AirAsia recently launched ride-hailing services in M’sia – will S’pore be its next destination?

On 24 August 2021, Malaysian airline AirAsia announced its entry into the ride-hailing space with the launch of its new airasia ride in Kuala Lumpur.

In a media statement, the company promises to provide passengers with “greater convenience, more competitive prices, and better income opportunity for drivers, in addition to a safe experience with a 100 per cent fully-vaccinated driver fleet.”

Users can book a ride through the airasia app, or by visiting airasia.com/ride. The service is currently available in Klang Valley, with expansion to more cities in Malaysia planned throughout the year.

At launch, airasia ride has about 1,500 registered drivers in Malaysia and it expects another 5,000 drivers to come onboard by February next year.

“airasia ride inherits the DNA of running a low-cost model which enables savings to be passed on to guests and strives to offer the lowest fares on the road, introducing great value to the highly competitive e-hailing ecosystem,” said Amanda Woo, CEO of airasia Super App.

She added that this is part of the company’s continuous digital transformation journey to become Asean’s top super app through its regional expansion into Thailand, and potentially Indonesia very soon.

The low-cost carrier also recently acquired Gojek’s ride-hailing and payments businesses in Thailand, signalling its fierce expansion into the region.

Although Singapore was not earmarked as a potential market, is there a possibility that airasia ride will launch here in the future?

Cashing in on new opportunities to build a super app

Airlines around the world have mostly been idle due to global travel restrictions following the Covid-19 pandemic. To stop the cash bleed and survive, most have had no choice but to innovate, finding new ways to leverage their assets and revenue streams.

Singapore Airlines, for instance, has doubled down on its e-commerce efforts, with initiatives like its blockchain-based digital wallet Kris+ and activities booking site Pelago.

AirAsia is no exception. In fact, it’s using this downtime to accelerate its super app ambition, which it has been very vocal about since last year. The end goal is to let its users do more within a single app.

It aims to provide a simpler, faster and more convenient user experience with over 15 types of products and services, under three main pillars: travel, e-commerce and fintech.

Amid the pandemic, AirAsia has entered the food delivery arena, and it’s actively adding more services as it shapes itself into becoming one of Southeast Asia’s leading super apps.

So far, the super app allows users to book flight tickets and hotels, order food and groceries, buy insurance and beauty products, and most recently, book a ride-hailing service.

The new airasia ride has been “many months in the making” and it’s very much like the last jigsaw piece that helps to “complete the whole airasia super app ecosystem,” said Captain Ling Liong Tien in the company’s media statement.

What sets airasia ride apart from other players?

airasia is all about convenience, flexibility and unbeatable value and airasia ride presents a different, yet compelling e-hailing solution to passengers through a single super app platform for a total mobility booking experience from air to ground.

By leveraging on our rich data we collected in the past 20 years, airasia ride is the new game changer for the e-hailing and travel industry. airasia ride not only brings you from point A to B, but we offer a complete user experience for our passengers — pre-flight, during flight and post-flight.

– Amanda Woo, CEO of airasia Super App

Lim Chiew Shan, CEO of airasia ride Malaysia, echoed that the “unique insights and data” captured by the company due to its super app positioning, is very valuable.

By tapping on the vast data and algorithm, they can better provide a seamless and connected journey experience for their passengers.

They will be able to perform in-path booking for both their flights and pre-book their ride to the airport and even for their return journey at the same time, all within the convenience of one single itinerary and without having to leave the airasia super app.

Very soon, passengers will be able to use their BIG points to pay for their rides, and be able to enjoy the lowest fare in addition to free rides, just like the iconic airasia free seats.

To add to that, passengers will have the ability to choose their preferred vehicle type and also drivers, as we have various communities that are part of our driver fleet.

– Lim Chiew Shan, CEO of airasia ride Malaysia

airasia ride also offers a special feature, where passengers can book an ‘Allstar Ride’ and be chauffeur driven by AirAsia pilots and cabin crew.

Unlikely for airasia ride to take off in S’pore (if and when it launches here)

Personally, I don’t think AirAsia’s holistic offering to provide a seamless user experience is a huge incentive, especially when very few people are catching flights nowadays.

Ultimately, I think pricing is the biggest appealing factor — it’s very likely that users will go for a ride-hailing platform that offers the cheapest fare.

However, staying true to their budget branding, airasia ride promises to offer low-cost fares and is positioning themselves as the more affordable super app.

According to the company, fares on airasia ride are set at an average of RM1 per kilometre, excluding toll charges.

A separate article by Vulcan Post has compared ride fares between airasia ride and Grab in Malaysia, and found that there is no significant price discrepancy. At most, you’ll save just a few Ringgit with airasia ride.

Beyond price, I think customers will also take into consideration how fast they can secure a ride booking. Even if airasia ride offers a cheaper fare, this won’t matter at all if they cannot even find a driver.

This is a likely possibility since airasia ride only had about 1,500 registered drivers in Malaysia at launch. Even if it plans to add another 5,000 drivers within the next few months, this pales in comparison to Grab’s pool of local drivers. According to a 2020 article, Grab has over 100,000 drivers in Malaysia.

If and when airasia ride launches in Singapore, airasia ride needs to take these two factors seriously. It needs to make sure that it offers a competitive pricing (compared to all the ride-hailing apps in Singapore) and make sure that it has a big enough driver fleet to compete with the other players.

It’s also worth noting that AirAsia has mentioned that there’s a chance for airasia ride to integrate with its logistics arm, Teleport, to complement its logistics and delivery services.

(We will tap) into the same pool of drivers for maximum efficiency and cost savings, apart from synergising with our e-commerce verticals, supplementing our existing last-mile delivery capabilities with greater capacity and reach.

– Amanda Woo, CEO of airasia Super App

“Another exciting product innovation in the pipeline is partnership with electric vehicles, to spearhead the drive for sustainability in mobility for Asean,” she added.

While venturing into EV is an interesting move and aligns well with Singapore’s national plan of ramping up EVs, it’s not a winning reason for users to jump onboard airasia ride.

Moreover, many other transport players in Singapore like Grab and SMRT have also ramped up investments in electrifying their fleet, so this is nothing novel.

Even if it uses promo codes as an incentive to get users to book airasia ride, this is merely a short-term strategy to build its customer base.

The key to winning the game is not just to capture new users, but actually retain the existing users — this is what will make a difference when it comes to long-term play.

A look at AirAsia’s business performance

AirAsia has been in the red for seven consecutive quarters, posting a net loss of RM767.4 million (S$248.3 million) in the first quarter this year. 

Last week, AirAsia Group revealed its latest financial results. It posted a smaller loss in the second quarter amid a jump in revenue, even as an enhanced lockdown dampened sales during an ongoing travel slump.

Revenue was 160 per cent higher at RM370 million (S$119.8 million), boosted by cargo revenues. Under its digital arm, revenue from its logistics business tripled while the fintech unit revenue was 56 per cent higher.

Net loss for April to June was 41.6 per cent lower at RM580 million (S$187.7 million), compared with a loss of RM992 million (S$321 million) a year ago, when the airline hibernated its fleet at the start of the Covid-19 pandemic.

In Singapore, AirAsia has been strengthening its foothold with its logistics arm Teleport, and food delivery service airasia food.

In Southeast Asia, airasia food is clearly lagging. Grab, foodpanda and Gojek are the top three players in terms of gross merchandise value (GMV) and in Thailand, airasia-Gojek only contributed seven per cent.

Momentum Works notes that for a food delivery platform to stick, it needs to provide at least check two boxes out of these four points — food selection of restaurants and menu items, fulfilment speed, quality of food and reliability, and prices — to be “consistently and better than its competitors”.

After assessing how food players are matching up to consumer expectations, we came to the conclusion that airasia food needs to improve its customer experience fast, since the ratings are currently hovering around a near pass or below standards.

Commenting on airasia food’s performance, Lim Ben-Jie, head of commerce of airasia Super App shared that it has been seeing two to three times monthly growth, fuelled by expansions in more cities.

If you ask me ‘would airasia food survive?’ We would. Food is just one of our businesses and our core is still travel. Our diversification strategy, our infrastructure, and logistics are very ahead of the curve, that’s why we are confident that we will make it through with these services.

We are still a very young platform, so comparing us with Grab isn’t an ideal comparison, but as Tony (AirAsia Group CEO) said, ‘Give us six months, that’s all we need to have experiences that’s better than our competitors.’ That’s how ambitious we are.

– Lim Ben-Jie, head of commerce of airasia Super App’s in a recent interview with Tech Wire Asia

It also helps that AirAsia has a huge financial war chest to rely on. The company said it plans to raise up to one billion ringgit (US$238.7 million) through a rights issue, to support its working capital needs as it grows its digital business units.

The digital arm of the low-cost carrier is also reportedly considering listing in the US via a special-purpose acquisition company or SPAC to raise at least US$300 million.

Featured Image Credit: AirAsia Travels via Facebook