Wednesday August 8, 2012
AirAsia opens Asean office to strengthen itself before penetrating India and China
By B.K. SIDHU
Jakarta: Asia is AirAsia's next frontier but it first needs a bigger foothold in all the Asean markets to give it the size it needs to take on bigger players and positions itself in India and China.
AirAsia has to capture a larger share of the respective domestic markets and offer greater connectivity so that it could become a formidable airline.
And while AirAsia group CEO Tan Sri Tony Fernandes said that growing organically was preferable, “if the opportunity arises for mergers and acquisitions, then we will do it.”
To penetrate greater Asean, the airline opened its Asean AirAsia office in Jakarta yesterday, and it will be a nerve centre for the airline to chart its future expansion.
“We have to grow from within first, be strong in Asean. It is not scary to go into India and China but as a single company to take on China and India would be a lot for us to digest,” Fernandes said after opening the AirAsia Asean office here yesterday.
Fernandes said the shifting of AirAsia's emphasis to a regional strategy was “we believe, not just good business, but also a move that will keep us ahead of the inevitable competition that is heading our way.”
AirAsia now has joint ventures in several countries such as Thailand, Indonesia, the Philippines and Japan and also AirAsia X. It has not given up hope to enter the Vietnam market.
“There is no opportunity in Vietnam yet, but we are still serving from Malaysia and and other stations,” he said.
On Asia, he said, AirAsia has a JV in Japan where it has a 49% stake in AirAsia Japan.
“Japan was not in my plan but it appeared at my doorstep, and we do not throw an opportunity like that... it is a dream,” he said.
“Asia will come, but it would be one step at a time. Whether it would be during my time or that of the next CEO, the mandate is to be (a big player with operations such as joint ventures) in Asia,” he said.
He also hoped that the proposed purchase of a stake in Indonesia's Batavia Air would give it access to Asean's most populous domestic market Indonesia.
Although the deal has come under the scrutiny of the Indonesian authorities over the possibility of contravening its anti-competitive laws, if it went through, it would give AirAsia a bigger share of the domestic market which Fernandes said was “tiny” for now.
“The market in Indonesia is predominately domestic, and we (AirAsia Indonesia) are tiny in the domestic market. (Batavia Air) gives us more size and allows us to grow the market.
“We can do it organically but that will take us longer than an acquisition. We are doing that with our Indonesian partner,” he said.
Asked what would happen if the deal did not go through as it is now being scrutinised by the Business Competition Supervisory Commission, Fernandes said: “We will find alternatives. It took us seven years to get our planes into Singapore. We are not discouraged by setbacks.
“(But) we do not anticipate setbacks. In this world there are ups and downs and we have come through positively,” he said, but declined to elaborate on alternatives. Batavia Air domestic route passengers reached 6.75 million, or 11.25% of the domestic share.