AirAsia Group believes its digital push will drive growth even as its core flight business suffers severe financial losses amid the coronavirus pandemic, according to the head of its online platform.
The Malaysia-based budget carrier, which is under pressure to shrink its business throughout Asia, has launched an app aiming to be the “ASEAN superapp for everyone,” and not only while flying.
The plan brings AirAsia into direct competition with some of the region’s leading digital players, including Singapore-based Grab and Indonesian rival Gojek.
AirAsia has been bullish on e-commerce and financial technology over the last couple of years, but the pandemic and subsequent border closures have prompted the company to speed up its digital transformation.
“We need to start focusing on growth. If we look at the airline for the next maybe 12 to 24 months, it would be about cost containment and rationalization. … AirAsia.com as the platform is purely about growth,” Karen Chan, the chief executive of AirAsia.com, the travel-tech and lifestyle platform of the airline, said Thursday at an online event held by Skift, a U.S.-based provider of information on the travel industry.
While AirAsia is increasing its presence in the region by grabbing market share from other struggling airlines, Chan explained that the focus of its airline business in the near future will be limited to the domestic market in each country it operates, capping its potential for further expansion.
AirAsia, like many other airlines worldwide, has been buffeted by the sudden evaporation of travel demand and has responded by cutting more than 10% of its workforce. It plans to downsize its fleet of aircraft and end its joint venture in Japan.
Nikkei Asia recently learned that the Malaysian government will back a 1 billion ringgit ($240 million) loan as a lifeline to the carrier. AirAsia reported a net loss of 1.8 billion ringgit for the first six months of the year, against a net profit of 111.78 million ringgit for the same period in 2019.
AirAsia revealed last week that it had launched what it hopes will be the region’s next superapp by unifying its mobile service and websites into a single app, offering e-commerce, deliveries and payments.
“We have also now moved into the e-commerce vertical and financial services,” Chan said, enabling consumers to enjoy home delivery of duty-free products and also buy products unrelated to travel, such as “potatoes and zucchini.”
Chan reiterated that the company has the advantage of a customer database of 75 million people across the group, gained mainly by its airline business.
“We already have a very high average revenue per user as compared to some other superapps, because they have been so used to purchasing [airline] tickets,” Chan said. “The barrier for entry is much less than when you are actually selling ride-hailing, and then you need to go and sell a flight ticket.”
Asked about the rationale behind selling the tickets of other airlines on AirAsia.com, Chan said enhanced connectivity is necessary for the platform to work.
“If you look at AirAsia as a budget carrier, we are expert in connecting two points. However, if you are actually talking about alliances, we want to first start an experiment on virtual interlining. … AirAsia DNA is about connectivity,” Chan said.
“What we have to focus on is to make sure that [75 million people in AirAsia’s customer base] can now come back with higher frequency, even if the basket size might be a bit smaller than the 300-400 ringgit for purchasing a ticket,” Chan stressed. “We [will] ensure that they can now come back and understand that we have a lot more to offer.”
AirAsia entered the business of packaging flights and hotel stays through a joint venture with Expedia in 2011. In 2018 it announced it would sell its 25% stake to Expedia for $60 million, freeing it to build its own accommodation services and other inventories.
The carrier launched a mobile wallet service in Malaysia in 2018, tracking consumers’ payments with credit and debit cards.
This article was first published on Nikkei Asian Review.