Tony Fernandes, chief executive of AirAsia. At a time when most carriers are sharply reducing capacity and cutting routes, AirAsia has been adding destinations.
SINGAPORE — As a teenager at boarding school in Britain, Tony Fernandes dreamed of having his own airline to fly between London and Kuala Lumpur, where his family lived.
This year, Mr. Fernandes, the 45-year-old chief executive of AirAsia, a low-cost regional competitor to Malaysian Airlines, has finally seen the fulfillment of that dream.
Mr. Fernandes, a hands-on chief, is known for regularly working alongside his staff as cabin crew or baggage handler. He established AirAsia X, its long-haul division, in 2007, but he had never actually taken a flight in the new airline until last March, when it initiated the Kuala Lumpur-London route.
“I really wanted my first flight on AirAsia X to be that one,” Mr. Fernandes said during a recent interview in Singapore. “I’d always made excuses, though no one realized why,” he said. “But picking up my daughter, who is going to same school as I did, and taking her home to K.L., that was really emotional. It’s the closest I’ve ever come to crying.”
At a time when most carriers are sharply reducing capacity and cutting routes, AirAsia has been adding new destinations for its short-haul operation as well as AirAsia X’s long-haul forays. In April, the company announced four new routes between the city-state of Singapore and destinations in Indonesia, which make it the biggest low-cost carrier out of Singapore.
Expanding in the middle of a downturn is not a strategy for the faint-hearted. But Mr. Fernandes said he had built his business by not being afraid of contrarian trends.
He and three partners bought the then-unprofitable AirAsia in 2001 for a nominal 1 ringgit, but with the assumption of its 40 million ringgit, or $11.3 million, of debt. The deal was concluded three days before the terrorist attacks of Sept. 11, 2001.
The following year, during the SARS, or severe acute respiratory syndrome pandemic, Mr. Fernandes decided to go against the perceived wisdom and tripled the company’s advertising budget. The goal: “to grab market share” while other airlines pulled back amid consumer fears about air travel.
Last year, Mr. Fernandes decided to unwind his fuel hedges, which had locked the company into buying oil at prices that Mr. Fernandes felt were higher than where the market was headed. While this led the company, which made a profit of 697.6 million ringgit in 2007, to post a loss of 471.7 million ringgit in 2008 — its first on his watch — the decision allowed the airline to get the full benefit of oil at $40 a barrel while other airlines were still locked in to higher prices.
“If we hadn’t done this, we’d be sitting on a fairly huge loss now,” he said.
Peter Harbison, executive chairman of the Center for Asia Pacific Aviation, an aviation analysis company, said Air Asia’s expansion plans in the current environment represented a risk, but one worth running “as long as the dark forces of protectionism don’t re-emerge and shut off access to new markets.”
“I think the AirAsia X model is a good one,” he added. Unlike the other long-haul low-cost airlines, like Oasis, Zoom, XL, which failed because they concentrated on one highly volatile market, “AirAsia X is able to synergize with the short-haul AirAsia network, which works very well,” Mr. Harbison said. “Whether it can weather the price cutting that is now going on is another question.”
So far this year, AirAsia has enjoyed a “fantastic” first quarter, while early booking for AirAsia X is strong, Mr. Fernandes said.
“We’re still getting a sense that people are willing to fly if the price is right,” he said. “I think we’re in a good position because as the market drops, a lot of the incumbents are cutting capacity and we’re soaking up a bit of that.”
Mr. Fernandes remains ambitious, hoping to raise the number of passengers for AirAsia to 60 million by 2013 from an anticipated 24 million this year, and for AirAsia X to about 10 million in the same period from just under a million this year.
Having achieved some of his dreams, Mr. Fernandes said he still had others to fulfill, including owning a sports team. “Football or Formula 1,” he said. “Football would be better because I’m not a mechanical type of person.”
“Right now is not the time because I wouldn’t be able to donate the right amount of time,” he added. “If I do it, I want to do it well. It’s not a vanity thing; I’d want to be successful; I’d want it to make money.”
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