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An interview with AirAsia's CEO


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"As long as we are enjoying ourselves, that's the most important thing," says Fernandes.
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Lorraine Hahn
Asia

Hong Kong, China (CNN) -- AirAsia, a Kuala Lumpur-based airline that was Asia's first budget carrier, is leading the no-frills travel revolution in the region.

Tony Fernandes, CEO of the company, talks to CNN's Lorraine Hahn about his two and a half year flight in the front seat of an airline that is redefining travel in the Asia-Pacific.

CNN: You have zero experience in running an airline. How did you do it?

Fernandes: Well, we have good people who work hard. There is no ego -- I started from the bottom. I had some good guys teaching me along the way and it all came together.

CNN: Where did the idea come from initially?

Fernandes: From a young age I have wanted to own an airline, but it is something you never think you are going to do. I was in Time Warner Music, and decided it was not quite what I wanted to do -- then came the AOL merger.

On the way back to London from New York, my second home, I saw easyJet on television. I thought this looked interesting, so I went up to Luton airport and spent two days there, watching easyJet in action. I talked to staff and the passengers, and thought right, this is something I want to do.

CNN: I mean it is one thing to say you want to do it, but it is another to actually do it, isn't it?

Fernandes: Yes, when I look back to it, it does sound kind of unbelievable. I came back to Malaysia. I did say maybe I was on drugs or I was possessed or something like that. But I just felt that it was the right thing to do and nothing is going stop me.

CNN: When you purchased the airline, it was millions of dollars in debt. Were you that rich?

Fernandes: No, I wasn't, and everyone thinks there was some invincible man behind this. We purchased the airline for a ringgit. In fact we took over a lot of debt with three major suppliers that were owed money: Petronas, Malaysian Airlines, and Malaysian Airports.

We did not ask for haircuts, because we wanted to respect the creditors. We thought we had a long relationship with them so we asked for time to pay them off, which they gave us because I think they thought they didn't have a lot to lose. We restructured the business model and we were cash positive from day one and that was able to pay the debt off -- we paid it off in full.

CNN: It is amazing to have the vision to realize something like that when you have so much debt. You are in a business you haven't been in before -- that's pretty risky?

Fernandes: Yes, but when you do not have a lot of money, maybe it is easier to go out and take risks. Yes, it was not quite a cushy job. By the way, working for Time Warmer Music, hobnobbing with all those artists is not as great as it sounds. But no, I did not have a lot to lose, I have a passion, I just went after it.

CNN: A lot of obstacles right? Less than a week before September 11? Then SARS and financial economic problems everywhere...

Fernandes: It has certainly been two and half years of rock and roll, that is for sure. We have had SARS, we've had a price war, we had airlines trying to obliterate us. We had no real financial support from any banking industries. Up to this point, we have got zero debt. In the beginning, no bank would even give us a cup of coffee. So yes, it was tough.

CNN: I read that the meeting you had with former Prime Minister Dr. Mahathir Mohamed actually helped you a lot. How did you score that meeting and how did you convince him that it is a good idea?

Fernandes: First of all, I had the idea. I wrote to my music guys, one had merchant banking experience, the other was a pure music man -- he came from BMG records. We were sitting around and they all have blind faith in me. And because I put my money in, they decided to chip in. We sat around and said: guys, we know no one in the government, no political master. You have got to have some political muscle to get an airline license.

The only guy we knew was the guy who used to help us fight piracy. He was in the ministry of domestic trade. So we went to see him, he was retiring. We expected him to throw us out of his office. And he said yes, you guys are honest and hardworking. Sure, he said, I am retiring with nothing else to do, what am I supposed to do? We said could you get us an appointment with the Prime Minister? He did. We went to see the Prime Minister in May 2001. I was a nervous wreck. The opposition were the first people to see the Prime Minister so we thought he was going to be in a great mood!

At that stage I was preparing my resume to re-enter the corporate world and we were going in to say that we would cut airfares by half. So we walked in and did our presentation. The Prime Minister did not say much. But towards the end, he was very learned on the low fare business -- he really knew what it was all about. At the end he gave us no indication what he thought. Right at the end, he said, I like the idea, you have my blessing, but you have to buy an existing airline.

CNN: Wow, right then and there?

Fernandes: Yes, he said I like the passion and the drive even though you do not seem to have any experience. He said you have to buy an existing airline. There were only two around. We walked out of that meeting; I knew the guys were a bit depressed -- now we have to buy an airline. But I must have been on something; I kept thinking nothing is going to stop us. We went to see the owners of AirAsia, who were more than happy to let the airline go.

CNN: Some experts call you an executive with the "Midas" touch, because everything you've spearheaded has been a roaring success, is that true?

Fernandes: Oh no, I would love to think that. We've had a lot of success but I would not say everything I touched was a success.

CNN: You mentioned earlier that your office is right at the airport, why don't you move to a fancy office building in downtown?

Fernandes: It is very crucial for us, very crucial for the culture of the company. No. 1, we have got to remain humble, we have got to remember our roots. Too many companies forget their beginnings and that is where it all goes wrong.

Secondly, what got us here is an open culture, no hierarchy; a family environment. We can't ever change that. As soon as we change that, we lose our focus. We put everyone together. I even go down to the fact that we go through one door; we have marketing people, finance people, engineers, cabin crew, pilots -- all in one office. It means effective communication. You open the door -- you see our planes. If people need help, we all go out there to carry bags. My secretary will go out and help clean the planes if we are running into a delay.

There is a tremendous camaraderie here, you know. The other day we had a flight that needed a couple of pilots and the pilots were stuck in a traffic jam. The Chief Pilot came to me and said: if you don't mind, I will fly in jeans if it's okay with you. I said, go ahead -- better than delaying the flight. So that's a great camaraderie, and I believe one of the key success factors is we are all together and we all respect each other's jobs. No one thinks they are more important than the other.

CNN: I want to talk more about your corporate culture. Very interesting, why did you decide to have this very casual atmosphere?

Fernandes: No. 1, it's me. It's kind of my background, the way we are and I don't think I can be formal. It was weird when I first came to the airline, the pilots freaked out because they suddenly saw their CEO pushing the ladder. They stood to attention, they called me sir -- they still do. They couldn't get over the fact that I have a cup of coffee with the guys who carry bags. It's me and I believe it's better for our culture. I really believe we have been successful.

Two and a half years of operating doesn't make you a successful company, but up to this point it's because of our corporate culture and I think it's very different to many Asian companies. There's not a lot of hierarchy -- people are allowed to think. I believe a thousand brains are better than just ten. And feedback: people aren't afraid to speak up, our staff are not afraid to send me an email and you get a much better functioning company that way.

CNN: Tony, what if it didn't work?

Fernandes: Never be afraid of failure. You got to take the risk and go for it. If you are afraid of failure, you aren't ever going to start. And I think that's what is wrong with too many people; they are too scared to try something out because they are afraid of failure. It was the same for us, you know; but I never thought we would fail. I am not an arrogant person or someone over confident, because it's a big whole obstacle challenge out there. Just for the enthusiasm of our staff, and the determination to succeed and the support from the public; we just went for it.

CNN: A lot of people have made comparisons with Richard Branson, Virgin and yourself. What do you think?

Fernandes: The major difference, he owns a record company and I worked for one. Yes, it could change, I would love to own a record company but I am far away from that.

Obviously we know each other and we have done things together but he likes to go up in balloons to 36,000 feet -- that's not something I am too keen on. I also think we are different managers. He is not an active manager, he is almost a new style venture capitalist, using the Virgin brand. He will go start a business, he will put managers in to run it and then he will go start another business. So he has moved from Virgin vodka to mobile phones to airlines to record companies. I like building the business and running the business, but we both like having fun so there are similarities.

CNN: So what kind of fun do you have?

Fernandes: I love parties, I love jamming with our staff -- I play drums and keyboards. I don't do very well right now but I enjoy people, I enjoy the interaction. Whenever there is a party, if I have the time, I certainly make an appearance, that's for sure.

CNN: Do you have enough time to relax and do everything you want to do?

Fernandes: No, it would be a lie to say I do. We turn most things around. We have staff meetings at 12 midnight, we have got the whole company in, we talk about what's right and what's wrong about the airline. We finish about 2:30 am and we go out and have a beer and finish at about five in the morning. So you can always be creative and find time to relax.

CNN: There are a lot of entrepreneurs building up in Asia, what advice would you give them if they are hoping to tackle the international market. Is there something they should keep in mind?

Fernandes: I am always wary about saying this, I am only a two and a half years old entrepreneur, I don't want anyone to think that I am preaching to these guys because I am very young at it myself, but I think No. 1 is belief; never take no for an answer. And surround yourself with good people

It is tough, and be prepared to be wrong and be prepared to be corrected. Sometimes entrepreneurs are their worst enemy. Because they just think this is it, I have the idea and there is only one way of doing it. I had a business plan and I met Brian McCarthy of Ryan Air who since left, he told me this business plan was no good and I tore it up in front of him, and said let's start again. So I think be prepared to be wrong, be prepared to be corrected but your overall philosophy, if you believe it's right, just go for it.

CNN: What is the future for AirAsia, more routes?

Fernandes: Well, we are going to buy SIA next week! No, I don't know, who knows. I am not a big believer in long term plans. I believe in living at least for the next year and because things change. If it's 15 planes, we'd be flying to Bangkok, and flying all over the place -- so we will take each step as they come and each challenge as they come. There are challenges every day, we have got all these other airlines setting up their own animal version of a low cost carrier -- we've got lions, tigers and birds. We have got an IPO in October hopefully. But we will take each day as it comes. As long as we are enjoying ourselves, that's the most important thing.


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