Beyond the Runway: How AirAsia Became a Digital Ecosystem

Determined to turn AirAsia around, Fernandes transformed it into a low-cost carrier, embracing the slogan “Now everyone can fly.” In its first full year of operation, AirAsia carried just over a million passengers. In 8 years, that number skyrocketed to 22 million passengers. The vision became a reality.

All of this was driven by AirAsia's vision of being closely connected with their passengers, or guests as the CEO preferred to call them. Ensuring that travel was simple and accessible to everyone was Fernandes’ ultimate goal.

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.

The starting point was to look at customers’ behavior on Airasia.com. The website had significant traffic, with 65 million unique visitors each month, but an average person flew only four times a year. The question was how to make better use of this substantial online presence.

In addition to that, AirAsia faced a threat from online travel agencies (OTA), as they essentially became a competition. AirAsia sold 80% of all tickets via Airasia.com, and the company wasn’t present on the largest travel aggregators like Expedia or Traveloka. Hence, if customers chose Expedia, they ended up booking other airlines’ tickets. That posed a problem for AirAsia.

As AirAsia confronted the rise of low-cost competitors and travel agencies and the potential loss of customers, they were left with pressing questions. Why were agencies so successful, despite AirAsia's significant user base? How could they increase the frequency of engagement on their website?

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.

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.

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.

AirAsia had already been considering the concept of a travel super app long before the pandemic. Due to the circumstances, AirAsia had to speed up the work. What was supposed to be completed within four or five years was now compressed into a tight timeframe of nine months. The result was a single, user-friendly platform where customers could access all the services offered by AirAsia.

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.

In most cases, travel insurance is necessary for a trip. AirAsia provides its insurance packages through the super app as well, although working in a web interface. If a traveler needs to bring extra items but doesn't want to buy more luggage, they shop for skincare products or clothes on the super app and have them delivered to the airport or to their seat on board.

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.

The customer journey shows that an AirAsia Super App user typically completes at least seven transactions instead of just one when buying a flight ticket. The ecosystem approach allows AirAsia to capitalize on its extensive user base while making trip planning easier for its customers.

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.