Online travel giants Expedia and Booking.com are warning that budget airline pioneer, AirAsia Group, risks being destabilized by ambitious plans to become the “Amazon of travel”.
AirAsia, which already offers limited travel plans on its website, plans to expand the online service to include booking flights with rival airlines and ecommerce. As profits tumble in the face of rising fuel costs and intensifying competition, CEO Tony Fernandes is seeking alternative sources of revenue and earlier this year told the Nikkei Asian Review he intended to invest 100 million Malaysian ringgit ($24.6 million) a year to become a technology-led company.
The carrier’s future competitors in the wider online travel sector dismissed the threat posed by the company which brought low cost flight to Asia.
Booking.com’s head of China, Marsha Ma, suggested the online travel giants would rally their vast networks of flights, hotels and services in the fight against any attempts by AirAsia to take market share. “The online travel agency business, especially accommodation, is a pretty heavy business model in terms of its supply chain management,” said Ma. “It takes years… We have offices at 190 locations and [they] have built up our supply chain capability, with width and depth.”
“We will keep fighting on that,” the Booking.com executive said, speaking at an event held in Singapore last week by Skift, an U.S.-based travel industry information provider.
Expedia, once a partner of AirAsia’s existing travel platform, indicated the carrier might not have the necessary skills to succeed. “What makes you great to run an airline” is not the same as being a great online travel agency, said Greg Schulze, head of commercial strategy & services at Expedia. Worse, the carrier risked being distracted from selling its own flights, which could exacerbate its current troubles, he suggested. “I am happy to see [AirAsia] negotiating with other airlines.”
However, Aireen Omar, AirAsia’s deputy CEO for technology, was confident AirAsia could manage the risks. It was “ambitious, but I think it’s very doable,” Omar said.
The aviation business model was changing, Omar said. “The key essence for us is no longer the aircraft but data.” AirAsia transported close to 100 million passengers this year alone in Southeast Asia, and was seeing six to eight million visitors come to its website every month. “A lot of new business opportunity is around there,” she said. This included enhancing its digital travel platform with itinerary suggestions, hotels or shopping, using technologies such as artificial intelligence to improve the offering.
When asked if becoming the Amazon of travel is overly ambitious, Aireen Omar, AirAsia’s deputy CEO for technology and digital, said it’s “ambitious, but I think it’s very doable.” (Photo by Eri Sugiura)
“I think online travel agencies are very cautious,” Omar said. She insisted that the company already has a “big platform” for AirAsia.com, the carrier’s BigPay, a mobile wallet which was launched in Malaysia last year tracking consumers’ credit and debit card payments, and combining this with its own loyalty program. “It is an opportunity for [other airlines] to have an access of the network and the data we have,” she added.
AirAsia entered the flight and hotel package business in 2015 through a joint venture with Expedia. However last August it announced it would sell its 25% stake to Expedia for $60 million. This freed the carrier to build its own accommodation and other inventories. The airline in 2017 acquired 50% in travel tours and attractions provider startup Vidi, in a deal worth $2.6 million.
Omar said the company’s data would be uploaded in the cloud by the end of the year, in preparation for the launch of its new service.
AirAsia’s rush to build an enriched travel platform can be explained by headwinds the company faces in its core business. The carrier’s net income slipped to 96.1 million ringgit, a 92%-drop in the three months through March from a year earlier, as it was hit by high fuel costs and lower average fares.
While the company remains profitable in Malaysia, where it is based, its operations in Indonesia, Thailand and elsewhere are either losing money or earning less.
