re going to be bloody awesome at selling hotels, holidays, et cetera. And we will be doing some cool things with AI, machine learning and voice that no other OTA has done. We are developing a smart travel planner for customers.

“We will have our own messenger product — think of WeChat and some of the things we can do. There’s a whole lot more. Customers will continue their journey with us far longer than with the traditional OTAs, doing tours and activities, shopping and so on with us,” said Fernandes.

Selling Competitors

But it is a moot point if other airlines will want to sell on AirAsia.com and hand over their customer data to a competitor.

Fernandes said he would sell all airlines, not just low-cost, as some full-service carriers have cheap fares as well. “We will negotiate directly with airlines and also go to consolidators. I’ve a lot of relationships with airlines — including those who don’t like us — but ultimately, people want business from a strong channel,” he said.

He expects AirAsia.com to begin including other airlines within this year.

Neither is he worried about cannibalizing his own airline sales. “The Internet is transparent. People who buy AirAsia tickets would already have checked Kayak or other price comparison sites. We’ve got to be good or our offers deserve to be kicked,” he said.

Hotel content and packages currently are  from AirAsiaGo.com, which is powered by Expedia, although that contract ends next year. “We may continue with Expedia or work with someone else and build some of our own supply. The beauty is there is so much choice out there,” said Fernandes. “The ability to get inventory from other places is far different today than it was three years ago.”

Its brands AirAsiaGo.com, Vidi, which provides tours and attractions, and Travel 360 destination guides will go, leaving only one brand, AirAsia.com. “Their content will be fed into AirAsia.com but the brands will disappear as we don’t want to drive traffic to five different websites. There will be only two platforms, AirAsia.com and BigPay, and the ability for customers to earn and burn faster with those two,” he said.

He won’t disclose sales targets for the new AirAsia.com and app, only saying his first goal is to replicate the $4 billion sales of AirAsia tickets in other services.

Amazonian

But won’t AirAsia.com still be seen as an airline website, as its name suggests?

“Amazon started by selling books; it now sells cabbage. Go-Jek is ride-hailing, now it delivers massages. We have delivered on planes, now we will deliver on everything else,” said Fernandes.

It’s “easy” to change people’s mindset about AirAsia to an online travel agency. “It’s just advertising and branding, something we’re good at. And about having a product that works, strong personalization through knowing our customers and strong payment infrastructure. Who wants to take 10 steps to pay when you can buy anything with one click?”

Still, the biggest question mark is, can Fernandes cause another disruption? When he disrupted legacy carriers 18 years ago, it’s an industry that was begging for a disruption. Now he’s up against disrupters, not legacies.

Expedia, for example, has more than 250 million app downloads, compared with AirAsia’s 32.2 million.

Said Fernandes, “I came from the rock and roll [music] business, I didn’t know anything about airlines. Yet we have executed one of the hardest businesses, there were politics, national carriers, rules and regulations and what not.

“The similarity is uncanny. Now people say, Oh, he’s an airline guy, how is he going to execute in the tech world? Well, we were a tech company before anyone else. We were the first website in Southeast Asia to sell tickets online.

“As for Expedia [downloads], Expedia is global and has been doing this much longer. The only reason to download AirAsia app before was to buy AirAsia tickets. Expedia had many more reasons for people to download its app. We’re now giving many more reasons for them to download AirAsia app.”

Tech backbone

AirAsia has quietly made senior hires who came from tech companies such Grab, Expedia and Traveloka. Among them are Lye Kong Wei, group head of data, formerly with Grab; Elias Vafiadis, group head of software engineering, and Nikunj Shanti, group head of product, both former Expedia executives.

Fernandes said, “How did AirAsia do well? We had the right people. Not all the people in AirAsia have the skills set to do what we want to do. Hence we’ve put in the right people, right plumbing in the last few years. We’ve hired hundreds of people in the world.”

AirAsia has set up a tech center in Bangalore, India, and will opening a center in Poland and Indonesia. It also worked with Palantir on data analytics and with Google on machine learning.

Fernandes said he is executing the vision from a cash positive standpoint, as opposed to relying on hundreds of millions of funds from wealthy benefactors.

Plus, it’s all low cost, he said. “The biggest cash drains for online travel agencies are acquiring customers and spending huge dollars on advertising. We have the customers, data and network.

“There is no need to spend $5 billion to build the business. Remember, I built the airline with two planes and less than half a million ringgit [$122,572].”

See AirAsia CEO Tony Fernandes at Skift Forum Asia