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.