Thomas White Global Investing
Emerging Leaders

Emerging Leaders

February 2013

Tony Fernandes, CEO of AirAsia & Founder of Tune Group


Anthony Francis Fernandes is a no-frills man, not unlike AirAsia, the airline he founded in the early 2000s. A man of efficiency, he doesn’t even mind shortening his name to Tony Fernandes if it can help save time and effort.

A little more than ten years ago, Fernandes started what was Asia’s first low-cost airline. Before he arrived on the Asian aviation scene, the skies above the world’s largest continent were largely empty except for the cottony clouds. Asian passenger carriers of the time were typically a motley group of state-owned firms that charged sky-high fares but provided downbeat services. No wonder at the time the Asian aviation market was tiny and underserved.

But Tony’s arrival changed all that. When Fernandes took-over the little known AirAsia, a loss-making airline owned by the Malaysian government, the decision looked like a no-brainer. Not many in the aviation industry had the vision, let alone the courage, to foresee how Asia would transform into the 2000’s. Mortgaging his home and dipping into his live-time savings, Tony put all his faith in the Asian consumer, who he thought would board his airline if he provided good service at a reasonable price.

Meanwhile, ordinary Malaysian travellers were in fact waiting for someone exactly like Tony Fernandes to offer them the experience of flying. When Tony started his airline, millions of fellow Malaysian travellers took to his airline enthusiastically. By starting a low-cost airline in Malaysia, Tony not only set a fuse to the pent-up demand for air travel in his home country but across Asia. Soon Asia’s air travel market exploded spectacularly –millions across the world’s most populous continent found that they too could afford to fly. Today, Asia is the world’s fastest growing air travel market and by 2025 the airlines in the region are forecasted to handle at least three times the amount of passengers as they used to in 2005.

AirAsia was a resounding success right from the word ‘go’.

From just two airlines in 2001 the firm’s fleet grew to 101 in 2012. Year-after-year AirAsia clocked double-digit growth in the number of passengers it flew and the revenues it earned. Today, the airline carries nearly 15 million passengers a year. When AirAsia ordered 200 Airbus A320 aircraft in mid-2011 worth around $18 billion, the single biggest order for Airbus aircraft during the year, the low-cost airline that started small revealed the phenomenal journey it had undertaken.

Tony’s airline flew higher because it stayed true to its mission: to fly as many people as possible at a low cost. Tony cut costs relentlessly in every possible way. He deployed his aircraft efficiently, hedged oil prices smartly, expanded the airline’s services to where others feared to tread, and marketed his airline for the budget traveller.

Although many imitators trying to copy the Fernandes model are sprouting across Asia, the original AirAsia still stands out.

That is probably because flying is as emotional to Tony as it is a business proposition. Back when he was still a school boy, Tony’s family could afford to send him from Malaysia to London for schooling, but it couldn’t afford to pay for his trips back home during mid-year holidays. To beat the isolation of a vacant boy’s hostel during the holidays, Tony did the next best thing: he went to London’s airport and starred longingly at all the planes that took off. “Plane-spotting” Toni recalls nostalgically. That was a time when Tony sat longingly for someone to come and cut air fares so that he could go home. When no one filled that need in his home country, Tony took matters to hand and became an entrepreneur himself cutting air fares for other budget travellers. These days, first-time airline travellers consider Tony a celebrity. “Regularly, an old man will come up to me and say, ‘I never thought I would be in a plane before I died, but now I can be”, Tony recalled in an interview to Forbes magazine.

Today, AirAsia’s flag flies high across Asia with its regional hubs in Thailand and Indonesia. Fernandes is keen on opening additional hubs in other countries in the region, such as the Philippines and Vietnam, with an aggressive strategy to capture markets in countries like Japan, China, South Korea, India and Australia as well.

As AirAsia soared high in the air so did Tony’s wealth and standing in Malaysia. With a net worth of $615 million, Fernandes has become Malaysia’s 15 richest persons and one of the few self-made entrepreneurs who did not get rich with the help of government connections.

But for the man who started an airline empire with just two aircraft the personal rewards are sweet. No longer would whole villages gather at just the sight of a single gleaming airplane in the clouds. For the first time, those villagers could become airline passengers too.

 

 

 

 

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