BOLD: HOW TO BE BOLD IN BUSINESS AND WIN – The Story of “AIR ASIA X”

The future belongs to the Bold.  The world is so crowded that only those who have a significant and dramatically different story to tell will grab the attention of customers.

In a world and age when we have come to expect good level of service and product as given, only an exceptional and memorable experience will earn customer loyalty.

Different breed of organizations are now emerging, they succeed because they have courage, confidence or just sheer chutzpah to pursue a purpose beyond profit:  to engage, entertain and educate their audiences, who see their customers and employees as members of a like minded community, who create and administer cult-like following among their brand – both within and outside their organizations – who are not just different, but dramatically different and who push to the extreme the consequences of their dreaded positioning and strategy.  AIR ASIA X is one of the bold brands.

AIR ASIA X

Tony Farnandes, CEO of Air Asia, mortgaged his house and together with some investor, bought Air Asia, a moribund airline, carrying a $12.5m debt in 2001.  In 2009, the airline earned a net profit of over $161m.

Air Asia quickly established itself a one of Asia’s leading airlines.  With its promise of “Now everyone can fly” it has extended operation to 20 countries around Asia.  It’s bold vision lead to the carrier ordering 20 new aircrafts from Airbus in midst of recession.  It has won numerous awards, most recently being voted the best low-cost carrier in the world in both 2009 and 2010.

Bold Practices

-       We took the low cost airline model and applied it to long-haul operations and doing this when everyone in the aviation industry said it can’t be done.

-       We also believe that if we give people much lower fare, more people will travel.

-       We also believe that there is a way of operating at a dramatically lower cost than other airlines because they tend to be homogeneous in their business model:  everybody does things in a certain way.  With our smaller planes we got the world lowest unit cost per available seat kilometer.  We were doing 2.8 us cent per available kilometer seat in contrast to Singapore airlines 6 cent, Cathy Pacific 7 cent, BA 8 cent, etc.  So at an operating cost of 2.8 cent, we are talking of a 20 or 30% reduction where the big boys can’t discount and squeeze us out of market, we are looking at more larger reduction in operating cost.

-       Another breakthrough insight is that the entire long haul (distance) aviation industry has been focused on what I call the “Time-sensitive, price-sensitive customer”, whereas Air Asia built its model around the price-sensitive, time-sensitive customer – a segment previously untapped.

-       Aviation industry had its origin serving the premium end of the market – the upper end of market, flying 30 years ago was a whole glamorous experience, because that is where airlines make bulk of their money.  That means you fly when the business class passenger prefers to travel, e.g. Cathay Pacific on average report their aircraft utilization rate is 12 hours a day.  So in a year, the aircraft is in air half the time the other half, they are sitting on the ground.

-       Air Asia X fly 18 hours a day, that is a big difference.  How do we achieve this difference?  For the past 50 years, airlines have been thinking about the premium customer.  The premium customer wants 2 things (1) They fussy about the time they depart (2) the time they arrive.  So that’s why you see long haul flights leaving Asian Airports close to midnight and arriving London or Sydney in the morning.  So the plane just sits there and wait until they are needed again clocking huge parking charge in the meantime.

        A premium passenger does not like to wake up at 3 am in the morning to catch at 7.30 am flight to Singapore, so the plane waits for a more convenient time for the passengers to fly back.  This means a lot more down time than necessary.  So at a lower cost, we were able to attract customer that was not time sensitive.

-       Seamless continuity with feeder connections in between countries is very important.

-       Air Asia X has diverse people with various experiences, most of which were not in airline business, the number one reason is probably to always ask why and why not – challenge the status quo always.

-       At Air Asia, their values and KPIs were very simple and everyone knew what it was all about

        1.      To get to $1billion dollar mark in 5 years

        2.     Get their cost structure to 2 cent per available seat

kilometer – cost focused

        3.     Three of every four seats in the plane must be filled and three out of every four air worthy aircrafts are always in the air.

-       Using Social media to sell an experience:  A key difference from other airlines is our extensive use of digital channels and social media.  Air Asia has about 75% share of sales coming through the internet, which is higher than most airlines.  Air Asia X has 89%.

-     We are also selling experiences, long haul travel to exciting destinations.  When we sell flights to Australia, we tell them “You got three of Conde Vat’s top 10 Islands on your door step: Bale, Langkavi, Phukat.  You got exciting cities:  Bangkok, Singapore, Kuala Lumpur, Hong Kong.  So with Air Asia cheap fare, you can shop in Kli, go phuket for beach holiday, visit Angkhor Wat for sightseeing.

        It is this multi dimensional variety that I really changing the way people travel and you begin to get a community built around your brand.

-       Building customer communities partnering with sports – sponsoring Manchester United in 2005, Oakland Raiders Football team, etc, when you make these brands parts of your global network, people start to associate that lifestyle with your brand.

-       Partnering with youth and university students with music and entertainment world, like sponsoring people to 02 Arena in UK to watch Rolling Stone perform or flying to London to watch Arsenal, it’s about lifestyle, an aspirational lifestyle.

-       Leveraging the brand – Air Asia X set themselves the objective of earning about 50% of our revenues from non-airline related sources.  This requires very big and bold ideas, i.e. Air Asia Courier Services, etc.

-       Connecting people to a purpose.  Air Asia has a slogan “Now everyone can fly”.  The Air Asia X version is “Now everyone can fly extra long”.  People join us not because we are the greatest players in the industry, but because of the challenge of building something new that allows people to travel faraway places and make the world a smaller place.  Because of cheaper fares people can now reach each other often connecting families.

-       At Air Asia, multitasking is a way of life.  Everybody does everything themselves.  

-       Low cost doesn’t mean poor services or low employee morale.  Our business model will only work if we pull together as a team.

-       A culture of openness – Anyone can approach anyone else.  It only works when we all work, everyone is involved.

-       Lean, not mean – highest cost is in relation to engineering – others are allowances to crew, pilots, etc.  Others are fuel.  So we reward and recognize outstanding performance.

Bold Practices

-       Air Asia was first Airline in the world to eliminate fuel subcharges.

-       In 2009, it offered a million free one way tickets with 400,000 snapped up with 24 hours.  Air Asia ordered 200 new aircrafts in depth of recession.

-       Air Asia is one of the Top ranking face-book accounts in transportation field.

-       Air Asia Red Txx.com is the portal where customers can book music and entertainment and download music need and news.

Air Asia Vision

-        To be the largest low cost airline in Asia and serving the 3 billion.  People who are currently under served with poor connectivity and high fares.

Mission

-        To be the best company to work for, in which employees are treated as part of the big family.

-        To create a globally recognized Asean brand.

-        To attain the lowest cost so that everyone can fly with Air Asia.

-        To maintain the highest quality product, embracing technology to reduce cost and enhance service levels.

-        Air Asia X launched the first SMS booking service in the airline industry.

-        Air Asia X launched the flat bed premium seats that are available in all its long haul flight.

-        Air Asia has adopted more of the style of Virgin than it has its Asian competitors.  No surprise the CEO used to work in Branson’s music business and Virgin owns 16% of Asia Carrier.

          So, let’s be bold.

Culled from:  BOLD:  How to be bold in Business and Win, by Shawn Smith and Andy Milligan