Open Risk Taker

One of the characteristics of entrepreneur is willing to take risks. An open risk taker is an individual who take an action that have the potential to cause physical harm or financial loss but it also can bring benefits to the person. (Business Dictionary, 2015) Tony Fernandes is one of the examples.

Tan Sri Anthony Francis Fernandes or Tony Fernandes as the founder of Tune Air Sdn. Bhd has taken a big risk to buy AirAsia. In 2001, Tony Fernandes come out with an idea of developing Low Cost Carrier at that time. Low Cost Carrier (LCC) can also be known as no frills, no discount or budget carrier. Fernandes thought that Low Cost Carrier could work in Southeast Asia and he wanted to make all the Malaysian can afford to pay for flight. He had a meeting with the Prime Minister, Tun Dr. Mahathir Mohamad to talk about Low Cost Carrier and to persuade Mahathir to give him official endorsement to be a new operator in the Malaysian aviation industries. Mahathir suggest him to buy AirAsia instead of getting a new airline license.

AirAsia is originally the sister airlines of Malaysia Airlines. It is the subsidiary of Malaysian government-owned conglomerate, DRB-HICOM (merger between Diversified Resources Berhad and Heavy Industries Corporation of Malaysia Berhad) that founded in 1993 and operated in 1996. Fernandes bought the airline with one ringgit (USD$ 0.26 at that time) which comprised two ageing Boeing 737-300 jet aircraft but AirAsia had debts worth RM40 million (USD11 million). To support and grow AirAsia, he mortgaged his house and used his personal saving. In December 2001, Tune Air got 99.25% equity of RM 51.68million shares from DRB-HICOM.

With debts of RM40 million, no one wanted to take the risk to buy AirAsia because they thought it will not survive. While as a Low Cost Carrier, everyone also thought it could not work in Malaysia and Fernandes would not clear the debts with this no frills carrier. Tony Fernandes proved everyone wrong. One year after takeover AirAsia, he managed to clear all the debts and turned Air Asia from a failing government linked airline to a successful budget airline. He cut the cost that included use the single type of aircraft, eliminate the travel agents commission by online ticketing, charged for the meal in flight, reduced turnaround time on the ground and ensured frequent flights. The ticket price set for USD $0.99 only which it attracted the customers who could afford it.

In earlier of 2002, AirAsia took its first flight as Low Cost Carrier and it served for six destinations only. After June 2004, it managed to serve 26 destinations and had carried 2.8 million passengers. (AirAsia Websites, 2006) From these stats, we can know that Tony Fernandes’s idea worked in Malaysia. Although he took some big risk for buying AirAsia that have RM 40 million of debts and developed the Low Cost Carrier in Malaysia and even mortgaged his house, he proved that he can do it. He thought about the risk he will take and minimized it. He turned AirAsia into a profitable airline and one of the largest low budget airline in the world.