Beyond the Runway: How AirAsia Became a Digital Ecosystem

A vision for affordable flying

AirAsia's journey sprouted from the aspirations of its visionary CEO, Tony Fernandes. As a student unable to afford a flight back home from England, he nurtured a dream of making air travel affordable for all. When the opportunity appeared, he purchased AirAsia, which was a legacy airline burdened by staggering debt at the time.

First innovations

The company’s digital vision took flight when Mr. Fernandes realized its distribution channels had to be optimized if the airline was to make flying easier for the masses. Thus, AirAsia was the first airline to launch an online booking system in 2002. Back then, it was a breakthrough, because the majority of its competitors sold tickets through travel agents.

First challenges

In the late 2000s, the low-cost approach became more widespread, with other low-cost carriers emerging in the region. Cheap tickets weren’t AirAsia’s competitive advantage anymore.

As a result, AirAsia faced a plateau, which prompted the management to search for new ideas for growth. The answer was found in the familiar area—digital innovations. The company appointed a new head of digital transformation, Aireen Omar, who had a new strategy for the company—to transform it into a global, cloud-driven digital ecosystem.

Omar envisioned a fundamental shift in the way AirAsia operated. In her view, focusing solely on aircraft as the primary asset for airlines had become obsolete. The true asset laid in customer data and behavioral patterns, which could help the company understand consumer lifestyles and demands. Thus, AirAsia aimed to provide more than transportation, in contrast with other airlines.

Travel & Hotels

Facing the challenges, AirAsia’s management came up with unconventional ideas. The first one was to use Airasia.com for selling not just AirAsia’s tickets, but tickets from other airlines. For many, it seemed counterintuitive. Why would AirAsia assist its competitors? However, the management believed in success for three reasons.

First, the company acknowledged that customers often visit other airline websites and OTAs alongside Airasia.com to compare prices and secure the best deals. Instead of losing those customers, AirAsia would provide them with that information while still keeping them within the AirAsia brand.

Second, the management was confident that, in many cases, they could outperform competitors by offering the best prices and deals.

Third, substantial traffic flowing through Airasia.com would be a benefit for other airlines as an additional audience.

Ultimately, it would be a win-win situation for all parties involved. To realize the idea, AirAsia joined forces with tech company Kiwi.com. The partnership worked well, and despite the impact of Covid-19, the platform went live in August 2020.

Together with selling flights, the next logical step was to sell hotel bookings, since customers were never looking just for a flight ticket. That’s why AirAsia began to create relationships with hotels and notched a partnership with China’s Trip.com Group to share inventory and services.

The introduction of new offerings and flight-hotel bundles proved to be a lucrative strategy. In 2019, Airasia.com reported a three-fold surge in revenue thanks to the service expansion.

Logistics and e-commerce

Another industry that the company eyed to enter was logistics. With one of the largest air fleets in the region, it was fairly easy for AirAsia to unlock this market.

The first step in this direction was back in 2014 when the company introduced a cheap courier service Redbox. Later, AirAsia decided to further leverage its aircraft's belly capacity for shipping a wide range of goods, including cargo, parcels, and last-mile deliveries. A spin-off from its cargo department, Teleport, was meant to help with that.

Having a whole entity focused on shipping goods, the management decided that they could go further into retail. At first, it was only about duty-free retail—the idea was to allow customers to buy duty-free goods online. The pandemic reshaped AirAsia’s approach, and the company turned to selling everyday goods, medical goods, groceries, and clothing.

As a result, AirAsia's logistics unit now serves prominent regional customers such as Lazada, Shopee, and Zalora. In 2020, Teleport delivered 228,300 e-commerce orders, marking a more than thirty-fold increase in monthly deliveries since the start of the year.

Finance

AirAsia's management noticed a gap in the market for banking services, particularly for currency exchange. They observed that many customers faced high commission fees when changing currency at airports. Sensing an opportunity, AirAsia built a banking service, BigPay, from scratch. From that moment, AirAsia’s customers could create bank accounts in as fast as five minutes, and get the currency they needed.

BigPay saw the volume of remittance transactions grow approximately five-fold in 2020. Encouraged by positive customer feedback, AirAsia further expanded fintech services and added an e-wallet, AirAsia Pocket, and a financial marketplace, AirAsia Money. Both were embedded in the company’s new mobile app, the AirAsia Super App (more on this below).

Food delivery

Observing customer behavior sparked an unexpected idea. AirAsia was popular for its in-flight meals, so much so that a lot of passengers asked the company how they could eat AirAsia’s food when they were not traveling.

This inspired the management to open AirAsia’s first Santan restaurant that served the same delicious in-flight meals that AirAsia is known for.

In October 2020, AirAsia Food witnessed a whopping 1,150% increase in order volumes in Kuala Lumpur, which generated more than a 500% increase in sales.

It seemed that the Covid-19 crisis would ruin AirAsia's plans for its restaurant business, but the company managed to adapt. While the physical restaurants had to be temporarily closed, AirAsia started a food delivery service and established a franchise model.

Digital Frankenstein

The success of AirAsia’s spin-offs wouldn’t be possible without a robust digital interface, where customers would be able to do all the tasks. Here comes the jewel in AirAsia’s crown—the AirAsia Super App.

Before the pandemic, AirAsia used all the customer data it gathered via Airasia.com to create a customer intelligence profile. This helped the company personalize marketing and better target potential customers. The next step, though, was to make the online experience convenient for the customer.

Super app

Launched in October 2020, the AirAsia Super App included more than 15 different types of products and services, with a single sign-on and the ability to earn and burn loyalty points. This was a sign of AirAsia becoming a digital lifestyle brand, rather than just a low-cost carrier.

Not all of the services were there from the very start though. AirAsia added them gradually, observing customer behavior and listening to their needs. For example, AirAsia Ride was added in August 2021, to make the travel experience complete—”pre-flight, during flight, and post-flight.”

Despite the fierce competition from the established giants Gojek and Grab, AirAsia Ride performed well—by early February 2023, the number of completed rides had increased to 3 million.

Let’s take a look at a typical journey of an AirAsia customer who’s planning a trip from Dubai to Bali. The first step is to book a flight. It’s possible to find a good option in the super app, for example, a connecting flight with AirAsia and a different airline that has partnered with the company.

Next—booking a hotel in Bali, which is also done via the super app. For savings, a good option is to buy a SNAP package, which includes both the hotel and the flight. In addition to that, to get to the hotel from the airport, it’s possible to book a ride within the same super app, although only up to three days in advance.

Finally, once a customer arrives in Bali, the super app continues to be helpful. For example, if they want to visit the nearby island of Nusa Penida, they purchase ferry tickets through the app.

To discover tips and tricks for exploring Bali, there's a Bali travelers community within the app. And, if they ever get tired of hotel food, the super app offers a food delivery option. Though its availability in Bali is uncertain, it's definitely available across Malaysia.

Tony Fernandes, AirAsia CEO, believes that the collection of digital services has an even larger potential to revolutionize travel in the region. The company has a five-year plan in place which will see non-airline revenues contributing around 50% of overall group revenue by 2026.

Looking ahead, the management envisions the AirAsia ecosystem becoming an “AirAsia republic.” With a loyalty scheme boasting nearly 51 million members, including 12 million active monthly users, AirAsia indeed resembles a community rather than just a company. The future of this community lies ahead, and time will unveil its possibilities.