Tony Fernandes is running late. The chief executive of AirAsia is in Kuala Lumpur briefly between a trip to the UK to check on Lotus, his Formula One racing team, and a planned flight to Vietnam to finalise an airline joint venture. “I’m glad we don’t run the airline on his personal timetable,” groans an aide.
When Mr Fernandes arrives, his schedule turns out to be something of a sore point. He has recently been accused by Tony Davis, chief executive of Tiger Airways, a Singapore-based rival airline, of losing his focus on AirAsia – the region’s biggest budget carrier and the world’s lowest cost airline – in the excitement of his involvement in motor racing. He is clearly eager to hit back.
“Just because one person might only be able to do one thing at a time doesn’t mean all of us are the same,” he says. “I can run an F1 team and run an airline, and ultimately what I’m doing is setting up businesses and putting other people in there to run them. Lotus F1 is no different.”
In fact, say his staff, Mr Fernandes is being rather modest about his ability to multi-task. A serial entrepreneur who has founded four airlines – AirAsia, its long-haul affiliate AirAsia X and joint ventures in Indonesia and Thailand – he is also part-owner, with his long-time business partner Kamarudin Meranun and others, of the privately held Tune Group. Tune runs substantial hotel, financial services and mobile phone businesses.
His core interest remains, however, AirAsia, whose spartan headquarters in Kuala Lumpur’s low-cost carrier terminal, a short drive from the airport, could have been designed as an object lesson in rigid cost control. Bustling in from the lift, Mr Fernandes leads the way to his small office in a corner of the airline’s open plan administrative floor.
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Casually dressed, though without his trademark red baseball cap (“I’ve had to stop wearing them – people keep asking me to sign them.”), the 45-year-old talks quickly, with a strong English accent, breaking off every now and then to speak to colleagues holding a financial planning meeting a few feet away.
When he bought AirAsia through Tune for a token M$1 plus M$40m debt in 2001, it was a failing state-owned regional carrier with two aircraft. Starting with $250,000 in cash, Mr Fernandes has built the airline up to 90 aircraft with costs per passenger kilometre lower than both Southwest Airlines of the US, which invented the low-cost model, and Ryanair, the Irish group often regarded as the world’s most competitive carrier. AirAsia now has a market capitalisation of just over $1.1bn (€820m, £740m).
It has grown fast thanks to a rigorous focus on keeping down costs, combined with rapid economic growth across Asia, the gradual liberalisation of the region’s air services and generally low levels of congestion at many Asian airports, which speeds up aircraft turnround times. “It’s all about keeping costs down,” says Mr Fernandes. “We are the lowest-cost airline in the world and we will continue to be. That’s what I focus on, and if you had sat in our budget meeting last week you’d have seen that that’s all I talk about.”
The CV
Born: April 30 1964, Kuala Lumpur
Education: London School of Economics (accounting and finance)Career:
1987-89 Financial controller, Warner Music International, London1989-92 Senior financial analyst, Virgin Communications, London
1992-98 Managing director, Warner Music, Malaysia
1999-2001 Vice-president, Asean, Warner Music South-East Asia
May 2001 – present Group chief executive, TuneAir/AirAsia
2005 – present Co-founder, Tune Group of Companies, including Tune Hotel, Tune Talk, Tune Money, Tune Sport and Tune Entertainment.
Interests: Music, motorsports, football, cricket, gadgets
The Vietnam joint venture, if it goes ahead, would give AirAsia operations in four of the five biggest members of the Association of South East Asian Countries, a 10-country grouping with an economy bigger than India’s and a population of 600m, which is the airline’s main target. The fifth country is the Philippines, which Mr Fernandes says is still on the agenda.
“The huge advantage that we have . . . is that we are where we are because we have invested in all these destinations and now we begin to milk money because the investment has been done over eight years,” he says. “So if [competitors] want to grow they are going to have put flags everywhere, and every flag they put there’s an AirAsia flag there already, so they’re going to have to compete with an established brand and an established competitor. It’s like me saying I’m going to go and compete with Ryanair [in Europe] right now. I might as well take a gun to my head and shoot myself.”
A UK-trained accountant, Mr Fernandes spent his early working life in the music business, as a financial controller for Sir Richard Branson’s Virgin Group and, later, as an executive for Warner Music. But it was Sir Stelios Haji-Ioannou, founder of EasyJet, the low-cost airline, who was responsible for his foray into aviation. Mr Fernandes had quit Warner and was watching television in 2001 in London, when he saw Sir Stelios talking about the company. Struck by his enthusiasm, Mr Fernandes rushed to EasyJet’s base at Luton Airport, video camera in hand, and instantly decided to set up an Asian equivalent – a train of events that makes him one of the few people in the world to have been inspired at the airport. “Yes, I had a look, and filmed [the aircraft],” he says with a laugh. “But I wouldn’t say it was the airport [that inspired me]; it was what was in Luton Airport.”
Mr Fernandes says his first thought was to start a long-haul low-cost airline flying between Kuala Lumpur and London – mainly because of his memories of being unhappy at Epsom College, the English private school where he was sent at 12. “You’ve read all of the Tom Brown’s Schooldays stories]. . . it was like it really was true. So I called my mum . . . and I asked, “Can I come home for half term?’ And she said, ‘No, its just too expensive.’ And there in my mind was like, ‘I must make airlines cheap for people to fly.’”
As it turned out, Epsom College was not so bad, and Mr Fernandes now sends his daughter there. But a business plan for the long-haul airline that he had discussed with banks was torn up and replaced with a short-haul plan on the advice of Conor McCarthy, a former Ryanair and Aer Lingus executive who is now a director of AirAsia.
The long-haul operation was eventually launched in 2007, but it is one of the ventures that triggered claims Mr Fernandes was losing focus. The others are his sporting interests, which include an unsuccessful attempt to buy West Ham, the Premiership football club.
Mr Fernandes says his sporting activities are separate from AirAsia and have no impact on his management time. Lotus, for example, is a private venture managed through the Tune Group, and he says there is no chance AirAsia will emerge as a major sponsor for Lotus, even when its current contract with the Williams team runs out after this season.
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He laughs when asked whether he considered making the investment through the airline. “No, never,” he says. “Can you imagine going to the stock market saying you’re buying a Formula One team? That was never in my thought process. Your readers would have a coronary.”
Mr Fernandes says shareholders understand the difference between his private and public business activities. But there is nevertheless a positive spin-off for AirAsia. “All my activity over the last one-and-a-half months has made AirAsia a more famous brand because it’s ‘Tony Fernandes, founder of AirAsia’ all the time.”
Mr Fernandes says his initial objective for Lotus – a famous but moribund brand founded by the engineer Colin Chapman – was achieved when both cars finished the season’s first grand prix in Bahrain. Two major objectives remain: ensuring that the cars do at least moderately well in the Malaysian Grand Prix next Sunday, and winning a bet with Virgin’s Sir Richard that Lotus will end the season ahead of the Virgin team. The two have agreed that the loser will serve drinks dressed as an air hostess.
But Mr Fernandes clearly thinks he is on to a winner with Lotus, even if it turns out the joke is on him. “AirAsia is exactly like Colin Chapman,” he says. “He started with very little money, but he had innovation, and AirAsia is exactly like that. We started with two new planes and $250,000. I’m sure many people laughed at us. They’re not laughing any more.”
