The epidemic has dealt a severe blow to the aviation industry, especially international aviation. On the one hand, there is still no hope of full recovery in the inter-connectivity between countries in the short term. On the other hand, the affected companies are actively seeking transformation to adapt to the new normal.

Where should the aviation industry go? AirAsia, headquartered in Malaysia, is trying to give a new direction. On October 8th, AirAsia announced its new platform airasia.com: it will accelerate its digital transformation into a “comprehensive platform that can provide sufficient daily needs” and is committed to becoming a super APP in Southeast Asia.

According to the news on its official website: AirAsia Group, a leading brand in the aviation industry, is committed to creating a Super APP belonging to Southeast Asia. This is also a cross-era breakthrough for AirAsia Group. The upgraded airasia.com will not only continue to operate all airlines of AirAsia but will also use its own 75 million users and more than 15 product lines to build a digital ecological platform to provide a full range of travel products and services, as well as those in China. Global air tickets, hotels, online shopping, food delivery, etc.

The past glory

AirAsia, founded by Indian Malaysian Tony Fernandes, was once a miracle of Southeast Asian entrepreneurial counterattack. He succeeded in grasping the pain points of aviation and the vacancies caused by the lack of competitiveness of airline institutions such as bloated organizations and poor management. He acquired Malaysia’s state-owned AirAsia at a price of fewer than 30 cents per share, and put this company on the verge of The bankrupt airline was built into the largest low-cost airline group in Southeast Asia in ten years.

AirAsia’s base at Kuala Lumpur Airport

In addition to Malaysia, AirAsia has also established joint ventures or subsidiaries in Indonesia, Thailand, the Philippines, India, and Japan. In addition, there have been attempts to establish joint ventures in Vietnam and China (the partners in China are Everbright Bank and the Henan Provincial Government), but none of them succeeded.

When signing the memorandum of cooperation with Everbright Group, the Prime Minister of Malaysia was Najib (third from left)

AirAsia Group has also established long-haul airline Air Asia X, which operates long-haul services from Kuala Lumpur to London and Perth, Australia where Malaysians live. AirAsia also brought the concept of low-cost airlines to the hotel industry and opened the Tunes Hotel without any services (the name should be related to the record company Fernandes worked for many years before founding AirAsia).

Fernandes has also become the idol of entrepreneurs in Southeast Asia-and made his own season [Apprentice] (Apprentice-the reality show created by Trump):

When he said you’re fired, it was not as adept as the one in the White House

Many people are beginning to know that AirAsia is basically a large number of cheap flights and energetic flight attendants traveling to various parts of Southeast Asia:

It may even be this commercial saliva book that was once sold in international airport bookstores:

In short, before 2018, everything about AirAsia is wonderful. Even the crash of an AirAsia plane flying from Surabaya, Indonesia to Singapore during the Christmas holiday in 2014 (162 people died) only had a short-term impact on AirAsia’s stock and passengers. In the same year, Malaysia Airlines suffered a more serious tragedy: MH370, which has not been found until now, and MH17, which was shot down over Ukraine and is still Rashomon.

Actively seek change in a tough situation

However, AirAsia’s aggressive expansion began to encounter strong headwinds in 2018, and the failures of trying to establish joint ventures in China and Vietnam are actually small things. The joint venture companies in India and Japan have encountered various problems. Japan is a mature market, and it is not easy to enter and make money.

And Fernandes, who is of Indian descent, found that even if he cooperated with a large local consortium like Tata, he still couldn’t figure out how to make money in India. Two five-star airlines, Kingfisher and Jet, which once smashed hits in India and founded by local tycoons, also went bankrupt. Vijay Mallya, the founder of Kingfisher and the once-wealthy beer tycoon, is now in a lawsuit, hiding in London and dare not return to India.

In Southeast Asia, AirAsia also faces fierce competition. In addition to price-cutting traditional airlines and the gradual saturation of aviation demand, low-cost airlines in various countries have also put a lot of pressure on AirAsia. In particular, Lion Air in Indonesia-has established

Subsidiaries or joint ventures across Southeast Asia in recent years, with a fleet of more than 300 aircraft.

mazy Lion Air Indonesia route maps

The position of AirAsia X is also very embarrassing. Kuala Lumpur can never replace Singapore and even Bangkok as a regional long-distance transit center. It is more difficult for long-haul flights to save costs by reducing services than for short-haul flights-and it is also difficult to achieve the efficiency of aircraft turnover as high as short-haul flights. And the demand for long-haul cheap flights is very uncertain.

For AirAsia, the real big challenge is this year’s COVID-19. Due to the stagnation of international air travel and the long-term failure to effectively control the epidemic in the Indian, Indonesian, and (or even) Malaysian markets, the loss in the second quarter reached a record US$238 million, and the overall passenger load dropped by 98% year-on-year. The Indonesian market is even down 100%.

The shares of AirAsia, which is listed in Kuala Lumpur, have bottomed out and then bottomed out again. Whether it can rebound this time is still unknown. Ernst & Young has issued a report that doubts whether AirAsia can continue to serve as Going Concern.

Although AirAsia’s loss in fuel price hedging is not as high as that of the “visionary” Singapore Airlines, after all, AirAsia does not have the Singapore government and Temasek’s background like Singapore Airlines. Therefore, even Singapore Airlines has begun to sell planes to experience day trips, and Thai Airways has begun to sell fried dough sticks. AirAsia must develop new revenue drivers to survive.

In order to survive, Thai Airways flight attendants set up a stall to sell food
Singapore Airlines flight attendants were assigned to subway stations to help passengers maintain a safe distance

Fernandes has also seen it, and this is the reason why the company has been expanding its territory beyond the aviation and hotel industries in the past two years. AirAsia has a lot of customer information-especially in theory, these customers can afford to fly, and they are relatively high-quality customers in Southeast Asia. There is a Tunes Labs within the company that has been investigating new business models and has been establishing new cooperation with the outside world.

The airline recently announced a partnership with Agoda, through its SNAP flight and hotel combination platform users can book 600,000 Agoda accommodations. Fernandes said in a statement, “The Agoda partnership is “part of our overall strategy to revitalize travel, as we look forward to reopening the borders of Southeast Asia in the near future.”

However, the distant water cannot save the near fire-this cooperation is estimated to have no short-term value except PR. In this regard, let’s borrow Singapore’s Minister of Transport Ong Ye Kung’s head-on response when the opposition party advocated imposing environmental taxes on Singapore Airlines’ “no-purpose roaming” flights during a recent parliamentary debate: “The current point is not whether the cost should be passed on to passengers. But now there are no passengers at all. If it were not for the recent large-scale capital restructuring, Singapore Airlines might have gone bankrupt. Therefore, we must help Singapore Airlines save funds as much as possible, and Singapore Airlines itself is trying to generate revenue… We are in crisis In…it’s really not the time to talk about levying environmental taxes on Singapore Airlines. If you do so, it will be a disaster.”

Turn the cart before the horse:the financial service

The crisis in recent years is also the reason AirAsia has expanded its financial technology services, including the possibility of applying for a Malaysian digital bank license. And launched a super app focusing on Southeast Asia covering entertainment, shopping, and travel.

AirAsia first entered the fintech sector through its BigPay mobile wallet in 2018. Since then, the app has won approximately 1 million users in Malaysia. According to reports, in terms of total transaction volume, AirAsia has now become the country’s largest electronic One of the wallets. During the epidemic, AirAsia’s core aviation business was in trouble, while BigPay benefited from the rapid development of cashless payments during the epidemic and attracted attention.

AirAsia also set its sights on Singapore. According to AirAsia, the app and its prepaid Visa card will be launched in Singapore this month. Although there are already many e-wallets in Singapore, people seem to be interested. BigPay said in a statement that BigPay’s first waiting list has 20,000 people.

Remittance will be the main business of BigPay in Singapore. Users will be able to remit money to major ASEAN economies in Indonesia, the Philippines, Thailand, Vietnam, and Malaysia as well as China, India, Bangladesh, Nepal, and Australia at “quick and competitive prices”.

Although AirAsia did not apply for a Singapore digital bank license, the company said that digital financial services will become the key to AirAsia’s diversified development from an airline to aviation + digital service provider. The company also attaches great importance to the review framework: it is located in Malaysia and has sufficient cash to meet the capital requirements of Bank Negara. The successful digital payment business will also bring more possibilities for AirAsia.

BigPay also claims to actively apply for payment licenses in Indonesia. But the problem is that when the local wallet bosses in Indonesia can’t burn their money, let alone whether AirAsia’s long-term project can be successful, the distant water cannot save the nearby fire.

Another point, perhaps AirAsia has recently realized that using payment and financial services to leverage other scenarios is simply putting the cart before the horse. Logically, it should be the existing scenario to leverage the payment-not the other way around

Even if AirAsia claims that it has 75 million users, the specific amount of water remains to be discussed. Moreover, the quality of AirAsia’s users may be good, but his mastery of user data dimensions, user behavior control, and user frequency of use have very large inherent deficiencies compared to companies such as Grab and Shopee.

This may be why he wants to make a super APP.

Of course, becoming a super app is not easy, and the promotion and ecological construction of super apps and how to let its users spend time on the app are all issues that AirAsia needs to face. Especially under the influence of the current epidemic, if users cannot book air tickets, accommodation, or travel activities, it will be a severe challenge.

But at least some of the investors’ confidence should be restored from the perspective of the story so that AirAsia’s debt restructuring is more likely to pass. Whether investors buy it or not is another matter.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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