Low-cost is a religion, says AirAsia boss

Low-cost is a religion, says AirAsia boss

Starting out in 2001 with only two aircraft, Malaysian budget
carrier AirAsia has now spread wings to most big cities in
Southeast Asia to become a prominent player in the region. The
Jakarta Post's Anissa S. Febrina talked last week in Jakarta with
AirAsia CEO Tony Fernandez on his views of the sector in
Indonesia and region generally. Following are excerpts from the
interview:

Question: How do you manage to be a low-cost airline and stay
away from problems of maintenance currently under the spotlight
in Indonesia's airline industry?

Answer: I do not think that there are any LCCs (low-cost
carriers) in Indonesia. If you look at Lion Air, they have a
business class, they give food, AdamAir also. These are low-fare
airlines, they are not really low-cost.

We are recognized as being very efficient in maintenance.
Trying to use the same type of airplane is one of them.
Maintenance is done with the best provider (AirAsia struck a deal
with Singapore ST Aerospace in 2002.)

We are very comfortable with our standards and the best way to
look at it is our insurance rate. It is one of the lowest in the
world. If our insurance was high then people would be worried. It
is only because in everyone's mind, when you give a Rp 99,000
(about US$10) fare people are worried about safety, especially in
your country where there have been a number of incidents.

I think the best way to show our safety is through the
insurance company. If they have no confidence in our ability to
fly planes safely, they would not insure us.

Could you elaborate more on low-fare and low-cost?

I think low-cost is a religion. It is a discipline and a focus.

It is not getting side-tracked. Not trying to be something
else. Giving passengers the lowest possible fare, and being the
most efficient and the safest ride.

I operate with the simplest and smallest airlines office in
KLIA (Kuala Lumpur International Airport), to avoid the
unnecessary cost. Another thing, for instance, is that we choose
to land in Macau instead of Hong Kong because we can get lower
airport fees there.

Low-fare is more like trying to be low-cost but trying to do
other things as well; giving some food and extra services. We
think, in the end, let consumers choose. Give them the lowest
fare. If they want food or extra luggage, they can buy it. Give
the basic travelers the lowest possible cost. It is very much a
religion and it is very much our corporate culture.

What are the current challenges of developing the business?

The biggest challenge I have is ASEAN itself. I find sometimes we
are our own worst enemy, rather than supporting each other. I am
trying to build an ASEAN brand, not Malaysian, Indonesian or
Thai.

One day there maybe an ASEAN newspaper and there will be
companies like us advertising because we will reach all the
market we want. There are already ASEAN banks coming together.

But, sometimes the regional rivalry is our own worst enemy.
Look at Singapore. Today they talk about open skies with
Malaysia, but I cannot get a bus (between the two countries). So
on one side there is open skies, but on the other closed roads.
You cannot selectively have competition. You have to have it all
the way.

If we work together we will have a huge market. That is the
challenge, to be welcomed by all of ASEAN and to be seen as an
ASEAN brand.

Other challenges, well, we have been through it all. We have
had bird flu, SARS, earthquakes, tsunami. I am very optimistic. I
love the growth. We have our new planes coming in. (AirAsia set a
deal to order 80 new Airbus planes earlier this year.) We would
hope to do about 10.5 million passengers next year.

The airline business in Indonesia has been emerging, but it is
rather unstable. What's your comment on this?

I think it is a fantastic market, enough for everybody. But I
think airlines here waste too much time trying to compete with
each other. They are always looking over their back. They spend
too much management time trying to kill others and trying to be
destructive.

Like I said, I do not worry about competitors. Our enemy is
cost. I believe a lot of management time is wasted on trying to
stop others rather than fixing their own business. Indonesian
airlines are in a great time. There is still great potential.
There are many places that should be connected that are not
connected. Like Lombok and Makassar, it should be a great tourist
place. We would develop Lombok for sure.