AirAsia: To infinity and beyond

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It has been a productive year for the world’s best low cost carrier.

Earlier in May, AirAsia formally connected Kuala Lumpur with Lanzhou in Northwest China, flying four times weekly to the capital of Gansu Province.

These new services takes the number of AirAsia destinations in China to 24, cementing the airline’s position as the largest foreign carrier by capacity operating in China with over 400 weekly flights.

It also made headlines in March as it announced a new route connecting Kuala Lumpur to Fukuoka in Japan, being the only direct service to link the two cities.

Domestically, the group marked the arrival of its inaugural flight to two historic towns of the country – Penang and Melaka.

Riad Asmat

“From the perspective of new routes, it is very important to us to look at possibilities of expanding our networks accordingly,” AirAsia Malaysia chief executive officer Riad Asmat told BizHive Weekly.

“That has always been the basis of AirAsia – to reach out to places that no one has gone to, to create a section of need in one form or another.”

Right now, AirAsia connects 164 destinations worldwide, inclusive of its subsidiaries AirAsia X, Indonesia AirAsia, Philippines AirAsia, Thai AirAsia, AirAsia India and AirAsia Japan.

“If you notice, these types of destinations are not Tier 1 cities. AirAsia is good at doing that – going to Tier 2 and Tier 3 cities – and more importantly giving the opportunities to people to travel to these places,” Riad explained.

“It is part of our DNA now – but there are many destinations we have yet to go yet,” he said with optimism.

Frequent flyers keep growing

The reason for these new routes are clear: the number of passengers continue to grow. From April to June this year, passengers carried by AirAsia was recorded at 12.8 million.

This marked an 18 per cent growth year-on-year (y-o-y), resulting in a load factor of 85 per cent.

AirAsia Malaysia capacity grew 13 per cent y-o-y, resulting in 11 per cent more or 8.8 million passengers carried in the quarter.

The growth rate exceeded that of the industry average as AirAsia Malaysia continued to increase its market dominance, while load factor remained strong at 84 per cent.

Available seat per kilometre (ASK) grew 17 per cent y-o-y as the group continued to expand its network through the strategic addition of new routes and increased frequencies to domestic and international destinations.

When asked about how AirAsia decided on its which routes to pursue and what cities to connect, Riad said: “The few points that we look out for would be interest.

“From the perspective of analysing a particular destination, the possibilities of people wanting to go there, and more importantly the current state that that destination is in as well – would they be open to wanting to fly out?

“Remember, our flights cannot fly in full and fly out empty. It has to be a two-way traffic, and we are connecting to bring traffic both ways.

“We also look at facilities, availability, and the support that we can get not only from facilities but also from the state agencies or even the countries itself as they would be eagerly wanting us to promote them as a destination.

“They would show support in many forms and we have to take that into account as well.

“We look at multiple destinations every day, what we mentioned just now was the ones that we’ve established and launched this year — on a daily basis, the team looks for destination and we fly as far as four hours so you can imagine the reach we have.”

Touching back on the Penang-Melaka route, Riad said he was happy as the take up has so far been very convincing.

“It is interesting to see there is enough movement between the two states. Although the two are tourist states, they complement each other in that aspect.

“Usually, if you drive between Penang and Melaka, it would take you between five to six hours and Penang is one of our main hubs, also an entry point for the likes of China and Indochina.

“I guess tourists can use that as a hub of their holidays. So, flying to Melaka now in a short period, spend a few days there and go back to Penang also makes sense.

“I am very encouraged by the take up and more importantly, and the economics of both states will improve further for tourism. We are not going to stop here, we’re going to look at other opportunities as well.”

 

AirAsia’s digital initiatives taking shape

Perhaps the key behind AirAsia’s success is the importance placed on technology as the way forward to enhance operational efficiency.

The Fast Airport Clearance Experience System – aptly abbreviated FACES – is one but of many new technologies introduced by the AirAsia Group in their mission to revolutionise air travel.

The FACES initiative, now operating at the Senai International Airport in Johor, boasts a success rate of 98 per cent since its inception in February last year. This covers both domestic and international AirAsia flights flying from the Johor Bahru International Airport.

“We are looking at the possibility of having facial recognition – to which you can board the plane without taking out anything –your face is your boarding pass,” explained AirAsia Malaysia’s Riad.

“This is something that we are working very hard on and if there is enough technology, we hope to start embracing this possiblity (at all airports) as soon as possible.

“The idea is to make it seamless from the customers’ point of view, that that customers are not going through multiple variables before they go for their holidays.”

By achieving this seamlessness, Riad said, digitisation helps to magnify the airline’s operational efficiencies as well.

“It’s all about the minutes,” he explained. “As we start digitising ourselves internally, we are seeing cost effectiveness. A good example is plane turnaround time.

“A year ago, we were still carrying boarding passes. Now, we are scanning passengers in. This scanning, which is part of the digital move of internal operations, saves the company about five to seven minutes of the boarding process.

“This means I am saving costs indirectly, and this can be passed down to customers in terms of ticket pricing, and I get a plane turnaround that is more efficient.”

This comes after the airlines introduced self check in kiosks as well as self baggage tag services.

“The ideal goal that shareholders want is being this ultimate travel tech airline,” Riad enthused.

“It is a future that we are embracing now with regards to the digitisation of not just operations but lso on the experiences for our passengers.

Riad further said, “We cannot ignore the fact that passengers have evolved digitally from 20 years ago.

“The simplicity of buying tickets today – some of us still need a laptop to buy, but the younger generation are okay with using mobile phones to purchase tickets!

“Looking ahead, say five years from now, all this digitisation will evolve and most importantly be implemented in our organisation to make not only the consumers experience better and seamless, but also for our organisation to achieve better efficiencies.”

 


Maximising operations

Going digital also helps in maximising AirAsia’s fleet utilisation. Riad explained that data analytics was employed to make the most of matching the right aircraft for the right routes.

“What we do is – over the years, engines start to deteriorate – not in terms of operation, but in terms of efficiencies such as fuel consumption.

“In that aspect, we can utilise these aircraft in shorter routes so that we don’t burn too much fuel, wherea the aircraft with newer engines can be sent on longer routes where fuel burn will be higher but will be done more efficiently.

“All that is encompassed in all the data that we are currently looking at, and plans are in place in how we better manage fleet movements, and in that sense, people movement – we reduce paper to that level because we digitise documentation for pilots and the cabin crew, so on so forth.

“This is a way forward for us. It is creating an organisation that is efficient which will also look at cost savings in many ways, to which is the model that we can work on.”

Another boon of #technologyrules is the removal of booking processing fees for customers who pay either through online banking and credit card from October onwards.

“We (will) still have some charges to drive traffic to cheaper, safer and less fraudless methods. But there will be methods with no fees,” group chief executive officer Tan Sri Tony Fernandes said earlier this week.

He tweeted the announcement with two hashtags: #technologyrules and #makingairfaresaffordable.

AirAsia’s processing fee starts at RM4 for passengers using direct debit. The fee can go up to RM16 with UnionPay as a payment method.

However, if a customer opts to make payment using AirAsia’s e-wallet application BigPay, no processing fee is involved.

 

Committed to Sabah and Sarawak

The low cost airline remains committed to serving East Malaysia.

This can be seen when AirAsia took over the KK-Sibu and KK-Bintulu routes from MASwings Sdn Bhd in January this year, coming hot on the heels of the government ending the contract with MASwings in a decision by the government to save between RM10 million to RM20 million bor both routes.

Riad Asmat said, “We are committed to improving the connectivity between Sarawak and Sabah. Last year, we flew 1.2 million guests to and from Sibu and over 669,000 guests in and out of Bintulu.

“With the additional twice daily direct flights from Kota Kinabalu, we foresee the number of visitors to both Sibu and Bintulu increasing significantly, further boosting connectivity between second-tier cities in East Malaysia.”

AirAsia now operates to four destinations from Sibu – Kuala Lumpur, Johor Bahru, Kuching and Kota Kinabalu – with 90 one-way flights weekly, and to three destinations from Bintulu – Kuala Lumpur, Kuching and Kota Kinabalu – with 56 one-way flights per week.

“Sabah and Sarawak – the level of importance is clearly there for us. In lieu of the days when people had a hard time flying to Sabah and Sarawak, you know, few airlines was servicing that route back in those days – we have come into the picture now and what has happened is that we made it more accessible.

“We fly multiple times a day and to multiple cities in both Sabah and Sarawak and this is something that we are continuously pushing, whether it be schedules, increased flights or new destinations.”

Both Kuching International Airport and Kota Kinabalu International Airport are make up two of AirAsia’s five secondary hubs, hosting six and 10 planes respectively.

“It is important for us to have hubs in both states because we need to start the day early.

“Committing our aircraft there also means committing manpower, up to about 400 to 500 people in each hub, to make our business work.

“Our commitment to Sabah and Sarawak is genuine. For us to commit that many numbers of planes there – it is not going to stop. The most heartening bit is not just committing to it, but that we have our own communities.”

 


From the people, for the people

AirAsia also listens to the public when demands are being made clear – such was the case drawing closer to Hari Kaamatan in Sabah and Hari Gawai in Sarawak.

“We always listen to consumers whenever they voice out to us. We know a lot of Sarawakians and Sabahans work in Peninsular and during the festive occassions – Kaamatan, Gawai and Raya – we are more than willing to extend our abilities to add on more flights.

“During the period, a lot of commitment was given internally. We have pilots who needed to take up extra flying duties. Some of them even sacrifice their own personal time to do so.

“As I said, we work as a family, but more importantly we listen to the public as well.

“We are still pretty much on the ground. we do business, don’t get me wrong, but at the same time we won’t do something for the sake of doing it.

“There is sense to everything that we do, and I think this is important that we listen to the people and where we can assist, where we can do more than we usually do, we will do it.”

This year, AirAsia added 115,000 seats for Gawai, Kaamatan and Raya.

AirAsia Group chief executive officwer Tan Sri Tony Fernandes said he was pleased they were able to do this for East Malaysia as AirAsia was born out of Sabah and Sarawak.”

Transport Minister Anthony Loke thanked AirAsia for their initiative and said the ministry supports private sector-led initiatives to bring down the cost and increase the convenience of flying for the travelling community.

He said the Chinese New Year extra late night flights that was first introduced this year was a success as seats, even those departing at three in the morning, were quickly sold out, signalling a need for airlines to provide more cheap flights during the festive season.

“When the successful Chinese New Year extra late night flights ended, I asked the agencies including the Malaysian Aviation Commission (Mavcom) to approve any additional flights for Gawai, Kaamatan and Raya,” Loke said.

“I’m sure this will be a permanent feature in every festival. During any major festivals whether Deepavali or Christmas, people can go home and celebrate with their families.”

Riad said as the people’s airline, AirAsia wants to play its part in reuniting family and friends during festive occassions.

“To cope with the expected surge in demand during the festive period, we are adding these extra flights.

“And there’s more to come as our teams work hard to secure more flights. We would also like to thank the authorities for their support in making this additional frequencies possible.”

 

Going head-to-head with airport operator

One would be remiss not knowing about the ongoing tussle between AirAsia and Malaysia’s sole airport operator Malaysia Airport Holdings Bhd (MAHB) on the issue of the Passenger Service Charge (PSC).

The PSC is a charge is currently paid by all departing passengers as part of their flight bookings with airlines, which will pass the collection to MAHB after the journey is completed.

The airline launched a social media campaign in protest against the government’s move to equalise the PSC for non-Asean international flights at klia2 with that of the main Kuala Lumpur International Airport (KLIA).

The campaign which calls for #FairAirportTax on social media educates the public on what the PSC is and how this hike in PSC was unfair for all budget travellers flying beyond Asean out of klia2.

“To me, it is all about fairness to the consumers,” Riad said. “The consumers are the one who are paying this – we are collecting (the PSC) on behalf of MAHB.

“From that perspective, we are fighting for fairness that the consumers are enduring.”

Those going through the low cost airport are required to pay a PSC of RM73 from RM50 previously – similar to their counterparts who are flying out of KLIA and other airports in the country.

This follows a High Court ruling on July 18 that ordered AirAsia to pay airport operator Malaysia Airports Holdings Bhd (MAHB) at least RM40.6 million over unpaid PSC from July to December last year. AirAsia says it will be appealing the decision.

The outstanding PSC collection was due to AirAsia’s refusal to collect the full PSC of RM73 imposed by MAHB for non-Asean international departures from klia2.

The airline has only been charging RM50 per passenger on its flights as it felt klia2 passengers should not be paying the same PSC as those departing from KLIA, which AirAsia deemed is more superior in terms of facilities and service quality.

AirAsia took its stance one step further with this #FairAirportTax campaign, noting that it had not collected the RM23 difference in PSC was to provide its passengers with the opportunity to fly through low fares.

“In order to keep fares low, we need the support from our stakeholders, especially airports which have the power to create guest-friendly spaces. Right now, we don’t believe MAHB shares that same vision,” it said on its website.

“klia2 was designed and operated as a low-cost carrier terminal. This is why we think you (passengers at klia2) should not have to pay the same airport tax as the far more equipped and luxurious terminal at KLIA.

“Airport tax has always been lower at klia2 for years until (July) 2018, when it was suddenly increased and equalised for reasons unknown.”

AirAsia further believes that increased airport taxes stifle tourism, hamper economic growth and put other destinations at a considerable advantage over Malaysia.

It also hit out at MAHB over the poor airport design at klia2, citing the extended walking distances that often cause delays to its flights and passengers missing their connecting flights.

“As the biggest user of klia2 – covering 97 per cent of overall passenger traffic – we want to ensure the terminal is fit for purpose, but due to frequent unplanned runway closures, uneven aircraft aprons and poor taxiways we often encounter operational issues,” said AirAsia.

A matter of priorities

AirAsia also called on MAHB to prioritise more critical operational and passenger experience issues at klia2, rather than proposed plans to integrate the low-cost carrier hub with KLIA.

The plans, which were endorsed by the Malaysian Aviation Commission (Mavcom), have become a topic of conversation, even though the two organisations have failed to design an execution model for the interlining.

It should be noted that MAHB has also not engaged in appropriate consultation with AirAsia or AirAsia X, the two largest airline operators accounting for 97 percent of overall passenger traffic at klia2.

AirAsia Malaysia CEO Riad Asmat said, “Major infrastructure and capex-intensive plans to integrate KLIA and klia2 need to be put on hold, and instead more critical issues need to be prioritised by MAHB.

“MAHB’s focus should be on spending the increased money, in the form of airport tax they’re asking for from passengers, on bringing klia2 facilities up to the same standard as the luxurious KLIA, fixing the uneven aprons and taxiways, installing more guest friendly spaces and redesigning boarding gates.

“MAHB has also been relatively slow in embracing technology to improve the overall passenger experience.

“Other, more prudent uses of the additional airport tax could for example include dealing with overcrowding at airports around Malaysia such as Penang International Airport, where the check-in area is simply too small to handle the growing volume of people using it.”

AirAsia X Malaysia CEO Benyamin Ismail reaffirmed AirAsia’s vision being about pioneering a low-cost carrier hub for Asia and for the people of Malaysia and its tourism sector, whereby long-haul travellers from places like Australia, China, India, South Korea and Japan can stop or connect seamlessly and efficiently into Asean’s most extensive short-haul network.

“With this and AirAsia’s existing know-how in mind, there is simply no point in wasting budget travellers’ hard-earned money on a concept that does not make sense.

“We do not see any benefit in interlining the full-service carriers at KLIA with low-cost carriers at klia2. In our 18 years of operations, we have not received any request for interlining services from full-service carriers, including our own flag carrier which operates out of KLIA.

“There is absolutely no interlining potential for the airlines, which MAHB fails to understand. This also shows that MAHB has no real understanding of what airlines and passengers truly need.”

Mavcom’s endorsement of the integrated terminal concept and the airside interlink proposal are further justification of the fact that MAHB and its increased charges are less about passengers and more about the MAVCOM-initiated Regulatory Asset Base, which seeks to protect and maintain MAHB’s earnings.