Air Asia and Tony Fernandes: From public champion to money-grabbing witch?

Written by  Kenny Gan, Malaysia Chronicle

AirAsia is one of Malaysia’s great success stories. From basically nothing except a few old planes serving a few domestic routes CEO Tony Fernandes has built it into the biggest budget airline in Asia with routes spanning most of Asia and reaching into Australia, NZ and Europe. He has done it without any help from the government unlike pampered bumiputra businessmen.

However AirAsia’s success story has begun to falter amid charges of poor service, inflexibility, hidden charges, deceptive pricing and anti-consumer practices designed to squeeze the maximum from passengers. Whenever there is a news item on AirAsia in malaysiakini, Malaysian Insider and other online sites readers’ comments are almost wholly negative towards the airline. It is unusual for a budget airline which purports to provide affordable flying for passengers to end up on the wrong side of public opinion but AirAsia has certainly succeeded.

When did AirAsia descend from a public champion to a money grabbing witch? To be sure this did not happen suddenly but has been ongoing for years. The negative public perception against AirAsia has reached an alarming level and cannot help but affect the airline’s business. The suit by the Australian consumer watchdog ACCC did not help.

Copying Outdated Practices

AirAsia copies a lot from Western budget airlines like Virgin Airways but some of what it copies are outdated or culturally unsuitable for local customers. It may seem clever to refuse to check in a passenger who arrives 1 minute later than the counter closing time so that he has to buy another ticket but Malaysians find this very infuriating especially when other airlines have been very flexible. MAS will allow you to check in as long as you can make it to the boarding room before the plane flies.

Other practices which do not go down well with passengers are credit card charges, counter check-in charge and seat selection charge. The first two may be considered hidden charges as they are non-optional and should be added to the fare in the first place. Those who do not pay to select seats (currently at RM35 per passenger from KL) are randomly distributed so families will be split up. This is especially annoying as passengers are not charged for any real goods or services but for the right to sit together which should be theirs in the first place. It’s like taking something away which should be yours and demanding a fee to give it back.

But probably the most aggravating is AirAsia’s RM1.95 a minute charge to talk to a service staff. It may be for something which is not their fault like flight delays, claim of refund, lost luggage or being overcharged on their credit cards but having to pay by the minute to complain is really annoying. To add insult to injury they are frequently made to wait on hold while the charge keeps ticking.

Is AirAsia Really Cheap?

AirAsia practices a sliding scale of pricing depending on when you book. Early birds get cheap prices which are probably below AirAsia’s cost while late comers will be charged more. Then there are the gimmicky promotion giveaway seats which have to be subsidized from somewhere and it’s not from Tony’s pockets. The upshot is that AirAsia is not always the cheapest and can be more expensive than regular airlines. As nobody will pay more than a regular airline for a budget airline AirAsia tries to hide its real pricing and make it difficult for customers to compare.

This pricing model of gouging Peter to subsidize Paul does not work anymore. Consumers are getting savvier with tight social networking and no longer assume that AirAsia is always the cheapest. They will buy when AirAsia’s prices are cheap and stay away when prices increase. There are still some ignorant ones who do not compare prices but depending on consumer ignorance is never a good business model. This is like BN depending on the rural Malays to be forever supportive through poor information.

During last year’s peak Christmas to New Year period AirAsia was flying between KL and Melbourne with empty seats while all regular airlines were sold out. This is extremely unusual for a budget airline which should logically be the first to be sold out. Passengers have wised up to AirAsia’s pricing tricks.

Customers should also compare beyond the basic fare. Things like food, entertainment, comfort kit and baggage have to be priced in as well as other extraneous charges. Passengers also fly from the LCCT which is a pathetic excuse for an airport and they have to walk a long way to the plane as AirAsia will not pay for aerobridges. This makes AirAsia unsuitable for senior citizens. Then again AirAsia usually flies to remote airports which may cost more to get to the city.

There are also hidden costs. AirAsia is really only cheap if you book far ahead and pay upfront. It accepts bookings as far as one year ahead. This means your money is tied down and any change in schedule can be very painful as AirAsia will levy a heavy charge out of proportion to the ticket just to change a date. Some consumers will find that paying a little more for flexibility is not a waste of money.

Delays and Cancellations

Those who fly AirAsia know that delays and cancelled flights are far more common than other airlines. AirAsia has the dubious practice of combining flights if passenger loads are low without regards to disrupting their passengers’ schedules. The fine print on their tickets claims they have the right to do this. Only a country with weak consumer laws like Malaysia allows them to get away with it.

Those whose flights have been cancelled and are entitled to a refund find dealing with AirAsia an exercise in patience and perseverance. Contacting AirAsia staff is an arduous task in itself. Some customers say they are asked to wait 30 to 60 days to process their refunds and when the time is up AirAsia can come up with another excuse to reset the waiting time.

Long upfront payment, inflexibly, inconvenience, risk of delay and poor service means that customers will demand a big price gap from regular airlines to fly AirAsia. This means that eventually AirAsia will only be able to sell if their prices are very cheap and below cost. Passengers will look elsewhere when prices approach regular airlines.

A case in point is AirAsia’s cancellation of routes to London, Paris, New Delhi and Mumbai. These are popular routes to densely populated cities which any budget airline should be able to work successfully. AirAsia’s stated reasons like visa requirements and additional taxes do not make sense as they apply to all airlines and can be added to the fare. The real reason as reported in The Star is that AirAsia is losing millions on these routes every month. So why can’t AirAsia raise its prices? The reason it can’t is because passengers will flee to other airlines. They are demanding a price gap to fly AirAsia which the airline cannot provide and still remain profitable.

The Writing is on the Wall for AirAsia

AirAsia may have started on good terms with the public but the honeymoon period is over. Its service has fallen to abysmal level and it is treating its own customers with contempt. AirAsia is behaving as if it is operating a monopoly when no such monopoly exists.

Passengers have a choice of other airlines including budget ones like Jetstar which has been complimented for its transparent fixed pricing. Air Emirates is encroaching in on AirAsia’s lucrative KL-Melbourne route with very competitive prices.  Hoping that its new KL-Sydney route will be as lucrative may not happen as SIA will soon launch a new budget airline called Scoot which will start with the Singapore-Sydney route.

AirAsia has obviously not come to terms with the power of social media. In the old days an enraged customer can do limited damage as he can only influence his immediate family and close friends. These days they can vent their rage in online forums, facebook and twitter and influence hundreds if not thousands.

Horror stories about AirAsia abounds online. Some say they find AirAsia staff so difficult to contact that they are forced to buy another ticket when they just want to change a departure date. One angry customer said he has been waiting 2 years for a refund with serial excuses from AirAsia. One passenger was especially unfortunate. He reached the airport to find the check-in counter closed and the staff agreed with him that it was closed earlier than the stipulated time. She made a phone call but was not allowed to re-open the counter. As a result the passenger missed his flight and his connecting flight and to top it off Air Asia refused him a refund.

There seems to be a culture of unsavoury practices to try to squeeze all they can from passengers even to the extent of forcing them to buy another ticket. Such corporate greed will drive customers away. My sister was asked to pay RM1000 to change the date of departure for a KL-Melbourne flight. She has declared that she will fly Air Emirates from now on.

Tony Fernandez should put his mega plane buying on hold and work like hell to improve AirAsia’s customer service and public perception. He should step out of his dream world that every year will be the best ever year for AirAsia. The writing is already on the wall and if AirAsia crashes it will be a pity as it can be said to be the only Malaysian global brand.