“If you don’t use AI, you will regret it”

He’s down but not out. He’s been battered and bruised but not knocked out. He’s cried but he’s a fighter. He’s survived the worst crisis to hit his 21-year-old airline business and now he’s determined to build a mobility business for the future, that of “moving money, people and boxes”.

Tony Fernandes, CEO of Capital A (formerly AirAsia Group) took to the stage at Aviation Festival Asia in Singapore, looking fit (he went on LinkedIn to declare he was going to lose weight) and sounding very clear and confident about his plans to create a data-driven business encompassing the Airasia superapp, BigPay and its aircraft engineering division Asia Digital Engineering (ADE) and logistics venture Teleport.

Here’s why.

Tony Fernandes at Aviation Festival Asia with Danny Lee, Asia Transport reporter, Bloomberg

First, he feels the pandemic has given him a fighting chance to compete on a more level playing field.

He said there had been two disruptors of capital – tech unicorns that had loads of money to spend and government-owned airlines that did not have to contend with the true economics of running an airline business.

Noting that unicorns like Gojek and Grab have had warning signals on profitability and governments now have more things to worry about than keeping their airlines afloat, he said, “We come at things from different angles. We are trained better. Airlines, we are tight with cash. Those unicorns came with enormous cash.

“We are a hard-nosed marketing company. Sixty percent of our routes were new routes. The platform companies grew by giving away their product – free rides, free food. At some point, reality bites and investors ask, when will you make money?

“We had to compete with government-owned airlines. Now there’s a huge opportunity for us to compete more fairly.”

Best decision – “we never gave up our data”

Secondly, he said the best decision he made since he started AirAsia 21 years ago and sold tickets through the Internet was “we never gave up our data”.

It is that data gathered over two decades that allowed him to create those other verticals, which became the lifeline during the pandemic when his 200 planes were grounded. “We were able to use our data to build other businesses around the airline – we applied data to engineering and predictive maintenance, we created an ecosystem to sell other customers other things. On our superapp, 24% of traffic is new – people that didn’t fly on AirAsia.”

To him, “digital is about accessibility. It enables me to build a bigger business at lower cost and using data to personalise offers”.

“Being a small guy doesn’t scare me”

Thirdly, he’s a fighter. “People ask me, how can I take on Grab? I started with two planes and we flew 19 million people before Covid. Being a small guy doesn’t scare me. Long as we have the right model, right cost structure, we will eventually catch up.”

He admits he’s got a long way to go, rating it 3-4 on a journey of 1-10. “But we are in ASEAN, a region of 700 million people.”

For now, he’s busy getting his planes back in the air. Currently, he’s got 150 planes up and expects to have all 200 flying by May or June.

He’s also busy fixing customer service, with AirAsia taking a battering on social media over refunds and flight change requests over Covid. “Starting again this time round was harder. When you haven’t used a plane for three years, there are bound to be glitches. Everyone is expecting you to be on top, and the cost of having human agents is not possible.”

Which is why he’s a believer in using Artificial Intelligence (AI). In February, the airline “sacked” its Virtual Allstar named AVA, with management even calling a press conference to bid farewell to chatbot, and replaced it with “Ask Bo” with enhanced AI and ML capabilities.

Tongue in cheek, Fernandes said they decided to name it Bo (after AirAsia Aviation Group CEO is Bo Lingam) so “that Bo is the go-to man, someone else to whack”.

Giving AVA her due at the press conference, Fernandes said she’s handled more than 113 million guests since 2019, and over 43 million queries in 2020 at the peak of Covid.

Other than fielding normal queries, Ask Bo will give passengers more autonomy – able to change flights, request refunds, choose Service recovery options and by March, able to talk live to human agents.

“AI is constantly improving, it’s like safety. It’s only going to get better. If you don’t use it, you will regret it,” said Fernandes.

“People value travel more and they will pay more for it”

There were good things that came out of Covid – the fact that the group now has three freighters and “I learnt about the first mile, last mile business”.

While the booking curve has changed – people are booking closer due to uncertainty – he said people value travel more.

“It’s their number one discretionary spend beyond fashion and dining. This demand is here to stay. All airlines have their capacity back and as capacity comes back, it remains to be seen whether it will be filled. By my estimation, people are travelling more, they value it more and they pay more for it.

“I hope airlines behave. For far too long, we’ve underpriced the product.”

Fernandes said the good thing about having a digital ecosystem is that businesses can learn from each other. “Stuff we learn from the superapp, we feed to the airlines.”

He does not believe Capital A will exist in its current form for long. “I see aviation being one group and logistics being another. We will spin them off.”

Asked what was his darkest moment, he said “when we had to lay off staff. For 21 years, we never had to do that. Telling people that they are losing their jobs through no fault of their own, that was the toughest.

“But what can you do? Either you put your head in the sand and cry and run to the government every two seconds or you fight. I did cry but I am an optimist and a fighter.”