More than an airline

“Once you’ve covered Vietnam and Myanmar, you’ve got all the big (Southeast Asian) populations,” he said. “Vietnam – we’re talking about October – we’ve had great support from the Vietnam government and we have a great partner. My team are very bullish.”

As for Myanmar, he concedes it won’t be a big airline because there is a lack of airport infrastructure but says with 50 million people, it will develop over time.”

As with all his joint ventures outside Malaysia, Fernandes has to find a local partner to take a majority stake and it appears he is on the way. While refusing to divulge who that might be he did comment while in Australia: “We had a good meeting with someone in Sydney – he’s got a good airline that we’ve known for a long time and he is a well-respected guy. We’re going through that process.”

AirAsia won’t be the first to try and get a toe into the Myanmar market, which is seeing significant economic growth. Last year, Japan’s All Nippon Airways (ANA) pulled out of a plan to form a new airline with local partner Golden Sky World after authorities rejected their application for an air operators certificate. ANA chairman Shinichiro Ito has said since that it will try again and is determined to become involved in Myanmar aviation.

The move to add Myanmar to the list is a clear indication Fernandes intends to continue to grow his group, which now operates in excess of 500 jets, mostly single-aisle A320 series but also including A330 on low-cost, long-haul operations by AirAsia X. The carrier is emerging from several turbulent years which saw some of the gloss rubbed off the brand. Profits were slim or non-existent at some of the subsidiaries, although there has been a revival in recent times. It also had to deal with the fatal crash of an Indonesian flight in 2014 that killed 162 people.

But Fernandes, who admitted to having so many fingers in so many pies he may have dropped the ball a little, has set about raising the bar and easing analyst fears the airline group may have over-extended itself. Recently, AirAsia has pursued an “asset light” model, forming a joint venture for its Singapore and Malaysian ground-handling operations and recently selling its leasing business in a staged process that will ultimately see 182 planes pass to established leasing portfolio manager BBAM Ltd.

That will bring in around $1 billion, although the sale hasn’t won universal approval from analysts. They warn that in the near term it could hurt AirAsia profits and leave it exposed to the risk of higher lease rates. Indeed, the leasing arm was a stable business and would likely have continued to produce good profits. While the sale proceeds from the leasing business will be used to reduce debt, the bulk will be paid out as special dividends, potentially limiting the upside in a stock that has more than quadrupled since hitting a seven-year low in late 2015.

But the aim, says Fernandes, is to foster sustainable growth. In Hong Kong for a presentation to analysts and investors at Credit Suisse’s Asia Investment Conference, he launched what he described as a “we’re more than an airline” campaign. He points out AirAsia has been moving rapidly to launch additional services for its 80 million-plus customers, from financial offerings, including foreign exchange, to e-commerce and content. His portfolio already includes a payments company, logistics firm, food and beverages brands and a loyalty program.

“While Southeast Asian companies like Grab (an Indonesian ride-hailing company similar to Uber) have to go out and spend a fortune to build that brand and data, we have 89 million customers travelling with us every year and we have data going back 18 years. We’re more than an airline – that’s the message for 2018 – like Amazon is more than a bookseller. The biggest asset is our data and we’re going to monetize that data over a series of joint ventures in three kinds of pools.”

‘We have 89 million customers travelling with us every year.’

This will includes turning its loyalty program points into a more formal currency through an initial coin offering, building a bigger logistics business and growing its content offering.