Air Asia : "Now Everyone Cannot Fly"

Tony Fernandez took over Air Asia in 2001. In 11 years of rock and roll growth, Air Asia has become the largest low cost carrier in Asia. This is a fantastic achievement by any measure.

However the intermittent announcements by Air Asia that they are cutting routes indicates not everything is going on as planned. I hope they do better. We really want our Malaysian companies to do well and succeed. It is good for the country and for all of us. Maybe 11 years down the road a reality check is due.

The frequently heard comment even among Cabinet Ministers is that Air Asia flies in about 10 million visitors to Malaysia annually.

A top CEO of a conglomerate pointed out recently that many of these passengers were "stolen" from MAS. There is much truth to this. In the past few years, even my family and I have travelled almost exclusively on Air Asia. Before we used to travel on MAS. So to say that Air Asia flies in an extra 10 million "new" visitors into Malaysia is perhaps quite off the mark. They have actually taken business away from MAS.

Air Asia does take the Nobel Prize for publicity stunts, aggressive ads and staying firmly in the public eye. Do you all remember when Bali suffered the bomb attacks? People just stopped going to Bali. Stepping up to the plate, Tony Fernandez announced that Air Asia would provide one million free tickets for flights into Bali. (The return flight saya tak tahu - usually they charge higher fares for the return flight). Immediately Tony Fernandez received huge publicity and the everlasting gratitude of the people of Bali.

But did anyone stop and figure things out a little ? One million free tickets is a lot of flights. Considering an Airbus A320 seats 140 passengers, that works out to 7142 flights. If AA flew just one flight a day to Bali, it would take 19.5 years to give away all those one million free tickets to Bali. Surely a lot of gimmickry was involved. It was a publicity stunt. The fact that the headline grabbing announcements were made while the ashes of the Bali bombings were still warm does exhibit some ruthlessness.

Similar to the claims of having brought in 10.0 million visitors to Malaysia.

Then Air Asia also went head to head with MAS on many routes, including in Sabah and Sarawak. In the face of AA's stiff competition, MAS retreated from these routes. AA became the monopoly operator on some of these air routes. Now Air Asia themselves are cutting back and shutting down these 'unprofitable' roots. So from "now everyone can fly" it has become "now everyone cannot fly" on some of these air routes.

A few days ago I also received this sms from someone :

"Air Asia is in mess. Biz model not working. Can't fly to Brisbane and Qatar for not paying. Singapore not gonna service their Airbus."

If true this can be quite serious. The fact that Air Asia has been cutting some routes entirely is no mere coincidence. I also think that the recent share swap where Air Asia has become a shareholder in MAS is perhaps a lifeline for Air Asia. I dont think it adds much value to MAS.

I received another sms from another former top gun in our corporate circles. The sms said :

"I luv ur Air Asia Mas conversation (btw a little bird whispered to me that the MAS share swap with AA comes with NO due diligence #*?- go check out). Yes - they were appointed during Badawi's time. Was Azman Mokhtar a "sizzling" investment banker b4 joining Khazanah? Smith Barney apparently calls him a "Duffer" - find out when he was in Smith Barney what was his outstanding achievements? Then Bina Fikir? Asset unbundling? In ***** we say "angkat kain sarong jual semua". Also if you look @ BOD of Khazanah you have mostly Melayus who failed - Azlan Hash*m one of them."

I received this sms after my post on Khazanah Nasional. So the MAS share swap with AA was done without a DUE DILIGENCE? If so, that is not very prudent at all for MAS.

But why would super duper, high flying Air Asia enter into a share swap with MAS? Especially without a DUE DILIGENCE exercise? Maybe Air Asia does need to enter into a share swap with MAS in a hurry. They bought 200 Airbuses last year and are cutting routes at the same time. That does not sound right at all.

For example MAS has good technical back up and repair facilities for their planes including the Airbus. If it is true that "Singapore not gonna service their Airbus" then of course Air Asia's tie up with MAS will assist in servicing the 200 new Airbuses.

In the past AA has built up a not so good reputation of not paying their bills on time especially to MAS for technical services and Malaysia Airports for airport facilities. I hope this share swap does not result in MAS holding the short end of the stick again. MAS is a taxpayer owned airline.

Somehow I get the feeling that the MAS - Air Asia share swap is the beginning of another flight into the unknown for MAS. I also get the feeling the folks in Air Asia have their flight paths mapped out a bit more carefully.

AA's business model based on breakneck growth may have to be relooked. The pace is perhaps really breaking their neck. I think there is a huge market that really appreciates the services provided by AA. Some fine tuning and clear focus on better delivery should take them to greater heights.