A Former Top Exec at Orbitz and Uber on What AirAsia Can Expect in Online Travel Competition

Online Travel This Week

While there are concerns that Grab, with its ridesharing, food delivery and financial services, is reaching near-monopoly superapp status in Southeast Asia, rival AirAsia, an airline and superapp wannabe, has been hanging in there so far in these early days of the airline’s digital aspirations.

Actually, is it still an airline? Undoubtably yes, but for the fourth quarter of 2020, AirAsia  Group reported recently that AirAsia Digital’s revenue, generated from its cargo, food and package delivery, as well as financial services, made up 42 percent of the group’s overall revenue.

Of course, this came in the context of the group’s substantial losses and 92 percent year over year revenue plunge. It’s also questionable whether lumping AirAsia cargo into its digital segment doesn’t distort the nature and statistics of that business.

AirAsia Group CEO Tony Fernandez generated headlines the other day when he said the next element in the Group’s superapp ambitions, which puts it on a collision course with Grab and others like Gojek and even Traveloka, would be entering the ridesharing business.

We asked Barney Harford, a former CEO of online travel agency Orbitz and the ex-chief operating officer of ridehailing company Uber, for his perspective on starting a ridehailing business and some of the dynamics in operating online travel businesses. Uber sold its Southeast Asia businesses to Grab in 2018 in exchange for an equity stake when he was there.

Harford doesn’t follow AirAsia’s digital strategy closely but he’s very familiar with online travel agency operations, having formerly served as president of Expedia Asia-Pacific and as Orbitz CEO, and given his experience interacting with Grab as then-chief operating officer of Uber.

To achieve the liquidity requirements of operating a two-side marketplace, including riders and drivers, and operating car services with estimated times of arrival of between two to four minutes “requires real critical mass,” Harford told Skift about AirAsia’s plans. “To get to that in 2021 from a standing start is nontrivial.”

Harford said there is lots of potential for delivery services and enabling local merchants — such as AirAsia is trying to do and Grab has already done — in countries where Amazon doesn’t have a substantial foothold. But he said the level of required investment is “quite substantial.”

“A lot of this has already happened,” Harford said, referring to Grab’s inroads in ridesharing and delivery services. For any new entrant “to light up merchants across countries and create a virtual payment network, that is a very heavy lift,” he added.

When he worked at Uber during 2018 and 2019, the company had some 100 million customers taking rides four to six times monthly, he said. That’s a very different customer relationship than with an airline passenger who might fly a couple of times per year.

AirAsia argues that it won’t have to spend billions of dollars in marketing as do rivals Booking.com and Expedia to get traction for the AirAsia app, which saw revenue increase 15 percent to a modest $3.5 million in the fourth quarter, because AirAsia already has a massive customer base that comes to its website and apps to look for flights.

Harford said “that’s certainly better than not having anything,” but he added that AirAsia and other airlines certainly don’t own the customer. In other words, they have plenty of other choices when they are thinking about grabbing a ride, or shopping for clothes or electronics.

“You have some mind space when customers are thinking about a flight, but that’s not the same as I need to get from home to the office or I need a ride back home from dinner,” said Harford, who’s also a United Airlines board member.

Harford said he wouldn’t dismiss AirAsia’s digital efforts, arguing that the airline could become a number two or three player as a superapp or ridesharing company in Southeast Asia, and perhaps acquisitions could bolster its strategy.

For now, AirAsia’s digital businesses are mostly relegated to Malaysia, but it claims to be making shopping inroads in the Philippines and Indonesia, and with its food business in Singapore.

Another thing to keep in mind is that although AirAsia is now offering an array of shopping, financial, lifestyle and transportation services, it doesn’t have to succeed in all of them to be successful. As AirAsia Group further develops its digital program, it has some time for some failures, and to see what sticks.

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