Take Off for Air Asia - Finding Opportunities in a Recession

I have heard many presentations from business folk over the years and the last two years of our embryonic Entrepreneurship Society have been memorable for some superb talks. None has quite matched the impact and the quality of a talk given by Tony Fernandes, Founder and CEO of Air Asia last Thursday night.

The back story behind Air Asia is fascinating. Bought for the equivalent of 20 pence in 2001 but taking on board existing debt in excess of £10m, Air Asia has developed into one of the world’s most remarkable low-cost carriers. Just three days after the airline was reborn, the aviation industry suffered the calamity of 9-11. And in the intervening years the business has had to weather numerous other shocks - from turbo-charged fuel prices to the impact of the Asian Tsunami, Sars, Swine Flu and the global recession.

It seems that each of these events has provided opportunities as well as challenges. Consider the recession - the message from Tony Fernandes was to market well in a slump. Lesson One - increase your marketing spend so that when an economy emerges from a slump people will remember you. The sponsorship of the English Premier League Referees is a stroke of marketing genius.

Lesson two - aim to stay free of the shackles of the fixed costs of the legacy airlines (or indeed overhead costs of well established players in any industry). Legacy costs can be a millstone around the neck. Smaller firms tap into technology, they embrace it quicker and it becomes a great leveller in a market. Consumers are pretty smart in finding their way to the distribution point / point of sale if an online business gets its marketing right and makes the purchasing process intuitive, safe and reliable.

Lesson three is the importance of people in driving a growing business. The talent in an organisation cannot be put onto a balance sheet but investment in human capital not only lifts productivity but creates ideas and energy - “never think that ideas are dumb”. The Air Asia Academy is a stunning example of what can be done.

Lesson four - look for businesses where the consumer is under-served by the existing businesses, where established brand names are in trouble and where there is an underlying demand for the idea. Tony Fernandes was speaking the night before he launched his new Lotus F1 team and he argued that this is a great time to get into Formula 1. The manufacturers have moved out, team budgets are falling and industry revenues continue to grow.

Finally lesson five - cash is king. Accountants can play around with different measures of profitability - but what matters most to a business is how much cash you have in the bank especially in troubled times.

Opportunities from a slump; commitment to people; smart marketing and innovation extension of a brand and a CEO prepared to get his hands dirty - some hugely important lessons for the large group of students enthralled by a magnificent talk from the CEO of Air Asia.