As expected, Tony Fernandes would do something erratic when things don’t go his way. His failure to gain control of Malaysia Airlines via the recently reversed ‘Share Swap’ which was inked 9 August last year, saw AirAsia being migrated to Jakarta.
Friday June 15, 2012
Tony Fernandes speaks to StarBiz on AirAsia’s future plans
By B.K. SIDHU
It will not be sending aircraft to MAS for maintenance
PETALING JAYA: Adieu Kuala Lumpur, welcome Jakarta!
The big move has begun and Jakarta will be home for AirAsia Bhd after being based in Kuala Lumpur for a decade.
It is growth beyond Malaysian shores which is tempting AirAsia.
“Growth in Malaysia will be boring at a single digit of 3%, 4% to 5% but countries like Vietnam, the Philippines and Indonesia are where there is plenty of opportunities over the next 10 to 15 years and that should keep AirAsia busy,” a Maybank Investment analyst said.
It is for these reasons – though AirAsia’s diplomatic answer for wanting to relocate is to be near the Asean permanent secretariat – that it is shifting to Jakarta.Fernandes: ‘All this has given me a new lease of life and I cannot tell you how excited I am of AirAsia’s future and the future is really good for us.’ – By AZMAN GHANI/ The Star
“When we started, we did not have a vision but somehow we became very big and now we have to look at how to manage,” AirAsia groupchief executive officer Tan Sri Tony Fernandes said in an interview recently.
What really pushed him to make the bold decision to relocate was the unwinding of the share swap with Malaysia Airlines (MAS), he said.
The share swap between both airlines ended in May due to objections from MAS unions.
It was only when he was director of MAS did he realise what “fantastic operations” he and his long-time business partner Datuk Kamarudin Meranun had built of AirAsia over the past decade.
“It was the unswap that woke me on the potential of the AirAsia. You don’t appreciate it until you see it (from the other side) and if I had put in the same energies for MAS into regional development, (just imagine the possibilities). All this has given me a new lease of life and I cannot tell you how excited I am of AirAsia’s future and the future is really good for us,” he said.
Although he was sad over the unwinding, he said: “I am glad it is over.”
Fernandes and Kamarudin started AirAsia a decade ago with two aircraft but grew to have operations in Thailand, Indonesia, the Philippines and Japan. It also has a medium-haul sister airline in AirAsia X.
It is eyeing five more joint ventures in markets like China, South Korea, Vietnam and India.
Fernandes alluded that he would also like to set up AirAsia Africa.
The airline may have grown by leaps and bounds into a regional low cost carrier and competition is a given for AirAsia but its biggest challenge is really about staying focused and in implementation.
Therefore, the move to Jakarta would mean there is a core team that looks at every aspect of the business. Some see this as creating better coordination and cohesiveness to enable AirAsia to focus and tap opportunities in the region.
Fernandes will also move to Jakarta, although he keeps saying “this (Malaysia) is my home.”
Below are the excepts of the interview with Fernandes:
Can you ever give up as CEO of the Malaysian operations?
Of course I will not let go, but the day-to-day jobs, like carrying bags, being in every meeting, there can be a Malaysian CEO to do all that. But I would still be heavily involved in the day-to-day running of the airline.
Can someone do what you do because you are synonymous with AirAsia?
It cannot be same, but I am not leaving, I am still around. All this is a good change and hopefully we can build new relationships with the appointment of the Malaysian CEO. Also, by appointing a CEO for Malaysia I want to show that AirAsia is not about one person, not about me and Kamarudin.
In reality you are the person (behind the airline).
But I am not going to live forever. It is all about succession planning apart from growth. However, I am not leaving anytime soon.
Is securing landing rights still an issue?
That has changed dramatically over the past few years as countries are seeing the benefits of economic development.
Has Indonesia imposed conditions that AirAsia must be based there to tap the market, and are you getting landing rights?
No. But we get plenty of landing rights. We don’t have any issues and Indonesia is perhaps the most open aviation market, it has so many domestic airlines. Airlines are the ones giving us a hard time in every market. The hardest time I have is in my own home country, and I am not running away from my country. Remember, we are listed here and AirAsia is a home brand.
Malaysian operations are a major contributor to AirAsia’s earnings but growth will mature experts say, where is the next growth area?
Hard to say but the (market) share will grow in markets like Indonesia and Japan. Malaysia’s returns is still most profitable. Cost wise, ours is still the same as Indonesia and China but our cost advantage in Malaysia is eroding as airport charges go up whereas in other countries they are building low cost terminals for us.
Outlook of your financial results?
They will be good for the second quarter and there will be a bonus in the third quarter because of lower fuel prices.
Are MAS problems too big to be fixed?
Nope, They could have been fixed. Everything was laid out for MAS. The people I feel sorry for, are the staff, even though some thought the share swap was a bad thing. In reality, you had to really look at the staff of AirAsia, how they have grown in terms of salaries and careers and that was the plan for MAS too.
Yes, there will be short-term pain but you have to make the business successful as you cannot be on life-support, or be on sukuks or WAUs forever. There has to be an end at some stage. So the idea we were putting would have transformed the airline at some point.
The thinking is that the management should have engaged more with the employees instead of bull-dozing changes through?
I was not there, so I can’t say. You know me and you know my style – I am the best engager, and I even know the guys that carry my bags.
I disagree with the statement, for whatever was put in front of the union, they did not want change. There even argued over over the stopping of flights to Buenos Aires. With that level of thinking, how can you implement changes? But we have a different culture at AirAsia, and there is no resistance to change.
Your biggest gain and biggest regret over the collaboration?
The biggest gain is, we are now friends with Khazanah Nasional Bhd and I can pick up the phone and call AJ (Ahmad Jauhari Yahya, MAS group CEO). I have made some good friends in MAS, I certainly could not do that before. Biggest gain is that the people who had very negative views of me, had begun to see that I am not the devil re-incarnated.
I had the opportunity to at least meet my detractors face to face and give them a better opportunity to know me. My biggest regret is that we did not finish what we set out to do. Me and Din could have done a lot for MAS and helped MAS. But I am not someone to cry over the past, we move on.
Are you sending your aircraft for maintenance to MAS?
No, we have not done that. I don’t think it will happen. I think it will be a headache for the management. If you read some of the comments it is like, we are benefiting, so we are not sending.
Are you recruiting some of MAS crew, those they are letting go?
We are taking 50 of the MAS Indian crew. Since we have grown, and if they are prepared to be mobile, we are prepared to take. But there are plenty of opportunities for crew out there.
Is there any progress in the area of training with MAS?
Training makes complete sense but there is massive resistance from the pilot management, so we move on. Why waste time talking, we do not need it. But Malaysia has lost out, because to have a training school in Sepang with Boeing and Airbus, we could have been number one in the Asia.
When Khazanah Holdings Bhd which is the shareholders of both airlines announced the reversal of ‘Share Swap’ six weeks ago, the Collaborative Co-operation Framework (CCF) between Malaysia Airlines and Air Asia would remain. The rational is for the national agenda, where the two airlines continue to work together and build the competency of the national civil aviation and commercial air carrier preparation ahead of ASEAN’s Open Sky policy by 2015.
The two airlines are supposed to work together on maintenance repair and overhaul (MRO), ground operations and training, on top of joint acquisition programs from aircraft companies or spares suppliers, for the economies of scale.
There you have it. Fernandes wasn’t interested at all on the national agenda all along. He was interested only for his own agenda.
This announcement is nothing new. Last July, Fernandes did threaten to move AirAsia to Jakarta. However, it was believed that he was ‘pacified’ not to carry out that plan. Conveniently, a few weeks later the ‘Share Swap’ deal came about where Fernandes and his partner Kamaruddin Meranun gained control into the Malaysia Airlines BOD and management, even though they were only 20% shareholders.
The Jakarta Globe reported this July last year:
AirAsia to Move Base to Jakarta
A. Lin Neumann | July 22, 2011
Tokyo. AirAsia has chosen Jakarta to be its regional headquarters in an effort to be seen as a Southeast Asian airline rather than just a Malaysian one.
The region’s largest low-cost airline plans to open its base in the capital at South Jakarta’s Equity Building in October, group chief executive Tony Fernandes told the Jakarta Globe on Thursday.
It plans to take advantage of easy access to the Asean secretariat in advance of the “open skies” agreement that will go into effect in 2015.
That agreement will lower barriers for air travel between the region’s capitals.
Asked why he chose to move the fast-growing airline’s principal corporate base to Jakarta from Kuala Lumpur, Fernandes said: “Asean is based in Jakarta, and Indonesia will be the largest economy in Asean in times to come … And I like it there.”
Fernandes, who is Malaysian, said he had already bought a home in Jakarta within walking distance of the new office. “I don’t like the Jakarta traffic,” he said.
The Equity Building is in the Sudirman Central Business District, near the Indonesia Stock Exchange (IDX). According to aviation experts, AirAsia’s relocation to Jakarta highlights the country’s growing importance in the region’s aviation sector.
“This will be great for our aviation industry,” said Dudi Sudibyo, an aviation industry analyst in Jakarta. “This will push us to be better.”
To match AirAsia’s ambitious strategy, the Indonesian government will have to continue to improve infrastructure to accommodate more passengers flying into and around the country, said Bambang Ervan, a Transportation Ministry spokesman.
“This is very positive, we welcome AirAsia’s plan,” he said. “It shows that AirAsia, one of the world leaders in the aviation industry, has confidence in Indonesia’s strong growth.”
The Indonesia National Air Carriers Association (Inaca) forecasts passenger growth at 10 percent to 15 percent this year.
Central Statistics Agency (BPS) data showed that air traffic in Indonesia grew 22 percent to 53.4 million passengers in 2010 on the back of demand from the middle class for domestic flights.
That is higher than the 9 percent average increase recorded by Asia-Pacific carriers, according to data from the International Air Transport Association.
“Indonesia is among very few countries that managed to record strong growth in air traffic last year,” Bambang said. “The lack of available airlines compared to population and geographic conditions is only a sign that there’s a lot of opportunity here.”
Fernandes was in Tokyo for the announcement of AirAsia Japan, a new joint venture with Japan’s largest carrier, the ANA Group, to launch Japan’s second budget airline next year.
He confirmed his airline’s recent order for 300 Airbus A320neos. The deal, originally for 200 planes, was increased with an option for 100 more. It was the largest single aircraft order until Wednesday, when American Airlines ordered 460 Airbus and Boeing aircraft in a $38 billion deal.
Fernandes played down concerns raised by some analysts about the possible debt implications of such a deal, saying the company was cash rich, with a turnover of more than $4 billion last year, and operated as a group with a profit margin of about 20 percent.
Despite the Federal Government and nation gave him a lot and tremendous concessions and space for him to prop his AirAsia up to this point, the bottom of the day everything is measured on how much money he would make.
It was a ‘directive’ that AirAsia be sold off for a token RM 1.00 eleven years ago, even though the owners then had over RM 30 million secured Armed Forces contract to ferry troops to and fro between Semenanjung and Sabah and Sarawak. Then the constant complaint about “Malaysia Airlines being a big bully” and “Not willing to co-operate”. AirAsia was allowed to go ahead with its flexible ticket pricing at the expense of Malaysia Airlines where Ministry of Transport (MOT) insisted the the national carrier must have a floor fixed price for tickets, based on IATA formula.
Then the perpetual complaints on Malaysia Airport Holdings Bhd (MAHB). The constant bitching did not go without AirAsia refusal to pay up all monies collected at source from passengers, where at a point the disputed amount was recorded at RM 114 million.
The ‘Level Four’ final Airline Rationalisation Plan in May 2006 saw many of Malaysia Airlines domestic routes were ‘transferred’ to AirAsia, especially in Sabah and Sarawak. The most significant as Rural Air Service (RAS) where these routes came with heavy Federal Government subsidy. Fernandes took these RAS routes and parked it under FAX. After a few months, he handed over RAS to Federal Government where the service had to be passed back to Malaysia Airlines to continue.
All of these allowed AirAsia to build their book and demonstrated extensive growth in passengers and routes. With that, they convinced international financiers and went listed on Bursa Malaysia.
Then the nation should not forget Fernandes’s attempt to ride on Sime Darby for proposed the low cost carrier dedicated airport in Labu. It was the bloggers who went against this vehemently and failed the attempt.
The soonest opportunity presented itself when Fernandes was appointed into BOD of Malaysia Airlines, the national carrier was ‘suckered of’ RM 18 million for sponsorship for his own private venture in English Premier League bottom-rung Queen’s Park Rangers. This is despite Fernandes’s agreement with Khazanah MD Tan Sri Azman Mokhtar, as the attention on the former is great.
The latest controversy was Fernandes’s way of going to the media and bitch against MAHB, especially during the final leg before the full picture of the much anticipated dedicated new LCCT terminal dubbed ‘KLIA 2’ was let out for public consumption. It was revealed that Fernandes consistently used the media in bitching overtones instead the proper channel to solve some of the issues.
The maestro of wayang tinggi opera has done it again and taken everyone for a ride. It serves as reminder that he cannot be trusted, at least from the perspective of the national agenda and ‘big picture’. Federal Government and now, Perak State Government too should really be mindful of allowing this man any inch for their proposal.
This dog has no qualms about biting the master’s hand the moment the treats don’t go his way.