News Article

AirAsia to aggressively enter restaurant business

AirAsia plans to open five eateries, franchise 100 cafes over next five years

Malaysia’s AirAsia Group is planning to expand aggressively into the restaurant business as Southeast Asia’s largest fleet budget carrier aims to become a lifestyle brand, its group CEO said Monday.

According to Group CEO Tony Fernandes, AirAsia aims to open five eateries and franchise 100 cafes globally over the next three to five years. The company is planning to establish franchises by franchisees in China early and has provided an offer for a master franchise in Australia, he added.

“We can’t be a lifestyle brand without food,” Fernandes said after the company’s first fast-food restaurant was launched at a news conference.

“Our airline food has been good. We are the first airline ever to monetise food.” The group will park the latest project under RedBeat Ventures, which covers the infrastructure, financial technology and rewards system for AirAsia’s non-airline companies.

All non-airline divisions are in orange, except for the Teleport logistics branch, which reported a modest operating profit of 62.12 million ringgit ($14.9 million). These companies also accounted for less than 6% of AirAsia’s total revenue over the quarter ended in September.

“There is room for non-airline online companies to dominate the airline business within the AirAsia Group,” said Aireen Omar, Ceo of Redbeat Ventures. “It could probably be a couple of years down the road for them to becoming more significant as they expand their footprint around the world.” Apart from Southeast Asia’s key market, AirAsia sees the growth of its restaurant business to London and New York, Fernandes said.

At a period of competitive overcapacity and weak passenger traffic, AirAsia’s latest venture arrives as airlines contend with fierce competition. To turn, this has prompted AirAsia to reel to global growth, divest some of its assets, and in the longer-term shift into an asset-light system.

“AirAsia will be able to capitalise on its brand which has become popular in the Southeast Asia field,” said analyst Mohshin Aziz of Maybank Investment Bank. “We would need to be successful at marketing and concentrate on operational efficiency.”

AirAsia’s stocks on Bursa Malaysia have fallen more than 15 per cent so far this year with many analysts, including Maybank’s Mohshin and CIMB Investment Bank Raymond Yap, currently ranking the stock as a “sell.” The firm has dropped to a loss of 51.44 million ringgit in the last half, mainly owing to accounts ending in September. A one-off gain from selling investments in an associate company had been recorded in the same quarter in 2018.

AirAsia’s shares ended flat at 1.69 ringgit on Monday, while the FTSE Bursa Malaysia KLCI benchmark was 0.6% higher.

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