An amazing airline! – Air Asia, the Asian low cost pioneer

Air Asia has turned from a tiny budget start-up airline, which started out taking over a debt-torn Malaysian airline to a profitable, leading low-cost, no-frills airline in Asia. It is estimated that Air Asia has the lowest operating costs and highest profit margins in the industry. Air Asia operates about 400 flights a day to over 60 destinations in Malaysia, Thailand, Indonesia, Singapore, China, the Philippines, Brunei, Cambodia, Laos, Vietnam and Myanmar. The airlines’ fleet has grown from two to 49 today and 139 orders are to be delivered in the next years. More than 35 million people are carried annually.

The company’s founder and chief executive, Tony Fernandes who is as young as 43 made his money in the music business at Virgin Music and later at Time Warner. After he quit his job at Time Warner, he spent some time in London where he was fascinated by the business model of Easy Jet and the Greek businessman who founded the extremely successful budget airline, Stelios Ioannou. As his interest was sparked, he returned home to Malaysia with the intention to found an airline. Together with three friends he overtook the unprofitable Air Asia and its debt in 2001 and the airline broke even one year later and all debts were cleared. The airline expanded its operations to neighboring ASEAN states as well as to China and India. The low-cost concept of the company includes operating from low-cost airports, taking bookings only via the Internet, charging for services like food and drinks, using the crews to clean the aircraft to shorten turnaround times and flying economically to save fuel.

While the global airline industry is suffering from sky-high oil prices, Tony Fernandes considers this as just a minor challenge as the airline faced numerous challenges in the past. Establishing a low-cost carrier in the very regulated region and challenging national airlines was really hard work. The company started out just after the 9/11 terrorist attacks which caused the entire sector to suffer from decreasing passenger numbers. SARS was another challenge which didn’t keep Air Asia from thriving.

Tony Fernandes has recognized a new market, came up with a viable business model and tapped into an enormous market of half a billion people. Air Asia enabled many middle-class Asians to afford flying which accords with their slogan “Now everyone can fly”. Tony Fernandes’ airline contributes to the growing together of south-east Asian states. In many regions there, travelling by plane is the only way of getting to remote places, e.g. to islands, as infrastructure is poor or nonexistent.

Tony Fernandes as well as the entire Air Asia staff convey a feeling of fun about flying. Their commercials establish the brand as “attractive” and charming. Their philosophy is making traveling fun for the passengers. Fernandes has ordered 25 Airbus A330 which are suitable for long-haul destinations. Whether he will manage to expand the network to Europe one day is to be seen. Such a step would be a real challenge as fuel would account for the most part of the operation costs and Air Asia would face fierce competition from global players like Singapore Airlines which has an excellent reputation and the power and money to battle rivals.

http://www.economist.com/research/backgrounders/displaystory.cfm?story_id=2502539

http://www.airasia.com

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