Skift Take

At Skift Forum Asia, AirAsia's deputy CEO said she was confident that becoming an online travel reseller was "very doable." The largest budget carrier in Asia certainly has the data and innovativeness to pull it off. But skepticism abounds among industry vets.

AirAsia Group Bhd., Southeast Asia’s largest budget carrier, wants to sell more than cheap flight tickets.

AirAsia is talking to potential partners to build an e-commerce app that it wants to see overtake the size of its airline business, Group Deputy Chief Executive Aireen Omar said in an interview.

The carrier, which is seen getting about 1 billion ringgit ($240 million) in revenue a year from its website, expects to earn 20 times more as it expands into an app that will offer lifestyle goods and services.

“This will be bigger than the airline itself,” Aireen said at her office at the Kuala Lumpur International Airport. “There’s a lot you can do in just one app and that’s what we are trying to do with our travel and lifestyle app.”

The budget airline, which carries 100 million passengers annually, is bolstering its digital capability to tap a regional e-commerce market that’s set to increase threefold to $240 billion by 2025, CEO and Founder Tony Fernandes said last month.

Premium carriers Singapore Airlines Ltd. and Cathay Pacific Airways Ltd. are already turning to onboard duty-free sales to boost revenue, while AirAsia’s app will also offer everything from hotel bookings to beauty products and dinner vouchers.

AirAsia, which announced a special dividend of 90 sen a share Wednesday, climbed 8 percent as of 4:14 p.m. in Kuala Lumpur. The shares rose as much as 16% earlier, the steepest gain since 2004.

Digital Spinoff

The digital business is likely to be spun off in the near future, Aireen said, without giving details.

Fernandes has slowly but surely prepared the company to focus on this digital drive. AirAsia has sold aircraft parked in leasing companies and disposed a stake in its ground-handling operations. He also restructured the company to have an investment holding group as its publicly listed entity and separated the Malaysian airline business.

The moves come as the budget carrier grapples with rising risks to its airline business, from the closing of holiday destination Boracay island and natural disasters in Indonesia last year, as well as Malaysia’s clampdown on price surges during high season.

Meanwhile, Brent has gained almost 30 percent this year, increasing costs for airlines from Singapore Air to Deutsche Lufthansa AG, which posted lower first-quarter profit partly due to higher oil prices. AirAsia’s net income slipped 92 percent in the three months through March from a year earlier, it said in a filing on Wednesday.

The company realized about three years ago that it’s rich with consumer data that a lot of people would want access to, Aireen said. It plans to use the data to market goods and services in a targeted way and provide internet connection on all its planes to sell products to passengers during the flight.

The new app will eventually consolidate its current AirAsia BIG Loyalty program, which already partners with vendors from Nike Inc. to Sephora to give special offers and discounts.

Editor’s note: For more, see Omar’s Skift Forum Asia interview with Executive Editor Dennis Schaal: AirAsia Deputy CEO Confident That Becoming Amazon of Travel Is ‘Very Doable.’

©2019 Bloomberg L.P.

This article was written by Elffie Chew and Kyunghee Park from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected]

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Tags: airasia, airline distribution, airline innovation, online travel agencies

Photo credit: Aireen Omar, AirAsia's group deputy chief executive. Southeast Asia’s biggest budget carrier is in talks with partners to build an online travel sales service beyond offering airplane tickets. Ian Teh / Bloomberg

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