How Tony Fernandes Runs and Revived AirAsia, the World's Best Low-Cost Airline | Endgame #207 (Luminaries)

TL;DR

Tony Fernandes revived AirAsia after COVID by rebuilding its grounded fleet, restoring its workforce, and funding the recovery through company cash flow. The crisis had reduced annual revenue from $5 billion to zero and left 210 aircraft grounded; 180 were operating again, with the remainder targeted by the end of September. Read on for his account of AirAsia’s survival, employee return, low-cost roots, and Southeast Asian connectivity.

Transcript

Ladies and gentlemen, Tony Fernandes. I'll start off with how you have gone through the last three to four years, which I know would have been very difficult for you and all the other airliners. Imagine this situation where you have 21000 staff, 210 aircraft and one day and carrying 90 million people. In 2019, we were the fourth largest airline in ... Read More

Key Insights

• Tony Fernandes led AirAsia through the COVID-19 crisis by focusing on transparency and a strong company culture.
• AirAsia grounded 210 planes during the pandemic, a feat unprecedented in aviation history.
• Despite layoffs and salary cuts, AirAsia managed to retain its workforce, bringing back all employees post-crisis.
• Fernandes highlighted the importance of connectivity and tourism growth in Southeast Asia, advocating for more open policies.
• AirAsia's success is attributed to its low-cost model, efficient operations, and innovative approaches to business challenges.
• The AirAsia SuperApp aims to disrupt the travel and logistics sectors by leveraging the airline's extensive data and brand recognition.
• Fernandes believes in treating employees well, including full-time employment for ride-hailing drivers, to boost productivity.
• AirAsia's culture emphasizes humility, transparency, and collaboration, contributing to its resilience and success.

Questions & Answers

Q: How did Tony Fernandes revive AirAsia after COVID?

Fernandes focused on returning AirAsia’s 210 grounded aircraft to operation and rebuilding the workforce after layoffs and salary cuts. At the time of the interview, 180 aircraft were back, another 30-odd remained, and every employee who had been let go had returned on full pay.

Q: How severely did COVID affect AirAsia?

AirAsia went from annual revenue of about $5 billion to zero, while its 210 aircraft remained grounded for an exceptionally long period. Before the shutdown, the company had 21,000 staff, carried 90 million people, and was the fourth-largest airline in Asia in 2019.

Q: How many AirAsia planes returned to service after COVID?

At the time of the discussion, AirAsia had returned 180 of its 210 aircraft to operation. Fernandes said another 30-odd aircraft remained and expected all 210 to be back by the end of September.

Q: How did AirAsia finance the return of its grounded fleet?

Fernandes said AirAsia restored the aircraft using its own cash flow. Returning 210 planes after such a long grounding was especially difficult, and he credited the company’s engineers as the heroes of that effort.

Q: What happened to AirAsia employees during the pandemic?

AirAsia let go of many employees and cut salaries to survive, decisions Fernandes described as deeply painful. He said every employee who had been released later returned, nobody left the company, and all were restored to full pay.

Q: Why did Tony Fernandes say restarting AirAsia was harder than starting it?

Fernandes originally entered aviation from the music business and started with two planes after buying an airline for 25 cents shortly before 9/11. Restarting after COVID meant reviving a fleet of 210 grounded aircraft while recovering from zero revenue and rebuilding the workforce.

Q: What earlier crises had Tony Fernandes faced before COVID?

Fernandes said he had already experienced SARS, bird flu, terrorism, and the loss of AirAsia Indonesia flight QZ8501. Even with those experiences, he described COVID as an entirely different challenge for the airline industry.

Q: Why does Tony Fernandes emphasize Southeast Asian connectivity?

Fernandes said he strongly believes in connectivity and contrasted Indonesia’s 15 million outside visitors with pre-COVID totals of about 23 to 25 million each for Malaysia and Singapore and about 40 million for Thailand. The comparison supported his view that Indonesia had substantial room to improve its connections and tourism reach.

Summary & Key Takeaways

• Tony Fernandes navigated AirAsia through unprecedented challenges during the COVID-19 pandemic by emphasizing transparency, strong company culture, and innovative strategies. Despite grounding 210 planes, AirAsia managed to bring back its entire workforce and continued to operate as the world's best low-cost airline.

• Fernandes discussed the potential for tourism growth in Southeast Asia, advocating for open policies and improved connectivity. He highlighted AirAsia's SuperApp as a disruptive force in the travel and logistics sectors, leveraging data and brand recognition to innovate and expand.

• AirAsia's success is built on a culture of humility, transparency, and collaboration. Fernandes emphasized the importance of treating employees well, which has been key to the airline's resilience and ability to overcome significant industry challenges.