Flying High, My Story Page 9

  After signing the deal we met with some of the existing AirAsia staff at DRB-HICOM’s offices. I was nervous – I was used to doing presentations, but about artists and bands, not about aeroplanes and passengers. Yet it was also an electrifying feeling because I’d never thought I had the balls to be an entrepreneur. I’d run a music company but all of a sudden I owned an airline – an airline with just two planes, but an airline nonetheless.

  I walked into a large office in DRB-HICOM’s headquarters in Kuala Lumpur. Lined up, hugging the walls and windows, were thirty to forty of the existing AirAsia staff. There were engineers, cabin crew, pilots and ground handlers, all looking at me sceptically. All they knew about me was that I was some music industry guy who had a wild idea about offering cheap air travel in Malaysia.

  I outlined the model to the staff, who listened in silence. I’m not sure whether it was out of respect or disbelief. After I’d finished, the chief engineer put his hand up. ‘Malaysians want and expect service. Can no frills work in Malaysia?’

  ‘Look, if you set the fare low enough, I think it will. And we can still offer service. We’re not going to be like Ryanair, because it doesn’t cost anything to smile. We’ll have rules and regulations that passengers need to follow but we’ll be nice. I’m not appealing to the people travelling on MAS or Singapore Airlines now – I’m trying to create a new market for people who’ve never flown before.’

  There was another moment of silence before one of the cabin crew piped up: ‘This is brilliant. I believe we’ll be bigger than MAS one day. Just listening to the energy and passion you bring to this is inspiring. We haven’t heard that kind of attitude for six years. I’m feeling very proud now to be part of this.’

  At that moment, it had all been worth it.

  6. Flying High

  Soundtrack: ‘Tubthumping (I Get Knocked Down)’ by Chumbawamba

  You never know what’s going to be thrown at you when you start a business. And it may have been a completely ridiculous idea to start an airline with no experience, particularly in the dark shadow of 9/11. But when I look back to the early years of AirAsia I’m struck by just how many unpredictable, huge problems we faced and survived. I’m convinced that our young company grew stronger after each crisis and we are where we are now because of each of them.

  Though my first staff meeting had been met with a positive response, the next staff session we had was a little trickier. The routes AirAsia were flying when we took over were twice a day to Kota Kinabalu and twice a day to Kuching. That’s all the airline covered, despite holding landing rights to other locations. Our business model required the ground crew and pilots to double the aircraft utilization from six to twelve hours a day; and to reduce the turnaround (the length of time between arrival at the gate and departure) to twenty-five minutes. I thought it was going to be a tough sell but as I walked into the room all the pilots and engineers stood up and saluted. I was thrown and quite amused. They were not aware of my style of management, that was for sure.

  ‘Sit down. Chill,’ I said in my music industry style. If I had never been saluted before, then I certainly don’t think they’d ever been told to ‘chill’.

  As I outlined the proposals, I sensed some pushback from the pilots and the engineers. There were concerns about cooling the plane’s brakes enough in the time, as well as more obvious worries about doubling the amount of flying the pilots would be doing. I privately thanked GECAS again for letting us retain the better 737-300s; if we’d suggested this while operating 200s instead I don’t think there would have been many people left in the room.

  The consensus amongst the staff, though, was that they’d give it a go. As we left the room, we met a few of the DRB-HICOM directors, who asked how it had gone. Aziz, always one with a quick tongue, just smiled and said: ‘Great. They can’t wait to be out from under you lot.’

  It was true for the staff but I have to say that DRB-HICOM couldn’t have been more accommodating or helpful to us.

  We finally signed for and took over the airline on 8 December 2001, once the due diligence had been completed. The pens and documents were being put away when DRB’s chief executive looked at me and raised an eyebrow. I thought this was odd but smiled. Then he held out his right hand, palm up, and said, ‘Come on then, pay up.’

  ‘What?’

  ‘You and Din owe us one ringgit.’

  I laughed and took my wallet out. No cash. I looked at Din. He pulled his wallet out of his back pocket, looked inside and shrugged.

  ‘Can you lend us the money? We seem not to have any cash.’

  When the laughing subsided, the CEO found a note which he gave to us and we ceremoniously handed it back. The purchase of AirAsia was complete. I don’t think Din or I ever paid the money back … so technically we didn’t pay anything for our airline.

  From that moment on, running AirAsia became the most exciting and exhausting rollercoaster I’ve ever been on; we really were flying by the seats of our pants. Our staff knew how to do their jobs well but we, as management, had to knit the whole process together and it was clear that it was going to take a bit of time.

  Fortunately, we made some key decisions that helped bring everyone together. When we took over the full operation in December, DRB-HICOM let us know that a bonus was due to the staff. The bill came in at MYR 1 million, which would have wiped out all of our cash and forced us to look for outside investment again. DRB were supportive once more and they agreed to pay half. Even so, we had less of a cushion than we felt comfortable with. Captain Chin, to date our longest-serving employee and a company legend, says that paying that bonus brought any remaining sceptical staff onside. It would have been easier to defer or not to pay at all that period, but Din and I felt strongly that we had to treat the team fairly. The mantra, ‘Your business is your people,’ is still one of the strongest elements of the AirAsia culture.

  When our first flight took off, my heart really did swell with pride. Not even a year before, I’d seen Stelios talk on a television set in an old pub on Hampstead Heath; now I was watching my own plane lift off into the skies.

  However, there was so much still to do to convert this tiny airline into a low-cost giant, it seemed we barely had time to celebrate or even mark the first flight before getting back to work. We couldn’t implement our low-cost model immediately. We relied on existing routes and structures for the first few weeks until we could convert the planes and introduce the full low-cost plan. This was based on increasing the number of seats in the cabin from 124 to 148 by ripping out business class completely. Every extra seat we sold would make a difference, so on the day we took over operations I ceremoniously padlocked the business class lounge at Subang Airport, and then over the course of six months we converted the planes.

  Our fares were aggressively low. The normal fare to Kota Kinabalu was MYR 400, but we were offering seats at MYR 149.99.

  However, we made the tickets non-refundable. They were so cheap that we decided it was up to the passenger to turn up. At that time, passengers still claimed refunds if they couldn’t fly but we made it clear that unless the passenger informed us within forty-eight hours of buying the ticket, we would not refund the purchase. If they did tell us within forty-eight hours, we agreed that we would try to do a credit swap and issue the ticket for another time – but the passenger would have to pay the difference if the new ticket was more expensive. The swap would also attract an admin fee.

  After a few weeks, we were ready to make our first low-cost flight. I got the staff together for a meeting the night before.

  We ran through all their questions and restated our aim about being no frills. If the staff had ideas for saving money, we said, we wanted to hear them. A stewardess raised her hand.

  ‘In the model, you mention selling food on the plane …?’

  ‘Yes.’

  ‘So where’s that going to come from?’

  There was a collective intake of breath. I looked around me, picked up my jacket
and told five people to follow me. We jumped in our cars and headed for the nearest Carrefour supermarket. We stocked up with sandwiches, drinks and water and paid for it on my credit card. We brought it back, loaded it on to the planes and were ready to go.

  ‘How much are we selling it for?’

  ‘Just don’t make a loss on it – otherwise I don’t mind.’

  Like I say, flying by the seat of our pants. We learned and adapted fast: we borrowed, loaned or bartered for just about everything. We didn’t steal, although we came very close when one of the pilots pointed out that there was too much wear on one of the plane’s tyres. Our engineer suggested we ‘borrow’ a tyre from a competing airline and replace it once ours was repaired. We dragged in a third party to arbitrate and fortunately they passed the tyre for use.

  Peter Talalla, an experienced fleet manager, had joined us when we were still in the set-up phase of AirAsia. He had been an airline pilot and I’d been put in touch with him through my growing network of airline contacts. As we were compiling the business plan, we’d realized that we lacked any pilot input. We were committed to changing the number of seats but had no idea how much extra fuel we’d consequently need. Peter came along to talk to me and I realized that he was going to be a big help – he’d been fleet manager at MAS as well as being an experienced pilot.

  Peter turned his hand to everything – exactly the kind of person I like to have around. I’d ask him about baggage handling or turnaround times or fuel and he’d get on the case. When we started operating, he used his contacts to fill in the missing pieces of the jigsaw; in particular, he found a ground handler who wanted to work with us and saved us the expense of investing in that equipment; Din’s brother helped us out with insurance; Select Aviation helped us with cabin crew training and then Singapore Technologies helped out with the maintenance. If we could get anything on loan or hire purchase we did, because we had to conserve as much cash as possible.

  Other incidental revenue streams helped us. We inherited from the old AirAsia a contract to provide travel for the hajj pilgrimage and also some military charter flights.

  The hajj was a big logistical headache. We flew from 18–20,000 passengers in the space of about twenty days in February 2002, allowing for all of the worshippers to complete the five-day pilgrimage. The complexity of that kind of contract (which we’d got from DRB-HICOM) was all-consuming for a small, inexperienced team. Peter Talalla led the project, working through problems using whatever written resources he could lay his hands on, talking to anyone who might have useful tips and liaising with the Tabung Haji (National Haji Fund) to make sure that all the requirements were met. It was extraordinarily complex but worth it because it generated MYR 20 million and we made a clear profit of about MYR 6 million. That inflow of cash kept us going for another few months.

  The dash to Carrefour had highlighted how much we didn’t know, so I decided the best way forward was to learn everything from the ground up. From day one it felt like I lived at the offices in Subang and I started a routine that I still practise today: I worked all the jobs in the airline. You can’t be an effective CEO unless you’re prepared to get your hands dirty. I think many leaders don’t actually know what’s going on; they get their information second-or third-hand and then they make the wrong decision. I decided I was going to learn everything. So I went in the simulator, to learn how to fly a plane; I learned how to change wheels and knew everything about the engine; I was cabin crew and I checked passengers in – which is the hardest job – and I carried bags. I’ve learned so much as a result and it makes a critical difference to the atmosphere of the company.

  Learning on the job with the staff means I can listen to problems and make a call with some authority. I can also become part of the staff’s narrative about their jobs. Being a ramp boy means you’re carrying two tons of bags off a flight and then two tons back on to the plane, which is physically challenging to say the least.

  The first time I had a go at being cabin crew, it reminded me of my time at the Cavendish. When you see cabin staff you don’t realize that they’ve probably had to get up at 4.00 or 5.00 a.m.; that their working day will consist of five or six flights, serving food and drinks, then cleaning the plane and handling the boarding within a twenty-five-minute turnaround. All the while they have to smile, be positive, deal with multiple questions and a range of complaints, and be the public face of the airline. It’s not an easy job and they work extremely hard. I was smiling as I pushed the trolley down the aisle, serving food and doing pretty well, I thought. A man asked for a can of Coke. I nodded, smiled and picked out the can quickly, but as I lifted the ring pull, my AirAsia colleague on the other side of the trolley put her hand out to stop me.

  ‘Don’t open it!’ she said.

  I looked at her as if she was slightly mad, ignored her instruction, handed over the can and, proud of my knowledge of the prices, said, ‘That’s three ringgit, please.’

  The man looked at me in horror and handed the can back. He had assumed the drinks were free.

  It’s a small illustration of the kind of things you learn. Customer interactions are never easy. In fact, I’d say dealing with customers is the hardest job in the airline business; but dealing with customers who are travelling low cost is doubly difficult because they push as hard as they can for more. When we say ‘no frills’, we mean ‘no frills’. You’ll get fantastic service for free but we charge for everything else because our fares are so low.

  AirAsia is one of the largest companies, and certainly one of the largest airlines, that has no union. And that’s not because of the law: Malaysia Airlines has forty unions. It’s because AirAsia staff don’t see the point of outside representation when we have such strong internal dialogue. Part of that is through internal networks, but also because I get out there and do the jobs on the ground.

  A few years into our business, when we upgraded the fleet to Airbus, there was an issue for the baggage handlers. They were used to throwing bags into the hold on the 737s but the Airbus hold is a few inches higher. The handlers came to me saying that they needed belt-loaders because the physical strain was getting too much. I refused because it was a cost we couldn’t afford at the time. Not long after, I was doing my turn with the baggage guys again and I was allocated an Indonesian route. Now people who fly with us generally bring their houses with them but people who fly to Indonesia seem to bring their neighbour’s house too! I ended up throwing hundreds of bags into the hold and my back was breaking. At the end of the day, I turned to the baggage handlers I’d been working with and said, ‘All right guys. You’re on. You’re right, I’m wrong. We’ll go sort it out tomorrow.’

  The next day I put in an order for belt-loaders.

  If I hadn’t done that, if I hadn’t gone down and actually done the job, I’d have destroyed many people’s backs, created a needless attitude of resentment and probably brought in a union as a result. Recently a pilot told me that our pilots were approached many times by MAS pilots suggesting they join their union; but, the pilot said, they replied, ‘Why? If we need to talk to Tony we just call him up – we work things out directly. It’s much better.’

  Getting out and doing all the different jobs or walking around head office are essential parts of my working life. As a CEO I don’t think there is any other way of getting to know your staff, getting to understand their jobs, frustrations and fears and gaining their respect. To this day, I know more about every aspect of the company than anyone else because I’ve done all the jobs. No reports, spreadsheets or interviews can replace that hands-on knowledge. I encourage all my management or office-based staff to fly as much as possible because you have to keep in touch with the customers and the front-line staff.

  This also works to keep communication open and unrestricted. In the last year or so, one cabin crew had been caught stealing. She’d been dealt with by the right people but she still felt able to text me directly to say that she was sorry and to ask for a second chance. H
aving access like that is worth seven HR departments in my view.

  At our management conference in 2017 in Phuket, Thailand, I had a go at our head office staff for hiding behind their laptops or in meeting rooms. As a company grows, it’s critical that everyone gets out and talks to everyone else and keeps a realistic handle on the day-to-day business. The moment you schedule wall-to-wall meetings all day every day is the moment that you start to lose your grasp on what you’re supposed to be doing. In our case, running a world-beating low-cost airline. Losing sight of that is how a great corporate culture can start to wither and die.

  The two biggest causes of unhappiness in an organization are offices and job titles. For years I have wanted to remove job titles from business cards – apart from emphasizing the title rather than the role, they shut down a conversation about what you do at a company. Far better to explain than be defined by your title.

  Offices are a nightmare. One of the earliest things I did in the first AirAsia offices was to hire some contractors to knock down all the office partitions. If there is no haggling for this or that office or space, everyone can just focus on doing their job and not stress about so-and-so who has an office or has a bigger office, and so on. The new HQ (called RedQ) at Kuala Lumpur International Airport (KLIA), which we designed together, has no offices. Everything is open plan apart from a series of glass-walled meeting rooms. It’s so important to have a space without brick walls: it encourages people to speak freely and it eliminates office envy.

  The other important decision I took was to try to bring everyone together. The staff were originally quite segregated: pilots spoke to pilots, engineers to engineers, cabin crew to cabin crew. I thought it was detrimental to the business because each group could help the other. So we also had lots of parties – all of them with no budget! – but it really did help people bond.

  With no money to take on MAS and Singapore Airlines, I felt the strongest weapons we had were our culture and the fact that we were small and agile. We had no preconceptions about a ‘right’ way of doing things. We could disrupt as much as we liked because we didn’t know any better.