AirAsia to Expand E-Commerce Beyond Selling Plane Tickets
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AirAsia Group, Southeast Asia’s largest budget carrier, wants to sell more than cheap flight tickets. AirAsia is talking to potential partners to build an e-commerce app that it wants to see overtake the size of its airline business, Group Deputy Chief Executive Aireen Omar said in an interview. The carrier, which is seen getting about 1 billion ringgit ($240 million) revenue a year from its AirAsia.com website, expects to earn 20 times more as it expands into an app that will offer lifestyle goods and services.
“This will be bigger than the airline itself,” Aireen said at her office at the Kuala Lumpur International Airport. “There’s a lot you can do in just one app and that’s what we are trying to do with our travel and lifestyle app.”
The budget airline, which carries 100 million passengers annually, is bolstering its digital capability to tap a regional e-commerce market that’s set to increase threefold to $240 billion by 2025, CEO and Founder Tony Fernandes said last month. Premium carriers Singapore Airlines Ltd. and Cathay Pacific Airways Ltd. are already turning to onboard duty-free sales to boost revenue, while AirAsia’s app will also offer everything from hotel bookings to beauty products and dinner vouchers.
AirAsia, which announced a special dividend of 90 sen a share Wednesday, climbed 8% as of 4:14 p.m. in Kuala Lumpur. The shares rose as much as 16% earlier, the steepest gain since 2004.
The digital business is likely to be spun off in the near future, Aireen said, without giving details.
“AirAsia, which announced a special dividend of 90 sen a share Wednesday, climbed 8% as of 4:14 p.m.”
Fernandes has slowly but surely prepared the company to focus on this digital drive. AirAsia has sold aircraft parked in leasing companies and disposed a stake in its ground-handling operations. He also restructured the company to have an investment holding group as its publicly listed entity and separated the Malaysian airline business.
The moves come as the budget carrier grapples with rising risks to its airline business, from the closing of holiday destination Boracay island and natural disasters in Indonesia last year, as well as Malaysia’s clampdown on price surges during high season.
Meanwhile, Brent has gained almost 30% this year, increasing costs for airlines from Singapore Air to Deutsche Lufthansa AG, which posted lower first-quarter profit partly due to higher oil prices. AirAsia’s net income slipped 92% in the three months through March from a year earlier, it said in a filing on Wednesday.
The company realized about three years ago that it’s rich with consumer data that a lot of people would want access to, Aireen said. It plans to use the data to market goods and services in a targeted way and provide Internet connection on all its planes to sell products to passengers during the flight.
The new app will eventually consolidate its current AirAsia BIG Loyalty program, which already partners with vendors from Nike Inc. to Sephora to give special offers and discounts.
Questions & Answers
Q.What is the expected revenue goal for AirAsia's new e-commerce app compared to its current website revenue?
What is the expected revenue goal for AirAsia's new e-commerce app compared to its current website revenue?
AirAsia expects to earn 20 times more from its new app, aiming to exceed the 1 billion ringgit ($240 million) revenue currently generated by its AirAsia.com website.
Q.Which existing loyalty program will the new e-commerce app consolidate, and what kind of partnerships does it currently have?
Which existing loyalty program will the new e-commerce app consolidate, and what kind of partnerships does it currently have?
The new app will eventually consolidate the AirAsia BIG Loyalty program, which already partners with vendors like Nike Inc. And Sephora to offer special deals.
Q.What strategic moves has Tony Fernandes made to prepare AirAsia for its digital expansion and shift away from purely airline operations?
What strategic moves has Tony Fernandes made to prepare AirAsia for its digital expansion and shift away from purely airline operations?
Fernandes has sold aircraft, disposed of a stake in ground-handling, restructured the company into an investment holding group, and separated the Malaysian airline business.
Q.What challenges is AirAsia currently facing in its airline business that might prompt this shift to e-commerce?
What challenges is AirAsia currently facing in its airline business that might prompt this shift to e-commerce?
The airline business is grappling with rising risks such as holiday destination closures, natural disasters, regulatory clampdowns on price surges, and increased costs due to higher oil prices.