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AirAsia starts moving to Jakarta base

“I cannot tell you how excited I am of AirAsia’s future and the future is really good for us,” Fernandes says during an interview with The Star.

Publication Date : 15-06-2012

 

Adieu Kuala Lumpur, welcome Jakarta!

The big move has begun and Jakarta will be home for AirAsia Bhd after being based in Kuala Lumpur for a decade.

It is growth beyond Malaysian shores which is tempting AirAsia.

“Growth in Malaysia will be boring at a single digit of 3 per cent, 4 per cent to 5 per cent but countries like Vietnam, the Philippines and Indonesia are where there is plenty of opportunities over the next 10 to 15 years and that should keep AirAsia bus,” a Maybank Investment analyst said.

It is for these reasons - though AirAsia's diplomatic answer for wanting to relocate is to be near the Asean permanent secretariat - that it is shifting to Jakarta.

“When we started, we did not have a vision but somehow we became very big and now we have to look at how to manage,” AirAsia group chief executive officer Tony Fernandes said in an interview recently.

What really pushed him to make the bold decision to relocate was the unwinding of the share swap with Malaysia Airlines (Mas), he said.

The share swap between both airlines ended in May due to objections from Mas unions.

It was only when he was director of Mas did he realise what “fantastic operations” he and his long-time business partner Kamarudin Meranun had built of AirAsia over the past decade.

“It was the unswap that woke me on the potential of the AirAsia. You don't appreciate it until you see it (from the other side) and if I had put in the same energies for Mas into regional development, (just imagine the possibilities). All this has given me a new lease of life and I cannot tell you how excited I am of AirAsia's future and the future is really good for us,” he said.

Although he was sad over the unwinding, he said: “I am glad it is over.”

Fernandes and Kamarudin started AirAsia a decade ago with two aircraft but grew to have operations in Thailand, Indonesia, the Philippines and Japan. It also has a medium-haul sister airline in AirAsia X.

It is eyeing five more joint ventures in markets like China, South Korea, Vietnam and India.

Fernandes alluded that he would also like to set up AirAsia Africa.

The airline may have grown by leaps and bounds into a regional low cost carrier and competition is a given for AirAsia but its biggest challenge is really about staying focused and in implementation.

Therefore, the move to Jakarta would mean there is a core team that looks at every aspect of the business. Some see this as creating better coordination and cohesiveness to enable AirAsia to focus and tap opportunities in the region.

Fernandes will also move to Jakarta, although he keeps saying “this (Malaysia) is my home.”

Below are the excepts of the interview with Fernandes:

Can you ever give up as CEO of the Malaysian operations?

Of course I will not let go, but the day-to-day jobs, like carrying bags, being in every meeting, there can be a Malaysian CEO to do all that. But I would still be heavily involved in the day-to-day running of the airline.

Can someone do what you do because you are synonymous with AirAsia?

It cannot be same, but I am not leaving, I am still around. All this is a good change and hopefully we can build new relationships with the appointment of the Malaysian CEO. Also, by appointing a CEO for Malaysia I want to show that AirAsia is not about one person, not about me and Kamarudin.

In reality you are the person (behind the airline).

But I am not going to live forever. It is all about succession planning apart from growth. However, I am not leaving anytime soon.

Is securing landing rights still an issue?

That has changed dramatically over the past few years as countries are seeing the benefits of economic development.

Has Indonesia imposed conditions that AirAsia must be based there to tap the market, and are you getting landing rights?

No. But we get plenty of landing rights. We don't have any issues and Indonesia is perhaps the most open aviation market, it has so many domestic airlines. Airlines are the ones giving us a hard time in every market. The hardest time I have is in my own home country, and I am not running away from my country. Remember, we are listed here and AirAsia is a home brand.

Malaysian operations are a major contributor to AirAsia's earnings but growth will mature experts say, where is the next growth area?

Hard to say but the (market) share will grow in markets like Indonesia and Japan. Malaysia's returns is still most profitable. Cost wise, ours is still the same as Indonesia and China but our cost advantage in Malaysia is eroding as airport charges go up whereas in other countries they are building low cost terminals for us.

Outlook of your financial results?

They will be good for the second quarter and there will be a bonus in the third quarter because of lower fuel prices.

Are Mas problems too big to be fixed?

Nope, They could have been fixed. Everything was laid out for Mas. The people I feel sorry for, are the staff, even though some thought the share swap was a bad thing. In reality, you had to really look at the staff of AirAsia, how they have grown in terms of salaries and careers and that was the plan for Mas too.

Yes, there will be short-term pain but you have to make the business successful as you cannot be on life-support, or be on sukuks or WAUs forever. There has to be an end at some stage. So the idea we were putting would have transformed the airline at some point.

The thinking is that the management should have engaged more with the employees instead of bull-dozing changes through?

I was not there, so I can't say. You know me and you know my style - I am the best engager, and I even know the guys that carry my bags.

I disagree with the statement, for whatever was put in front of the union, they did not want change. There even argued over over the stopping of flights to Buenos Aires. With that level of thinking, how can you implement changes? But we have a different culture at AirAsia, and there is no resistance to change.

Your biggest gain and biggest regret over the collaboration?

The biggest gain is, we are now friends with Khazanah Nasional Bhd and I can pick up the phone and call AJ (Ahmad Jauhari Yahya, Mas group CEO). I have made some good friends in Mas, I certainly could not do that before. Biggest gain is that the people who had very negative views of me, had begun to see that I am not the devil re-incarnated.

I had the opportunity to at least meet my detractors face to face and give them a better opportunity to know me. My biggest regret is that we did not finish what we set out to do. Me and Din could have done a lot for Mas and helped Mas. But I am not someone to cry over the past, we move on.

Are you sending your aircraft for maintenance to Mas?

No, we have not done that. I don't think it will happen. I think it will be a headache for the management. If you read some of the comments it is like, we are benefiting, so we are not sending.

Are you recruiting some of Mas crew, those they are letting go?

We are taking 50 of the Mas Indian crew. Since we have grown, and if they are prepared to be mobile, we are prepared to take. But there are plenty of opportunities for crew out there.

Is there any progress in the area of training with Mas?

Training makes complete sense but there is massive resistance from the pilot management, so we move on. Why waste time talking, we do not need it. But Malaysia has lost out, because to have a training school in Sepang with Boeing and Airbus, we could have been number one in the Asia.

 

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