AirAsia Wants Half Of Its Revenue To Come From Outside Flights
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Low-cost airline AirAsia had a tough 2020. But its CEO, Karen Chan, is taking a glass half full approach. She says the travel downturn and subsequent fallout for AirAsia was a blessing in disguise. It forced AirAsia to look outside its comfort zone and at a new way of doing business. Now, Ms Chan plans to transform AirAsia into a lifestyle brand. As a result, by the mid-2020s, she expects 50% of AirAsia’s revenue will come from non-aviation sources.
Speaking at a CAPA Live event on Wednesday, Karen Chan spoke about her vision for AirAsia and what it would mean for the airline.
“We anticipate in five years time, basically by the end of 2024, that 50% of (AirAsia’s) revenue would be coming from non-flight-related, non-aviation-related revenue.”
As a low-cost carrier, AirAsia already has handy ancillary revenue streams. Their base fares are cheap, but checked-in luggage on short sectors starts from US$12, seat selection starts from just under $3, and a reheated container of AirAsia’s pretty good nasi lemak costs just over $4. In 2018, ancillary revenue made up 22% of AirAsia’s total revenue. Around half of that 22% came from baggage charges.
Last year, AirAsia Group chief executive Tony Fernandes, said his airline group was diversifying.
“AirAsia.com is more than just selling airline tickets,” he said. “We now have the same potential to sell hotel rooms. I can do some crazy things. I can say I can buy hotels, book a hotel room with us and I can give you a free flight. Hotels can be as large as AirAsia tickets.”
Yesterday, Karen Chan spoke about AirAsia’s ambitions to become a fully-fledged online travel agency that offers not just hotels but also a range of travel and lifestyle products and experiences.
“We anticipate in five years time, basically by the end of 2024, that 50% of (AirAsia’s) revenue would be coming from non-flight-related, non-aviation-related revenue.”
“Not all the flights are always full, and the load factor will not be 100%,” said Ms Chan.
“So the unsold infantry, and because they are so perishable, even as an 85% load factor for an Airbus A320, I still have about 20 to 25 seats unsold. I will now be able to bundle that unsold inventory for one ringgit or 25 cents with the hotel’s direct inventory. And I will be able to go into the market with a best buys guarantee.
“We can go and expand into where other airlines are just not able to do so. We actually want to go and be seen as basically a lifestyle partner.”
AirAsia’s ancillary revenue plans are not restricted to the travel basics of hotels, transfers, and side excursions. The airline wants to build its delivery and e-commerce business. AirAsia sees itself as a future Asian e-commerce giant. But it’s not just Amazon parcels AirAsia wants to ferry around. AirAsia has detailed data on 75 million former passengers in its database. They know you purchased a nasi lemak on your last three AirAsia flights. Ms Chan wants to get down to the nitty-gritty. She wants to be able to deliver that meal to your home.
“Data is basically the new black gold for us,” Ms Chan said.
With AirAsia’s fortunes taking a hammering in 2020, there’s a good reason why the airline wants to expand its ancillary revenue sources. Whether a cheap and cheerful low-cost carrier out of Southeast Asia can successfully transform into a lifestyle brand is another issue. Whatever the result, but it will be interesting to watch.
Questions & Answers
Q.What percentage of AirAsia's total revenue did ancillary services make up in 2018?
What percentage of AirAsia's total revenue did ancillary services make up in 2018?
In 2018, ancillary revenue accounted for 22% of AirAsia's total revenue. Around half of this amount came specifically from baggage charges.
Q.What specific non-flight revenue sources is AirAsia looking to expand into?
What specific non-flight revenue sources is AirAsia looking to expand into?
AirAsia plans to become an online travel agency offering hotels, travel products, and experiences. They also aim to build a delivery and e-commerce business, including delivering meals to homes.
Q.What is the timeline for AirAsia to achieve 50% of its revenue from non-aviation sources?
What is the timeline for AirAsia to achieve 50% of its revenue from non-aviation sources?
The CEO expects that by the mid-2020s, specifically by the end of 2024, half of AirAsia’s total revenue will originate from sources unrelated to flights.
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