AirAsia’s head honcho can’t wait to transform the airline — he's in the driver’s seat for AirAsia.com and pulling in the best of his troop on the journey. Second-quarter results, just out, show a rather promising platform.
AirAsia CEO Tony Fernandes will take on the added role as CEO of AirAsia.com, a new position that will allow him to have direct oversight of his vision to transform AirAsia into a much broader platform for online travel.
The company said Fernandes’ new role will be temporary with a new CEO for the digital platform to be named “in due course.”
Fernandes has said he sees AirAsia becoming a digital force, increasing its efforts to sell additional travel-related services such as hotels, tours, insurance and more to the millions who fly the airline.
AirAsia Group announced the executive restructuring as part of its second quarter financial results released Wednesday.
AirAsia.com generated sales totaling $1.3 billion (RM5.4 billion) in the second quarter, while profit (EBITDA) grew 232 percent to $439,000 (RM1.85 million), the group said.
Joining Fernandes in driving AirAsia.com is AirAsia’s chief commercial officer Karen Chan, who oversees all commercial functions as AirAsia.com’s chief commercial officer. Former AirAsia Malaysia’s head of commercial, Spencer Lee, has taken up the role of AirAsia.com’s chief operating officer managing the online business portfolio that includes OurShop, AirAsia Wi-Fi (Rokki), hotel partnerships “and others.”
“Others” should include airline partnerships, although AirAsia.com has yet to snare its first airline partner in its intention to be a full online travel agency selling not just its own seats but those of other carriers.
A chief product officer for AirAsia.com will also be appointed to head up the product teams, while AirAsia software engineering and technology head, Elias Vafiadis, formerly with Expedia, continues to lead software engineering, all reporting to Fernandes in the interim.
Meanwhile, Aireen Omar has been appointed president of RedBeat Ventures. She was AirAsia’s deputy group CEO, technology & digital. In this role, she focuses on seeking out new companies and technologies to power AirAsia’s core business while still overseeing the company’s digital businesses such as BigPay, Teleport and AirAsia Big Loyalty.
Bo Lingam is now AirAsia Group’s president (airlines). The former deputy CEO (airlines) continues to run the core airline business and drive customer service improvements and cost efficiencies.
Fernandes believes with the right structure and foundations in place, digital and ancillary business will eventually contribute up to 70 percent of the company’s earnings. This is despite widespread skepticism, especially from the big players in the arena.
“We are taking travel to another level by giving our guests a truly integrated and end-to-end experience. Not just flights but hotels, activities, lifestyle, e-commerce and more. Right at the heart of this is AirAsia.com, which will be a lifestyle brand that offers a frictionless travel experience of discovery, booking, pricing, branding, deals for all our products and partnerships,” he said in a Bursa Malaysia announcement.
The platform recently added hotels widget and product badges on its website, while passengers can now pre-book more than one meal.
AirAsia Group overall posted a 17 percent increase in revenue to $712 million (RM3 billion) in second quarter versus last year. That was driven by an 18 percent increase in passengers to 12.8 million. Ancillary revenue grew 39 percent to $163 million (RM687 million), driven by both traditional airline ancillary and non-airline ancillary streams.
But operating profit (EBITDA) was down 9 percent for the airline group to $112 million (RM473 million), which the company said was primarily due to share of prior years’ losses at AirAsia India previously not recognized, amounting to $34.9 million (RM147 million).
Net profit was down 85 percent to $11.1 million (RM46.8 million) as a result.
On the bright side, AirAsia Indonesia returned to profitability in the quarter, carrying 58 percent more passengers. AirAsia Philippines saw improved performance, with profit after tax increasing more than eightfold.
AirAsia Thailand, however, reported a loss as it was negatively impacted by the sluggish growth of tourism and the baht’s appreciation.
Group president (airlines) Lingam nevertheless expects all its Southeast Asian carriers to be profitable this year.
“Despite expanding capacity by 19 percent year on year, load factor remained strong at 85 percent demonstrating the growing appetite for air travel across the markets in which we operate,” he said.
“We are also steadily growing our traditional airline ancillary revenue. Inflight, duty-free and baggage all recorded double-digit growth, while our focus on improving ancillary revenue at AirAsia Indonesia and AirAsia Philippines proved to be successful, with both growing 45 percent and 42 percent in ancillary revenue year on year respectively.”
The airline group is planning for a net fleet growth of 20 aircraft this year, with nine aircraft expected to be delivered to AirAsia India. It also expects to receive in November its first A321neo, which is more fuel efficient, has a longer flight range and holds an additional 50 seats.
“We are also working on driving down costs through our investments in digitalization, which we believe will help reduce overall costs in the long run,” said Lingam.
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Photo credit: AirAsia A330-900neo. Its first A321neo, which is more fuel-efficient, will be delivered in November. AirAsia Group