Shattered success factor

AirAsia Big Boss Tony Fernandes should come out and boldly admit to the public some of his pronouncements of his low cost carrier success all these years may not be truly as he claimed to be.

The Star story:

AirAsia X finds fictitious services

Friday, 28 August 2015

AirAsia's plane is seen take off from KLIA2 during the AirAsia and AirAsia X new office ground breaking ceremony in Sepang. AZMAN GHANI / The Star

AirAsia’s plane is seen take off from KLIA2 during the AirAsia and AirAsia X new office ground breaking ceremony in Sepang. AZMAN GHANI / The Star

It involves 24 payments totalling RM7.01mil made to a service provider

PETALING JAYA: Long-haul budget airline AirAsia X Bhd has discovered payments for fictitious services that adds up to RM7mil.

In a filing with Bursa Malaysia, the firm said its internal and external auditors had recently discovered that certain payments had been made to a service provider between the period of 2010 to 2014 for services which were now established to be fictitious.

“Following the discovery of the irregularities, the board has on the recommendation of the audit committee appointed PwCCS to carry out a forensics audit and instructed the management to ensure the availability of all relevant documents and/or key personnel for PwCCS review and interview, where applicable,” the aviation firm said.

During the course of the forensics audit, the auditor PwCCS discovered 24 payments totalling RM7.01mil had been made to a service provider for fictitious services.

The payments were authorised by a person in a management position within AirAsia X.

Based on the forensics audit findings, the irregularities had been confined only to a sum of RM7.01mil, it added.

“The board is of the opinion that the amount involved in the irregularities does not have any material financial or operational impact on the company,” AirAsia X said.

Following the discovery, the company has taken several measures to safeguard its assets and interest.

Among others, it has sought legal advice on the possible courses of action the company can take to recover the losses and lodged a police report.

On top of that, it is reviewing the current internal control process to ensure that similar transactions will not recur.

“The board could not make any announcement earlier as it did not have sufficient evidence to substantiate the allegations and to assess with certainty the financial and operational impact to the company,” it said.

For the second quarter ended June 30, the firm raked in RM653.03mil for its revenue but made a loss of RM132.94mil. That’s compared to a revenue of RM671.61mil and net loss of RM128.79mil in the previous corresponding quarter.

During the quarter, the group recognised unrealised foreign exchange loss on borrowings of RM30.9mil as compared to a gain of RM31.9mil a year earlier due to the weakening ringgit. It also saw lesser passengers flown but average passenger fare has increased by 7.2%.

For the first half-year, its topline was at RM1.43bil while losses sum up to RM258.86mil. Net asset per share stood at 20 sen per share.

The stock traded 1 sen higher to 16 sen with a turnover of 19.17 million shares.

***************

Needless to say, this is very embarrassing admission to Bursa Malaysia, which is an avenue to tell all the stakeholders of AirAsia X. It includes the customer base.

These transactions are pro-rated to be RM 1.4million a year or almost RM120,000 per month. That is about RM4,000 per day.

FY 2014 AirAsia X posted a revenue of RM2.94billion and net loss of RM529million. That is half a percent of daily takings which had been discovered gone into one the fictitious service providers.

It could be assumed that a fraction of what the consumers paid for AirAsia X services did not go to the services that they paid for but probably is a part of a continuous scam, which slipped through AirAsia X’s safety net.

Simply, the consumers may not get what they actually paid for. Now, the market talk is if this falling out of AirAsia’s safety net is true, is that the extend of the leakages from the transactions derived from its online portals or third party payment gateways.

That is counter productive to Fernandes’s success story for the longest time, is based on the low operating cost by eliminating ticket sales through third party agents.

What is embarrassing that Fernandes continuously proudly claimed that e commerce is one of AirAsia’s key success factor.

Nextupasia.com story:

3 AirAsia Success Factors

3 AirAsia Success Factors that entrepreneurs should look at to grow their businesses. 10 years on after taking a bold chance to start a low cost airline, Tan Sri Tony Fernandes has built AirAsia from two planes to 115 aircraft today, flying to more than 400 destinations spanning 25 countries, making the slogan “Now Everyone Can Fly” comes true.
So what are AirAsia Success Factors?
When the music industry failed to adapt quickly to the World Wide Web, Tan Sri Tony Fernandes decided to make a clean break. He left his job to pursue a childhood dream: Set up Asia’s 1st ever Low Cost Airline.

Today, AirAsia is named as the World’s Best Low-cost Airline for 4 consecutive years 2009 – 2012 by Skytrax. Air Asia has become a household brand in Malaysia and beyond in less than a decade.

In my opinion, Air Asia has not just only revolutionized the entire airline industry but more significantly, it has allowed more Malaysians especially the younger generation to travel abroad and see the world.

AirAsia Success Factors

This experience has enabled many Malaysians to be critical to the nation’s developments; they count the blessing of their mother land but at the same time, give constructive criticism by comparing to more developed nation as well as to progress which went awry.

There are indeed, a lot of lessons for Start Up to take home from AirAsia stories. Tan Sri Tony Fernandes has shared with BBC on his way of doing business.

He adopts a “walk around” management style. “If you sit up in your ivory tower and just look at financial reports, you’re doing to make some big mistakes.” For a few days every month he works on ground or in the cabin crew and he made important decisions by getting the feedback from the crew.

Being a big fan of AirAsia and its business model, there are 3 AirAsia success factors to learn from:

1. Never afraid to challenge the norm.

A few years ago, people had to call a travel agent or airline operator to buy a flight ticket. Air Asia challenged the norm by riding on the e-commerce wave. It invested in a user-friendly website interface and allows travelers to book and print flight ticket anytime and also introduce online check in services. This has proven to be enormously successful especially in engaging with the Gen-Y customers.

AirAsia Success Factors

2. Dare to Think Big and Serve the right Customer

Air Asia business model has always been focusing in low cost operation and serving the mass market. They know their targeted customers well and do not directly compete with other premium airlines. 10 years ago traveling by air was a luxury. Air Asia was daring enough to think big and today, it is truly “Everyone Can Fly”.

3. Create Complementary business opportunities, they can be Huge

This is shared by Luke Bong and I think it is an exemplary example for businesses to learn.

AirAsia Success Factors

When we fly AirAsia, most likely we will use their services such as Sky Bus from KL Sentral or stay at Tune Hotel. It is very important to think of innovative ways to get more out of your existing customers.

The question is not about how to squeeze more profit out of the existing operations, but how to provide add on values so that customers are willing to pay for even more.

************

Announcement to Bursa Malaysia is not enough enough considering that Fernandes is aloud when criticising and even dramatising against other corporations, especially Malaysia Airports and Malaysia Airlines.

Example, recently AirAsia  made a big ruckus about the defective Malaysia Airports’ KLIA2 and making a claim against the GLC which is part of Khazanah Holdings Bhd.

Bloomberg story:

AirAsia Demands $107 Million Damages From Airport Operator

Michael Arnold
July 31, 2015 — 5:09 PM HKT Updated on August 1, 2015 — 8:24 AM HKT

AirAsia Bhd., Southeast Asia’s largest budget carrier by market value, is asking the Kuala Lumpur airport operator for 409 million ringgit ($107 million) to cover losses and damages the airline says it suffered using the new and old budget terminals.
AirAsia sent a letter Friday demanding payment from Malaysia Airports Holdings Bhd. and a subsidiary, claiming they breached their duties at the airport. The letter claims problems at the new klia2 terminal have hurt the airline’s reputation, “as the public perception is that the failings of the facilities are within the control of AirAsia” as klia2’s largest user.
The 4 billion ringgit terminal, which opened in May 2014, is sinking, causing cracks in the taxiways and pools of water that planes must drive through, Bloomberg News has reported. AirAsia says the defects could cause flight delays, increase wear and tear on planes and pose safety risks.
Malaysia Airports says the depressions and ponding are caused by soil settling unevenly in the apron and taxiway, where some of the structure is built on piling and some stands on normal ground. The operator has patched and resurfaced problem areas and is building a concrete slab that it says will serve as a more permanent solution by next April.
In a statement late Friday, Malaysia Airports called AirAsia’s claims “baseless” and said it would “vigorously challenge them.”
“We are surprised by some of these assertions about klia2” and the old low-cost carrier terminal “after AirAsia has benefited from the facilities provided by Malaysia Airports since 2001 to grow into the largest LCC in Asia,” the airports operator said in the statement.

************

Its time Fernandes literally put his money where his loud mouth is or was. To be exact, RM7.01million.

Published in: on August 28, 2015 at 23:00  Comments (9)  

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  1. And what is your point?

    Are you claiming that AirAsia X deliberately concealed information about this fraud from the authorities?

    Are you claiming that the factors that led to the success of low-cost carriers in Malaysia and elsewhere are ephemeral and not sustainable and that the LCC business is built upon shaky foundations?

    As for the legal disputes between AirAsia and MAHB, let that be decided in the courts.

    Unless you are trying to adversely influence public opinion before the court cases are heard?

    • And your point? Just go to the Courts for everything? Suing and counter-suing? And nobody paying their aircraft parking fees etc running in the millions just because they counter-sue? Or cross sue, whatever.

      Looks like people can get away with not paying until the court case is settled in 2-3 years or even more if the case reaches the apex or the Federal Court. More time to improve cash flow and to pay, eh?

      What “adversely influence public opinion before the court cases are heard”? You mean everybody shuts up and let Tony Fernandez get away without paying MAB for 2-3 years?

  2. I was hoping for a post on Bersih or a continuation of the past post as today is D Day. Let me say a bit on my concerns on the irresponsible Bersih people in the hope that it would deter some from participating or lead to action being taken on the thug-like attitude of the leaders. Most of all, fears that the illegal Bersih road demo might flare up and turn racial.

    The following news headlines don’t augur well for a peaceful to-day and to-morrow as those concerned with the preparations for the Merdeka Day parade go about with their work, including carrying out rehearsals at Dataran Merdeka:

    Bersih supporters overwhelmingly Chinese: Merdeka Center -sinchew

    Khalid: Any rally not carried out in compliance with the Peaceful Assembly Act is illegal.

    Learn your law, IGP tells lawyers endorsing Bersih – SinChew
    IGP Tan Sri Khalid Abu Bakar today slammed the legal fraternity for endorsing the upcoming … Mysinchew

    Bersih 4: Rally will go on despite ban, says Maria Chin
    Government’s move to ban Bersih t-shirts laughable, says Maria Chin
    So ‘Bersih 4’ tees banned? No problem, just use ‘Bersih 4.0’, Maria Chin tells

    Despite Maria Chin’s thug-like stubbornness, clearly, the public should not participate in the Bersih event. Good that MCMC has blocked 2 Bersih websites. Good that the IGP has said they are prepared for those breaking the law on illegal assembly and that the Armed Forces Chief has stated their preparedness to assist the Police to control order if needed by the Police.

    Let’s hope and pray that nothing untoward will happen that’ll spark anything leading to the declaration of a state of emergency. Democratic rights will be curtailed under that situation and freedom-loving people will suffer, the likes of Bersih people will not be able to even squeak.

    • The Star says now 4 websites blocked by MCMC.

      The Armed Forces Chief said they will intervene if the Government declares a state of emergency. Of course when that happens, the Police would have asked for assistance to control order.

      But that would mean the Military will be in charge. That’s the usual situation under a state of emergency. Let’s hope that won’t happen.

      The state of emergency following the race riots of 1969 led to the New Economic Policy and the Malays benefited a lot. But let’s not wish for a state of emergency to get great benefits. Let’s demand and get those under normal democratic rule. Although a new leader may pursue the NEP more actively than Najib.

  3. As for Air Asia, I have my sympathies for the low cost airline but not for the arrogant, loud-mouthed Tony Fernandez. He keeps blaming the Establishment but not himself. Wonder if the airport fees, reported in the past as owed to MAB in the millions, have been paid. As tax payers, we have an interest in seeing that every sen of it is paid.

    The airline has provided the means for Malaysians to travel abroad, broaden their minds, despite many getting narrow-minded with the wrong ideas they bring back, like wanting to imitate the Hong Kong democracy-demonstrators after coming back from there at that time. The kind who will be on the streets in the name of Bersih to day and to morrow. Hong Kong simply cannot be compared with Malaysia – they no longer have British democratic values when the island was handed back to China. “One country, two systems” said the Mainlanders but, heck, they are communists, the Communist Party of China is ruling the entire country.

    Has Tony personally admitted his own weakness in not seeing the RM7 million paid for non-existent services? It’s difficult to imagine a big, public-listed company, not having instituted financial systems to prevent those. Surely they can pay for really good corporate personnel to handle their finances. We also have a right to speak our mind on it as it is a publicly listed company.

  4. BD,

    Pls don’t think that I am racist. It’s all convenient fact, if you like.

    However, the crux of Malaysia’s problem today is about or from the Kelings.

    There is Ambiga, Irene Fernandez, Ivy Josiah masquarding as NGOs.

    Then there is Gobin, Norman Fernandez, Kulasegaran, Govindan, Surendran on the political front.

    Shafiee Abdullah, Latheefa Koyakutty, Janice Khatri, Gopal Sri Ram on the legal front.

    Palanivel and Nalla Karupan on the mainstream component party setback.

    This is not withstanding Syed Akbar Ali, Zam, Firdaus and of course Tun Dr M, who are discolouring the cybersphere with their intepretations of anti-Christ on present day Umno.

    If course Fernandez, Kenneth Iswaaran and Mohan Swami on the corporate front.

    Bastardising Churchill’stribute to the young RAF airmen in the Battle for Britain in 1940, “Never in the history of internal conflict within, so many hated so much because of so few!”

    • Frankly, I have no problem with the pendatang. They are not pendatang when they are grateful to the Malays for having agreed to their citizenship right (like MCA and MIC – their Presidents – did in Parliament in 1968), respect the Social Contract and accept fully the Constitution, including the sensitive Articles that are protected by the Sedition Act.

      The word pendatang was spoken in a certain tone by UMNO Penang Chief when DAP said and did things that showed them not respecting and accepting those. DAP, in fact, tried to question the Special Position of the Malays – which was extended to the Bumiputeras of Sabah and Sarawak upon the formation of Malaysia – and did those things that caused the race riots of 1969. Google “13 May 1969: A Tragedy, National Operations Council, October 1969” to get the details.

      Those others not MCA or MIC members or supporters who have questionable attitude towards the Social Contract and the sensitive Articles of the Constitution are in the category of DAP members and supporters. They are pendatang to me. And when that word is applied to them, they have no reason to find it offensive – it is factual and there certainly is no other word to describe them.

      • How much of that attitude goes into Tony Fernandez’ arrogance when dealing with the Establishment as represented by MAB is not known. But it seems that he has no kind words for the MAB bosses since a long time ago. Enriched, he got emboldened.

        Yet whether there is any desperation on his part of maintaining his and Air Asia’s image of financial strength and integrity in the suing and counter-suing of MAB, is also not known.

  5. Many of the pendatang are among those who march the streets in the vicinity of Dataran Merdeka earlier to day, meant to last until to-morrow.

    Those like Lim Kit Siang and son Tokong Lim who no less than the DAP Vice President, Tengku Aziz, himself said is “biadap”, as he stormed out of the party 1-2 years ago. Called ultra kiasu (always want to win, never want to lose), extremist, even “Cina Bukit” since the time they were in Malacca many years ago.

    Yes, the term “Cina Bukit” is very apt. Professors of Chinese history have written books in which they explained that those from south China are descended from the hill tribes. South China was originally inhabited by the hill tribes, not Chinese. And practically all of the Chinese in this country came from south China.

    No problem with that. Except that the “biadap”, uncultured and not respecting the Constitution and the laws emanating from it are not acceptable and are pendatang to me. Imagine, there is the Peaceful Assembly Act 2012 clearly spelling out the rules on peaceful assembly. Told by the IGP that they have not complied with those and that their planned rally was illegal, their yellow shirts etc gazetted as banned, they simply didn’t care. Now what else can they be described as?

    And they are trying to hijack the Merdeka Day celebration parades etc being rehearsed there, chucking away any notion of loyalty to the country and patriotism among them. Yes, they have their agenda but told to do their thing the week after, again, they simply could not be bothered to even consider. Now, what else do you call them? Of course, the others like PKR blokes and such are inconsequential as far as I’m concerned.

    And I would now also bastardize Shakespeare’s words – hell hath no fury like the pendatang scorned. Remember, not all are, but those described above are pendatang.


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