The Air Asia Establishment

Topics: Suvarnabhumi Airport, AirAsia, Thaksin Shinawatra Pages: 4 (799 words) Published: February 3, 2009
The Air Asia Story

Inspired by the LCC business model of Southwest Airlines inspired Tony. Southwest Airlines was established in 1971 and had been profitable every year since 1973. Then model adopted by Europe after liberalization of aviation industry. Ryanair (Ireland) and easyJet (London) are the largest LCC in Europe and follow the same business model.

Air Asia was established initially by DRB-Hicom Bhd in late 1996, asian financial crisis in 1997.

Government studied Tony’s proposal to start a LCC carrier and refused to issue a new licence and had requested Tony to buy over an existing airline.

Tune Air, set up by Tony and his investors bought Air Asia over from DRB-Hicom on 8th Dec 2001 for a token sum of RM1, with its 2 x Boeing 737-300s, a tiny route network and nearly RM 40 million in debts.

Tony Fernandez (VP, Times Warner Music, SEA), from music industry had RM 1 million in hand (mortaged house and sold off Times Warner Share Options) to pump into Air Asia.

Air Asia’s LCC runs short-haul (less than 3 hours) and is low-cost, no-frills carrier serving routes within Asia.

Air Asia was re-launched in January 2002, with fares lower than bus ticket for local destinations and even gave away free tickets. First day of operations started with RM 1 promotional price.

Air Asia started with routes from KL, and then from Senai Airport in Johor in 2003.

By Dec 2002, the revenue was stated to be RM 113 million and profits of RM 19.4 million, 1.1 million passengers and most debts settled.

Cost cutting measures such as : Fuel consumption being cut by half, and landings being doubled with the tyres. Safety and service were given same priority as cost cutting measures. Problems raised were resolved within 24 hours as a KPI.

Air Asia Financial Performance

FY Ended
30th June (RM Millions)
Revenue 217 330 392 666 1,058 1,603 Pretax Profit/(Loss)...
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