AirAsia a Walmart in the sky, says Fernandes

airasia_nfPUTRAJAYA: AirAsia, an airline that is well known to often break new ground, is keen to turn itself into “a Walmart in the sky”, a move to push its ancillary income to be a major contributor to its revenue.

“We are the Walmart in the sky, we just happened to be at 35,000 feet above,” its group chief executive Tony Fernandes said.

Walmart, the world’s largest company by revenue, is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores and grocery stores.

“While you’re walking through 7-eleven in the ground, there’s no reason we can’t be a consumer company up in the sky. Selling duty free, food, foreign exchange and insurance,” he told Bernama recently.

However, the effort to boost its ancillary income is not something new, it has been a work in progress for sometime now, Fernandes said.

“Right now, profitability from ancillary services almost matches profitability from our airline. We have a very strong airline business which is generating about 15 per cent margin, and a very strong ancillary income business which is generating far greater in margin,” he said.

These are the things that would drive the business high, while AirAsia continues the effort to create new routes and increase frequencies.

“Right now ancillary income makes up 23 per cent of our revenue, but almost 50 per cent of our profit,” he said.

Asked on AirAsia India’s shareholding, Fernandes said it continued to cruise smoothly.

AirAsia India started operations in June 2014 via a joint-venture between AirAsia Bhd, Tata Sons and businessman Arun Bhatia’s Telestra Tradeplace, with a 41.06 per cent, 49 per cent and 9.94 per cent shareholding respectively.

Now, AirAsia Bhd has 49 per cent stake in AirAsia India, while Tata Sons Ltd and its executives hold the remaining 51 per cent.

“Amar (Abrol, Chief Executive Officer of AirAsia India) is planning what we are going to do in the next 15-16 months. We have six aircraft now and we hope to ramp it up to 10,” he commented on the expansion plan.

AirAsia India has recently announced that its seventh aircraft will joint operations next month, which marks the start of its growth phase in India.

“While our competitors spend a lot of time suing us, they don’t realise they giving us free publicity. And so, we are a big brand in India. They saved me a lot of money,” he said.

India needs more tourists and connectivity with its population of 1.25 billion, and it is a market with abundant opportunities for AirAsia India, he said.

On the recent AirAsia 15-day roadshow, he said it received good response from investors as they were able to see how undervalued the airline was.

“Our share price obviously had a good run. We’re at about RM3 (now). We were down at 78 sen. People are beginning to see our value,” he said.

As at 12.30pm, AirAsia share price was up two sen at RM3.27.