Air Asia – The low-cost airline business

January 20, 2011 | By More

Air Asia is a low-cost, no frills airline based in Kuala Lumpur. They are also Asia’s first and most successful low-fare airline with 200 flights a day to over 75 destinations around Asia, China, Australia and India. The revenues in 2007 were $450 million.

When we first met Tony Fernandes to understand his problem, he explained that he was very concerned about the charges they were paying in credit card transaction fees because over 85% of ticket sales from the internet.

Tony Fernandes

With no other choices available to Air Asia and with ticket sales projected to increase significantly, both Visa and Mastercard were not interested to reduce their fees. The question for Tony was what else to do.

Internet purchases need to use a credit card or something similar.

When we studied the profile of travellers on low cost airlines, a majority were transient workers and casual travellers. Transient and domestic workers primarily come from countries like the Philippines, Indonesia, Thailand, Vietnam, India and so on. They have no choice but to use air travel with they go home. Low cost airlines such as Air Asia are the cheapest way.

They are also the segment that are most likely not to have a credit card. So, how would they book and pay for their ticket?

Tune Money

To address this problem we proposed that Air Asia introduce their own branded debit card to avoid the higher credit card transaction charges. Debit cards do not require credit checks, have many reload options and can be used to make online purchases and elsewhere. The card was launched with Visa as the ‘Tune Money’ Card.

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Comments (3)

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  1. arthur says:

    Wow you do consulting for AirAsia, that is great. AA is my favorite airline cos it is cheap and no frills as I don’t have to pay for the things I don’t need. thanks

    • Error: Unable to create directory uploads/2017/10. Is its parent directory writable by the server? ET says:

      Yes Arthur, thanks for your comment. You will hear in later posts about other companies we have worked with. Some, of course, we cannot name directly.

  2. Randall says:

    This is a really good tip especially to those new to the blogosphere.
    Short but very accurate info… Thank you
    for sharing this one. A must read article!