AirAsia Philippines to cost bus like fares

By Daxim Lucas

December 22, 2010

MANILA, Philippines—“Mr. Fernandes has to fly to another meeting in Jakarta this afternoon, so we will wrap up in two minutes,” the organizer tells reporters during last week’s press conference to unveil the joint venture deal of Air Asia in the Philippines. “Any final questions?”

The owner of the giant budget carrier politely countermands him with a casual wave of his hand: “No, it’s ok. [We’re using] our own plane anyway. It can wait.”

Local reporters—most of them seriously covering the short visit of the international celebrity to the country—erupt in a wave of laughter.

Indeed, Tony Fernandes’ mien is often compared to that other rock star of the airline industry, Sir Richard Branson.

They are both perceived as brash and aggressive, and rarely take no for an answer once they’ve set their sights on something in the field of business.

Thus, when word got around that Air Asia would start a Philippine-based airline in a joint venture deal with local partners, not a few eyebrows were raised.

After all, isn’t the global airline industry—both legacy carriers and their so-called low-cost carrier cousins—struggling due to weak demand for travel by passengers hard hit by the recent economic crisis?

And with several carriers like Philippine Airlines and Cebu Pacific already fighting tooth and nail for the relatively small number (as compared with peers around the Asean) of flyers, isn’t the Philippine market too small for a regional giant like Air Asia?

So is the local aviation industry saturated?

“Oh no! It’s anything but!” Fernandes says. “I think the Philippines has been starved for connectivity.”

To illustrate his point, he explains that he had to take one of Air Asia’s Airbus A320s out of circulation just to fly eight passengers from Kuala Lumpur to Manila at the time of his preference—a difficult decision for the cost-conscious former accountant.

For other major cities, no such private flight would have been necessary as would-be passengers could have easily booked themselves on multiple flights available throughout any given day.

“There is a massive amount of connectivity that is required in the Philippines,” he says. “If you look at Malaysia, Thailand and Indonesia, the growth [of airline passenger traffic] has really come out of low-cost carriers.”

Under the announced plan, Air Asia will start operating out of either the Diosdado Macapagal International Airport in Clark Field, Pampanga, or the Subic Bay International Airport in Olongapo, Zambales, by August 2011, with the first flight possibly coming in September.

The administrations of both special economic zones are presently lobbying aggressively to woo the new joint venture airline to make them its hub, although Clark supposedly has a slight advantage since the parent Air Asia airline already operates regular flights to and from the former US airbase.

Malaysia’s Air Asia Berhad will own 40 percent of the local joint venture, while the trio of Antonio “Tony Boy” Cojuangco, Michael “Mikee” Romero and Maan Hontiveros will own 60 percent.

Seen through local eyes, the airline’s owners are an unusual mix, but probably par for the course for the brash and aggressive Malaysian entrepreneur.

“I’ve known Tony Boy for a long time now and I’ve known Maan for many years through the music industry,” says Fernandes, whose past career includes working for a major recording company.

Most surprisingly, however, Fernandes’ decision to partner with Mikee Romero of Manila North Harbor fame is a vote of confidence for the young businessman who has been gradually stepping out of the shadow of his father, Reghis II.

“I met Mikee through basketball (Air Asia is a major sponsor of the Asean Basketball League where the team run by Romero is the defending champion), and I like his style,” Fernandes says. “He is young and aggressive. Sometimes too aggressive. If it were up to him, we would have had our [initial public offering] yesterday.”

But given that Philippine Airlines already serves the needs of more affluent travelers while Cebu Pacific is marketed toward budget flyers, what’s in it for the Filipino consumer?

The principal owners of what will be called “Air Asia Philippines” predict nothing less than what was previously thought impossible: Cheaper airfares—much cheaper than where they stand now.

“If you go to Air Asia’s terminal in Kuala Lumpur, you’ll see passengers in slippers,” says the joint venture’s chairman, Cojuangco. “This airline has been taking away business from the bus companies. That’s how cheap the airfares are.”

Company president Hontiveros also stresses that Air Asia Philippines’ operations will be patterned after its Malaysian parent: a flat organization that will keep costs to a bare minimum—with many of its ancillary services outsourced—in a move that will translate to cheaper airfare for end-users.

Amid the promises of cheaper fares, however, Fernandes believes that the best thing about having Air Asia come to the Philippines is its potential to generate more jobs for the local tourism industry.

“We can create 8,000 jobs in the Philippines, and that means 8,000 less who have to go abroad to work,” he says. “And all those jobs will also translate to more jobs in the tourism and service industries.”

Indeed, Fernandes, who professes a love for Filipino hospitality (warmer than anywhere else in the world, he says), already speaks like his interests are tied closely with those of the country’s.

“One of the key aims we have is to create more economic activity and more jobs for more Filipinos,” he says. “There’s so much talent in this country, it’s unbelievable.”

This early, it’s already starting to sound like a good partnership in the making.

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