Asia’s first real no-frills airline is pioneering a corporate travel product next. Given its track record so far, AirAsia’s business travel foray should be a winner, writes N NITHIYANANTHAN.

AIRASIA has shaken conventions, rocked traditions, innovated and shifted paradigms from the time it re-entered Malaysia’s domestic air sector on January 15, 2002, under its new owners, Tune Air, as a low-cost, no-frills airline.

Offering fares from Kuala Lumpur to 12 destinations – at times as low as RM10 (US$2.70) and at least 60 per cent less than what Malaysia Airlines (MAS) charges – AirAsia has brought air travel to every Malaysian, living up to its tagline, “Now Everyone Can Fly”.

It has also mainstreamed radical concepts such as ticketless air travel, free seating, non-refundable purchases, penalty for changes made, no-service flights, Internet booking and seat bookings via mobile phones using short messaging service (SMS).

When it acquired AirAsia on December 8, 2001, Tune Air inherited two Boeing 737-300 aircraft and four destinations – Langkawi, Kuching, Kota Kinabalu and Labuan.

By October 22, 2003, AirAsia would have taken delivery of its eighth aircraft, flown to its 13th destination from its base in Kuala Lumpur – Johor Bahru – after Penang, Kota Bharu, Miri, Tawau, Kuala Terengganu, Alor Star and Sibu, and increased frequencies to the existing destinations.

While leisure travellers have been its target, the surge in aircraft inventory is expected to lead AirAsia to also regard business travellers as a target, and review strategies and routes to suit them.

The corporate travel segment has always been considered important. AirAsia chief executive officer, Mr Tony Fernandes, said: “I make it a point to meet two or three arriving aircraft a day, and I do notice more businessmen are travelling on our aircraft. The reason for this would be savings, and that we are an efficient product.”

A corporate travel site within its website has already been built. “While we only expect to launch it next year, 250 companies have already registered with us, hoping to benefit from our services when we are ready,” Mr Fernandes said.

Various specifics have first to be sorted out before its launch. “Travel agents give corporations credit. Now this is something we have never done and will never do. We have to inform them by paying upfront, they get savings of 60 per cent, which is of greater value than two months’ credit,” Mr Fernandes said.

Corporations which accept this principle and register with AirAsia will get a separate screen on its website, when its corporate travel product is launched. They will be given a password to enable them to access inventory directly.

“Two fare structures will be posted, a general standard fare with a no-cancellation policy, and a more costly fully flexible fare which enables the changing of dates,” Mr Fernandes said.

With 10 more aircraft due after October, AirAsia was ready to consider schedules and networks suited for business travellers.

“As we keep expanding, we will broaden the market and create new schedules such as Kota Kinabalu to Johor Bahru or Johor Bahru to Penang. We will listen to what our customers say,” Mr Fernandes said.

The Johor Bahru to Kuala Lumpur route to be launched on October 22 is also expected to be of special interest to business travellers. A shuttle coach service between Johor Bahru and Singapore will be finalised soon. With regards to regional expansion, Thailand, Indonesia and Singapore (in that order) are on the cards. On a Singapore to Kuala Lumpur direct service, he said: “We are still talking to Changi International Airport and may consider introducing the service for the benefit of business travellers in particular.”

When asked why AirAsia has clicked so far, he said: “From the beginning our objective has been to keep our average cost per seat kilometre as low as possible. This has enabled us to keep our fare structure low.”

Apart from not serving any food or drink, cabin crew also doubles up as check-in staff at the gates. Planes are turned around quickly, thereby maximising their use.

Going ticketless on April 18, 2002, has led to savings of RM0.50 per ticket.

Equally significant has been its efforts to create direct distribution channels, rather than use travel agents and global distribution systems (GDS), thereby saving on commission payments and GDS costs.

“We broke this distribution channel of agents. We are probably the only airline in Asia which is non-GDS based,” Mr Fernandes said.

Instead, the airline relies on its website, nationwide call centre, eight sales offices and mobile phones to receive its bookings.

On March 1, it became the first airline in Malaysia to enable credit card payments for telephone bookings made through its call centre. On August 29, it became the first in the world to enable bookings via SMS, Mr Fernandes said.

Its biggest breakthrough, however, was on May 10, 2002, when it launched online bookings via its website, www.airasia.com. Heavy advertising prompting consumers to use the Internet for extra special fares is why 45 per cent of its current bookings are Internet-generated.

By May 19 this year, AirAsia reported a 400 per cent increase in passengers, to 1.75 million, since its transformation to a no-frills airline. November 2002 remained its best-ever month with an average load of 90 per cent for all routes.

Competition from MAS on the domestic front and upcoming budget airlines such as Valuair are considered positive developments.

“Where we are concerned, our greatest competitor is cost, and not other airlines. This focus has enabled us to maintain our strategies from the beginning. We did not change them when MAS started offering 14,000 Supersaver seats a day at a discount of 50 per cent to compete with us, or when SARS hit the region.

“However I regard wasteful or unprofitable competition when an airline is propped up by a government,” Mr Fernandes said.

He compares the interest in low-cost airlines to the excitement generated by dotcom companies when they first emerged.

“Everyone feels they ought to have one but must realise there are many tombstones around.

Managing and operating a low-cost airline is a very exact science and is not easily replicated.

“Having said this, I still encourage more players in the market,” Mr Fernandes said.