AirAsia CEO Tony Fernandes Turned A 29-Cent Investment Into A Billion-Dollar Empire

Tony Fernandes

AirAsia is the world’s best low-cost airline, according to the aviation ratings agency Skytrax. The airline’s long-haul subsidiary AirAsiaX also finished second on the list.

The company is now gaining negative attention worldwide after the disappearance of AirAsia flight 8501.

The plane went missing during a flight from Indonesia to Singapore shortly after asking to deviate from its planned flight path because of bad weather.

The flight crew lost contact with air traffic control at about 6:17 a.m. local time Sunday, about halfway through the flight. The plane was initially thought to have crashed near the Indonesian island of Belitung, which is near the plane’s last known location.

The search is ongoing and is set to expand to additional areas tomorrow, according to CNN.

But in fact, AirAisa has actually topped the Skytrax ratings six years in a row.

That’s quite an achievement for an airline that was on the brink failure little more than a decade ago. 

The man at the heart of the airline’s spectacular rise is its charismatic CEO Tony Fernandes. 

Before AirAsia became a multibillion-dollar aviation juggernaut, it was a small, struggling airline owned by the Malaysian Government.

It consisted of nothing more than two ageing Boeing 737 jets, 250 employees, and one route. Not to mention $US40 million of debt. 

Together with several partners, Fernandes took control of AirAsia from the Malaysian government in December 2001. He paid 29 cents and assumed the airline’s massive liabilities.

Fernandes, then a 37-year-old music executive, had absolutely no aviation experience to speak of, but he did understand entrepreneurship and the leisure and entertainment market in Southeast Asia.

Born in Malaysia and educated at the London School of Economics, Fernandes began his career at Richard Branson’s Virgin Communications in the mid-1980s. He rose to the position of financial controller before moving to Warner Music International’s London operation in 1989. Fernandes was chosen to lead Warner’s operation in Malaysia as its managing director before being put in charge of its whole Southeast Asia division. 

AirAsia CEO Tony Fernandes
AirAsia CEO Tony Fernandes in front of an AirAsia Airbus A320. REUTERS/Romeo Ranoco

Taking a cue from Southwest Airlines, Fernandes built his airline on cheap fares, quality service, and quick turnarounds for its planes.

The airline quickly reached profitability and remained in the black. 

The Kuala Lumpur-based AirAsia — together with its subsidiaries in Indonesia, India, Thailand, and the Philippines — now operates a fleet of more than 160 Airbus A320 and A330 series jets transporting more than 230 million passengers per year.

The airline had fewer than 300 employees in 2001. It now has more than 15,000.

Fernandes didn’t stop with AirAsia. The airline is just one piece of his sprawling Tune Group, which includes a line of trendy no-frills hotels in Asia and the UK, along with investments in professional basketball and the Caterham Formula One racing team. 

“What does the market want? Nine times out of 10, when you go for what the market wants, it’s something that’s different,” Fernandes told INSEAD Business School’s Knowledge publication in 2007. “But we weren’t the first to invent low-cost travel, we weren’t the first to invent a low-cost hotel.”

“We’ve taken it to another level, but we’ve been a bit Japanese in taking it, and adapting it, and making it better for our part of the world,” Fernandes added.

Tune Hotel Kuala Lumpur
Tune Hotel in Kuala Lumpur. Wikimedia Commons

AirAsia may have adapted an existing business model, but it has revolutionised the way people travel in Southeast Asia.

In a marketplace traditionally dominated by regional powers like Singapore, Thai, and Malaysia Airlines, AirAsia’s rise to prominence has left the aviation establishment scrambling to compete in the short-haul business.  

While all three national airlines have remained highly rated for their service, their financial stability has been shaken by an influx of low-cost upstarts, led by AirAsia.

Singapore has taken a proactive approach by launching budget subsidiaries: SilkAir and Scoot. 

Malaysia Airlines may be AirAsia’s biggest victim. Even before the tragic disappearance of MH370 and shooting down of MH17 this year, Malaysia Airlines has been struggling. The airline’s regional business has been decimated; the national airline’s more traditional business structure hasn’t been able to cope with AirAsia’s lean, mean strategy.

With the disappearance of AirAsia flight 8501, the airline and its charismatic leader will face their greatest challenge to date. The probable tragic loss of the flight may be a turning point in the airline’s story. But given Fernandes’ track record, AirAsia should be up to the task.