AirAsia pivots away from its airline roots

An AirAsia A320 fitted with the Inmarsat GX inflight WiFi system, parked at Kuala Lumpur
An AirAsia A320 fitted with the Inmarsat GX inflight WiFi system, parked at Kuala Lumpur

This story is produced in partnership with PaxEx.Aero - The Business of Passenger Experience

“We have successfully pivoted from an airline to an all-in-one digital lifestyle company anchored on travel.” This was the key message delivered by AirAsia Group CEO Tony Fernandes as part of the company’s Q2 financial results that showed a 96% drop in quarterly revenue. Airline-related revenue dropped 98% while non-airline revenue, a much smaller portion of the company’s operations, dipped only 55%.

We have used the downtime to review every aspect of our operation and to expand and transform our three core digital businesses – the travel and lifestyle platform, our logistics division Teleport, and fintech through BigPay and AirAsia BIG Loyalty. – AirAsia Group CEO Tony Fernandes

A digital transformation writ large

Airlines across the globe speak of digital transformations. The idea of retailing with an airline that happens to deliver some of the product is not unique to AirAsia. That it accelerated the process during the global downturn in air travel is also not too surprising. But the company’s declaration of success in the transition is unique.

But AirAsia also knows that the transformation remains woefully far from complete. While the new foundations are in place the company must now execute on the plans. President (Digital) of AirAsia Group Berhad Aireen Omar highlighted revisions to the website as critical to this success, noting “multiple ongoing projects to further evolve as a leading one stop travel and lifestyle platform.” Omar also calls out homepage personalization as an opportunity to “recognize the unique needs and preferences of each customer.” Ultimately the goal is to “further stimulate demand and result in higher take-up rates as preferred tailored products are pushed to customers’ screens, providing them more value and choice to fulfill their needs.”

Read More: AirAsia looks beyond the pipe for inflight connectivity value

Fernandes offered similar views on the retailing concept and transformation a year ago in discussing the company’s on-board offering. The inflight wifi system is an extension – and miniature trial – of the company’s personalization and data mining play. It is not without challenges, but it is also one of the more advanced versions mooted by an airline. Moreover, the platform continues to evolve with impressive pace.

Earlier this month the company’s exclusive partnership with Expedia for hotel bookings ended and the company now operates that segment with direct-sourced lodging partners. Similarly, its “SNAP” hotel+flight bundles are gaining momentum and it is integrating activities into the platform. The company sees better margins through these direct negotiations and is operating at sufficient scale to deliver benefits to its customers and the hotel partners. That the website leads with hotels, activities and packages rather than flights shows just how far down the transformation path it has tread so far.

And AirAsia is not completely writing off external partnerships. Its deal with to sell 3rd party airline tickets via its core website remains intact, at least for now.

Capitalizing on cargo

The company’s Teleport business similarly pivoted from delivering cross-border cargo and logistics services to supporting last-mile deliveries. The division transported more commercial goods, restaurant orders and fresh produce during Malaysia’s lock-down than in the prior year combined. It also continued to move medical supplies through the region.

Teleport now operates two businesses, cargo and delivery, taking into account the different demands of those services. Both work to support other aspects of the company’s digital shopping platforms.

In May 2020 the company launched Food by AirAsia, a food ordering solution. In July the Fresh by AirAsia shopping category, featuring fresh and frozen foods launched on the AirAsia Shop. Both of these are backed by the Teleport logistics

Beyond travel

While selling travel will remain the company’s primary revenue driver in the near-term, the company envisions its as a platform to “soon rival the best super apps in Asia.” This includes integrating its BigPay virtual bank. Licensed in Singapore and Malaysia, BigPay can be used to remit money to members in 10 other countries. Volume continues to grow and the company is pursuing expansion into other markets. A bill payment feature is expected to roll out in the current quarter.

The Group is also working to integrate its BIG Loyalty program into the platform, providing a cohesive offering that extends well beyond travel into the retail markets.

AirAsia might not be a full-fledged WeChat competitor yet. But it is clear that a similar type of platform, handling a huge range of consumer needs, is the goal. That it is vertically integrated, with logistics and fulfillment available as a core service certainly helps on the service delivery front, even if consumers never recognize that aspect of the relationship.

Fernandes further notes, “We have many more digital products in the pipeline which we will announce in coming months.”

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.