Fast cars, fast planes, fast football (of the British kind) -- and now, fast money. Tony Fernandes has always had a maverick streak.
Asia's answer to Richard Branson, the billionaire behind the Virgin empire, Fernandes has taken pride in taking on the big boys in aviation, and winning. Now the co-founder of AirAsia (AIABF) is taking on Silicon Valley.
Like SoftBank Corp.'s (SFTBY) founder Masayoshi Son, Fernandes is a self-made pioneer in Asia, a continent known for its family money more than its entrepreneurs. And like Softbank and Son, he is now setting up a venture-capital fund to invest in startups.
Neither 21st century tycoon exactly shuns the spotlight, either. SoftBank, backed by billions in Saudi funding, has aspirations to take on the world through its Vision Fund.
AirAsia's aim is more modest, and set squarely on its home market in Southeast Asia, a grounded and sensible start.
AirAsia transferred its digital businesses into a new entity, RedBeat Ventures, in the middle of last year. It announced this week that it will partner with arguably Silicon Valley's most-successful accelerator, 500 Startups, and set up a venture-capital fund, RedBeat Capital.
AirAsia is Asia's most-successful budget airline. In a continent where collusion between "rivals" on prices and routes has been commonplace, it has fought for a place for itself by flying out of secondary airports in major cities to keep costs down.
That works, and then some. AirAsia reportedly has the lowest operational costs in the world for an airline, with a unit cost, per available seat kilometer, of 3.5 U.S. cents. That means it breaks even if its flights are only half-full (52% full, to be precise).
RedBeat Capital will be based in San Francisco, and will seek to "develop a travel-technology ecosystem," according to Fernandes. Its remit is to find startups worthy of investment in travel, lifestyle, logistics and fintech for Southeast Asia.
The partnership with 500 Startups will give it access to the accelerator's deal flow, though it's unclear how that will differ to access afforded to any other venture-capital fund. Some of the 500 Startups protégés are likely to lean on AirAsia's expertise as a way of expanding into Southeast Asia, which 500 Startups CEO Christine Tsai notes has more Internet users than the United States.
Aireen Omar, a former finance director at AirAsia who now heads its digital operations, will also head RedBeat Capital. She told Reuters that the airline has allocated about $10 million to RedBeat Capital, which will likely take minority stakes of up to 20% in its seedings.
In June 2018, AirAsia transferred its stakes in nine digital businesses in to RedBeat Ventures: Its airmiles program AirAsia BIG Loyalty; the mobile-payments app BigPay; its travel agency/guide businesses travel360 and Vidi; the onboard WiFi system ROKKI; its onboard sales business Ourshop; its cargo-haul business RedCargo Logistics; cross-border shipments company RedBox Logistics; and the online-ticketing agency RedTix.
Most of those businesses, then, are spin-offs from its air operations.
But like Virgin, it would like to build out into a lifestyle brand and empire, offering entertainment and enjoyment well beyond travel.
AirAsia Group, also listed in Kuala Lumpur under the ticker AIRA, last week posted a loss of $97 million for the last three months of 2018, its first quarterly loss since the September quarter of 2015. It blamed higher fuel costs and consumption, as well as higher aircraft-leasing costs.
Fernandes said while reporting the loss that AirAsia was ramping up its emphasis on hotel bookings, tours and insurance, all sold online.
Non-flying revenues currently account for around 20% of the AirAsia Group's revenue. Omar, effectively charged with spurring the growth, says its possible ancillary, non-airline business could make up as much as 50% of revenue in the future.
Don't put it past Fernandes. The Malaysian of Indian extraction is technically not the founder of AirAsia. It started life in 1996 with backing from the Malaysian government. But it failed.
Fernandes, a graduate of the London School of Economics, started his working life with Branson at Virgin, as an accountant. He soon left for the record label Warner Music -- and left Time Warner in 2001, at the time of its disastrous merger with AOL.
His timing was perfect. I was with CNN at the time, and couldn't fathom how the world's biggest media company was being acquired by an internet-service provider, either. The biggest merger in history at the time, I'd vote for it as the worst merger in the history of time, too.
Fernandes sensibly jumped ship and climbed on board with AirAsia. In 2001, he and his friend Kamaruddin Meranun took over AirAsia for 1 Malaysian ringgit (roughly a quarter), getting their hands on two Boeing (BA) 737s and $11 million in debt. So they founded its current existence.
Meranun, the executive chairman of AirAsia and a former private-wealth manager in Borneo, is far more low-profile than flashy Fernandes. But he is CEO of the Tune Group, the holding company he and Fernandes use one layer up from AirAsia and its long-haul offshoot, AirAsia X.
Tune is the holding company for their other non-airline operations. It's a wacky portfolio, apparently determined by personal interest as much as business sense, that includes a music label, a boarding school, the sports-car marque Caterham, and budget hotels. There's also Tune Labs, its Malaysian venture-capital arm, which runs programs as an incubator and an accelerator.
Fernandes independently had a two-year flirtation with Formula One motor racing. He licensed a team to compete under the Lotus name of sportscars, now owned by the Malaysian carmaker Proton. He also still owns the London football team Queens Park Rangers.
The Lotus team didn't win any points in Formula One. But Fernandes did win a bet with Branson, whose Virgin Racing competed in the class at the same time. After Virgin lost to Lotus, Branson dressed as a flight attendant and served customers on an AirAsia flight from Perth to Kuala Lumpur. Click here for some truly scary photos of the event.
Publicity stunts aside, the AirAsia "empire," if it is to become one, has yet to hit the touchpaper on a successful startup outside the airline. But if Fernandes puts his considerably energy behind these new venture capital ventures, watch for them to take off.
