Piloting AirAsia’s digital pivot

This article first appeared in The Edge Financial Daily, on July 30, 2018.
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KUALA LUMPUR: Barely eight months have passed since Aireen Omar was promoted to the role of deputy group chief executive officer of AirAsia Group Bhd, seven years after being at the helm of the group’s Malaysian operations. Yet she has lost no time in jetsetting between home and the US, relentlessly pursuing opportunities for AirAsia’s digital ventures.

In her first face-to-face media interview since her promotion, Aireen outlined how AirAsia’s aggressive digital push will not only boost its revenue, but transform the company via its digital venture arm, RedBeat Ventures.

While it is not a formal entity as yet, RedBeat Ventures will house the group’s non-airline digital businesses, acting both as an investor and an incubator for some of its start-ups, Aireen explained.

“In terms of percentage, 20% of AirAsia’s revenue comes from ancillary [services]. You could easily see that double up once we get all our RedBeat Ventures companies up and running well,” she told The Edge Financial Daily. For the group’s first quarter ended March 31, 2018, ancillary revenue grew 11% to RM505.1 million from RM454.6 million a year ago.

The group’s internal restructuring has so far seen AirAsia Group Bhd assume the listing status of AirAsia Bhd on Bursa Malaysia’s Main Market. Although a complete formal reorganisation has yet to occur, AirAsia has been lucid about its intention to house units such as travel portals travel360 and Vidi, logistics arms Redbox and Red Cargo, online Wi-Fi provider Rokki, retail portal Ourshop, as well as digital wallet BigPay and point programme BIG Loyalty under RedBeat Ventures.

As a start, the group is focused on growing volume of its digital offerings instead of worrying about profit margins.

Aireen admitted that the take-up rate of some of its services such as Rokki is “still quite small, at a single-digit percentage”, but believes that this will change as AirAsia targets to have almost all of its planes equipped with Wi-Fi by the end of this year, at least for Malaysia. The group expects to carry some 90 million passengers this year.

“We would not go there (digital products) if there is no good revenue base that we can create and grow,” Aireen said. As such, Southeast Asia is an ideal base, as it not only has a young, burgeoning middle class and a population of over 600 million people, but also a geographical landscape of island nations that supports greater air travel.

A key theme behind several upcoming partnerships AirAsia will be announcing is the use of its data to help improve key decision-making for both commercial and operational purposes.

“We realise, as we grow throughout the years, that we have got a lot of data — from our passengers, from our operations, from the aircraft. And we own that data,” Aireen said, adding that 80% of the group’s bookings are done digitally.

The question, Aireen said, is how the group could serve its passengers better using the data, in addition to creating new revenue bases, improving operational efficiency and productivity, as well as developing services that are cost-efficient, straightforward and scalable.

To support the harnessing of its data, AirAsia is aggressively hiring talents across the world for roles such as software engineers, data scientists, user interface designers and programmers. RedBeat Ventures is looking to at least double the size of its team by the end of the year.

“People in tech are now like my right-hand men,” she said, noting that there is an urgent need for talents to be developed in the region.

On top of training programmes and opportunities that AirAsia itself is developing, Aireen said governments should also prepare young people with the necessary skills being demanded by the digital economy.

As the group’s data is coming from a variety of systems, part of AirAsia’s task will be consolidating them. It must then engineer rules and algorithms to turn that collated data into insights it can use for key decision-making.

However, a key concern is the issue of data privacy. It is worth noting that Facebook saw its costs rise and share price plummet after having to adhere to stricter regulations regarding its users’ personal information.

Aireen clarified that what differentiates AirAsia is that it is not in the business of selling or sharing its data with third parties or other companies, having worked hard to build its own database.

“[Our data] is within AirAsia’s control. We use it to provide a better product offering, a better experience for our own consumers, so it is for their own benefit,” she said. On top of that, the group has made sure that it has remained compliant with regulations so far, Aireen added.

As part of its digital thrust, AirAsia launched its facial recognition system, named the Fast Airport Clearance Experience System (Faces), for domestic flights through Senai International Airport earlier this year. Now, the group is in talks with the Australian government for the integration of systems and data for the technology to be implemented there.

“It’s a government-to-government thing, so we need to bring it up to our authorities to ensure there is alignment and [that] it works for both countries,” Aireen said.

At Senai International Airport in Johor — which is managed by Senai Airport Terminal Services Sdn Bhd, a member of MMC Group — trials have started for international flights, she said, adding that Malaysia’s immigration authorities have been keen on adopting the technology.

Faces can help not only to provide a growing number of passengers with a more seamless journey, but can also ensure accuracy in terms of identification and for security purposes, Aireen said.

In addition to that, the group plans to use Faces in various parts of the AirAsia office as well as for transactions of some of its products, she said.

On the whole, its initiatives under RedBeat Ventures are just one part of an ecosystem AirAsia is building that is unique to the Asean region, Aireen noted.

“It is not just about digitalising the whole company. It is about us becoming a digital company which happens to fly planes and to transport people,” she said.