For autonomous vehicle startup Cruise, the future isn’t just about artificial intelligence. It’s about machine learning, and that’s why Cruise is teaching its electric vehicles to drive themselves in San Francisco – one of the most complicated urban environments for self-driving cars to operate in.
“Learning how to drive in San Francisco is amazing for AI,” said Hussein Mehanna, the company’s head of AI, noting that the dense and unpredictable streets are ultimately an advantage. “The more interesting the data, the more the machine can learn.”
Mehanna hopes that learning will not only revolutionize autonomous driving, but also plant Cruise at the forefront of the next big thing: AI-based companies.
Taking machine learning to a new level
General Motors bought Cruise back in 2016 for around $1 billion, and through subsequent investment rounds, it’s grown to a nearly $30 billion valuation. The company’s goals are spectacularly ambitious, with CEO Dan Ammann effectively calling for the end of personal-car ownership and spurring Cruise to go after a multi-trillion-dollar future global ride-hailing opportunity.
In order to get there, Cruise needs game-changing hardware and software – a quest overseen by Kyle Vogt, its cofounder and chief technology officer – and high-profile partners, including ones it already has like GM and Honda. But Cruise also needs artificial intelligence and machine learning at a level that, frankly, nobody has seen before.
As powerful as 21st-century AI sounds, Mehanna said it’s only recently that its full capabilities have been unleashed. Advancements in robotics and machine learning have made that possible.
“I always had a fascination with AI,” Mehanna, whose career path to Cruise included stints at Facebook and Google, told Insider in an interview. But where are all the robots we might have expected to see by now?
Mehanna said the kind of AI we see in demonstrations – dancing humanoids robots on YouTube, for example – doesn’t scale.
“They’re scripted to handle a certain number of use cases,” he said.
Enter machine learning, which he said has the critical power to generalize.
This is, to put it mildly, huge. At Cruise, Mehnna’s team is tackling a whole new way of undertaking computer science, led by those autonomous EVs cruising through San Francisco.
If it all comes together and Cruise is able to successfully commercialize its service, then Mehanna said that the company could notch an unprecedented achievement: becoming what he termed the first “AI-native company.”
Dreaming of robots that can do much, much more
“It’s a new concept, and we’re inventing it,” he said. The analogy that leaped to mind for him was being able to handle HTML coding for the internet of the late 1990s.
“If you knew HTML, you were a rocket scientist,” he said. The skillset led to internet-native companies such as Google. That history is now staged to repeat with Cruise.
“In five to 10 years, AI natives will be the status quo,” he said.
The endgame of this process should be what he called a “general-purpose robot,” able to learn as humans now learn. It could drive a car, fly a plane, or attend to more mundane tasks.
“My dream,” he said, “is to get my laundry folded by a robot.”
Talking to Mehanna, one gets that sense that we’re just at the beginning of something radical in changing how the world operates. Cruise has already made huge leaps in teaching a car to drive itself, once the stuff of science-fiction movies. But for Mehanna, those apparent leaps are but small steps toward robotic applications and machine learning remaking numerous aspects of everyday life – aspects that we take for granted or have long assumed would always have to involve natural, rather than artificial intelligence.
In the short term, however, he’s simply contemplating machine learning as a prerequisite to Cruise accomplishing what it set out to do five years ago.
“At Cruise, you can’t have a company without AI,” he said.
A year-long struggle with the COVID-19 pandemic has brought more headlines than we as a society – as well as the people writing those headlines – can really handle. There’s been speculation, sadness, chaos, fear, isolation, data, and graphs. So many graphs.
But one of the earliest headlines of the pandemic wasn’t about any of that. It was about supply, and the supply of one product in particular: toilet paper.
When Insider mentioned the great toilet paper crisis of 2020 in a virtual roundtable with Hannah Kain, founder and CEO of California-headquartered supply chain management supplier ALOM Technologies, she laughed.
“Yes, we can talk about the toilet paper,” she said. “I never thought I would be interviewed so much about toilet paper.”
When much of the US shifted to quarantine overnight last March, the world’s supply chain was forced into the spotlight. Suddenly, we were ordering more online: our groceries, our home office setups, our bread ingredients, our puzzles. When we did face this new, mysterious virus to go into a store, we were met with empty shelves and freshly printed signs telling us we couldn’t buy more than two jugs of milk. Sales of toilet paper in the US shot up 845%, demand for Clorox products spiked by 500%, and treadmill sales more than doubled.
As we depended on our supply chain more, we criticized it more. After all, how hard could it be to just make some more toilet paper?
As consumers, we focused on the supply side of the equation. But Kain said for the professionals, supply problems haven’t been the story for much of the pandemic – demand shift has.
“Demand shifted so dramatically, sometimes 50% or 100% compared to forecast,” Kain said. “The supply really got constrained, right? If the demand had not shifted, the supply side would have been difficult, but it would still have been flowing really, really well.
“Many [journalists] say, ‘But why don’t they just make more?’ I’m like, ‘Well, guess what, you need equipment to make more toilet tissue, and where do you get the equipment from?’ A lot of times, from China. But even if you use a local equipment maker, they need spare parts from all over the world and it just takes time to deploy it.”
Kain said demand changed in two important ways: which products people bought and, as people shifted even more of their purchasing online, which channels they bought them through.
Mei Yee Pang, the Singapore-based head of DHL Asia Pacific Innovation, saw similar patterns, illustrating a common theme of the pandemic: how intertwined supply chains are, for better and for worse.
“Supply chains today are so global, you see pretty much the same phenomena everywhere we go,” Pang told Insider. “We too had our toilet paper issues. There was, at some point in time, a global shortage of glassware because everybody started making jams at home and needed glass jars.
“So we do see very interesting demand shapes, and a lot of them, looking back, are something that we can expect. That’s where big data potentially in the future can come in more, better forecasting some of these effects that we normally wouldn’t have expected.”
Changing demand isn’t the only issue the pandemic highlighted. More online ordering didn’t just mean more convenience for the buyer – it meant more waste, too.
“Every time I receive a parcel, I feel bad about it because I’m contributing to waste,” Pang said. “I think this is something that needs to change. We can’t be sending individual shipments using partially utilized vehicles to send stuff around to individual homes.
“It’s not easy, but I think as we go more and more from a less than 20% e-commerce channel to now, some companies are having that switch around to e-commerce as a major channel, we are going to see a lot of waste coming into play and it’s not sustainable.”
Kain thinks the switch to e-commerce is here to stay, but said there’s “no easy solution” to making the change more sustainable from a packaging perspective.
“If we go to things like consumer electronics, everything was packaged for the retail shelves,” Kain said. “Maybe now you have a shippable box, and you don’t have a box inside a box.
“We are a little bit in a tough spot right now because recycling and return packaging is of course a big issue because of the risk of infection. I think this is something that we’ve got to develop over time, but I do think that the big carriers are going to come out with support in this area.”
Pang, whose employer DHL is one of those big carriers with more than 350,000 employees worldwide, said analytics will help.
“In our organization, we start looking at how we can help our customers look at packaging and use data information to optimize the way we pack, the way we pelletize,” Pang said. “Every small bit counts to really reducing our footprint, and at the same time, lowers cost. So what’s not to like about this sort of solution?”
Peter Evans, CEO of the UK-based sustainable supply chain technology company Orderly, told Insider his company’s main product is something called a “scorecard.” Its goals include reducing waste of both products and packaging.
“It rates everyone who manages supply chain operations, from someone in a warehouse to the CEO, on a scale of zero to five,” Evans said. “Zero being ‘You’re wrecking the planet and you’re wrecking your business,’ five being ‘You’re really making some decent change here.’ We use AI against all this data we pull in to give each person two recommendations each week on what they can do to provide the biggest, most sustainable impact to their supply chain.
“For us, it’s changing people’s mindsets on an individual level, showing them what can be done in the world as well – what can create the biggest benefit.”
Kain said that’s important, both in terms of sustainability and social responsibility, as more people think about their relationships with companies.
“Corporate social responsibility has become way more important for decision makers,” Kain said. “It’s driven by consumers. We want companies to be in sync with our values. We don’t want them to be out of sync.
“For instance, early in the pandemic, there was a survey done in the US showing 87% of consumers did not want to buy product from companies that did not keep their workers safe. We’ve never seen sentiments like this before, and it’s very healthy and good. It’s forcing the corporations to think differently about their supply chain in a very healthy manner. In any crisis, there’s a silver lining, and I think that’s it.”
Another silver lining might be that when or if this kind of global crisis happens again, the supply chain will be a bit more prepared for what’s coming – thanks, in part, to how big of a spotlight its struggles received when the pandemic hit.
“I think there’s a newfound respect for the sector, from the boardroom to the individual consumers at home,” Pang said. “There’s a newfound priority placed on the sector to put in more technology, to put in more innovation, to put in more R&D into making it more agile and more prepared for situations like this, so I’m quite optimistic about what we can see from the sector in the next few years.”
As COVID-19 continues to bring havoc to airline markets across the world, a decade-old budget airline in Vietnam is one of the few carriers to have come out of 2020 in relatively good shape VietJet Air, headed by Vietnam’s first female self-made billionaire Nguyen Thi Phuong Thao, not only managed to get through the year still in profit, it also did so without laying off any staff. In its financial statements, the airline said it earned US$790 million in consolidated revenue in 2020, with an after-tax profit of roughly US$3 million.
VietJet’s experience is in stark contrast to the aviation sector in general, where airlines have been devastated by global travel restrictions. According to the International Civil Aviation Organization (ICAO) passenger traffic numbers fell by around 60% last year, with just 1.8 billion people taking flights compared to 4,5 billion in 2019.
The financial hit to airlines has been huge, with an estimated loss of around US$370 billion. Before the year had even ended as many as 12 airlines had ceased operations, with many more filing for bankruptcy or making significant cuts in expenditure.
Few airlines have managed to avoid the crash. In mid-March, for instance, Hong Kong carrier Cathay Pacific unveiled its worst-ever financial results, with losses of around US$2.8 billion. The airline had earlier been forced to lay off some 8,500 staff, roughly 25% of its total workforce. Similarly, Vietnam’s national carrier Vietnam Airlines made losses of over US$480 million in 2020, and has said it doesn’t expect to be generating profit until 2023 at the earliest.
The success of VietJet Air is undoubtedly grounded in the achievements of Vietnam itself in 2020. Vietnam was Asia’s top-performing economy last year, growing at a rate of 2.9% compared to 2018. Vietnam has also excelled in terms of handling the COVID-19 pandemic. With just over 2,500 infections and only 35 total deaths, Vietnam was able to resume economic activities earlier than most of its Asian counterparts
“Strong national economic performance generally, underpins a solid airline operating environment,” agrees Matthew Findlay of Ailevon Pacific Aviation Consulting (APAC). “The fortunes of many well-run airlines follow or better GDP growth rates – VietJet has benefited in this case from an economy still in positive territory.”
But while a booming economy has given VietJet a leg up, it is only one part of the story. After all, VietJet’s domestic rival Vietnam Airlines has failed to achieve similar results. More important has been how VietJet has innovated its way through the crisis.
A pivot into cargo services
Like all airlines the early part of 2020 was one of uncertainty for VietJet, but unlike many of its competitors the turnaround came sooner than expected. By June it had restarted all domestic flights, and even added eight new routes to its network. Overall, the airline flew more than 15 million passengers in 2020 and domestic air travel fell by just 14% in 2020 compared to the previous year.
Without question, continued domestic demand gave VietJet a strong foundation for recovery, but what really carried the airline through 2020 was its ability to pivot into new business areas, in particular its move into cargo services.
By the end of 2020, the airline said it had delivered more than 60,000 tons of cargo internationally, reporting a 75% year-on-year increase in cargo revenue. This is particularly impressive given that prior to COVID-19, VietJet had no full-cargo aircraft in operation. Instead, passenger craft were reconfigured to enable them to carry goods on the main deck.
The airline also established partnerships with other carriers, which enabled it to extend its cargo network into Europe and the US. In November last year, VietJet announced an air cargo link-up with logistics giant UPS to operate weekly flights from Vietnam to the US, which also signaled the first time a VietJet craft had landed in the US.
This shift into cargo is much more than a temporary fix to pandemic conditions, and VietJet has already said that it plans to build on the mounting demand for cargo transportation. Toward the end of 2020, the airline launched an affiliate company – VietJet Cargo – which reinforced its future commitment to cargo transport. Vietjet Cargo standing vice-president Tran Quang Hoa told Insider that the carrier would continue to diversify its range of cargo services.
“These services will be developed based on our existing products in 2020 which have optimized our fleet and operation and raked in quite a considerable amount of revenue for VietJet in the past year,” he said. “I believe that freight transportation will continue to be our focus sector which brings in breakthroughs and extra revenue for VietJet in 2021.
A new future for aviation
Indeed, the lessons of 2020 look set to play a key role in defining VietJet’s future course. The airline’s success with cargo operations have also accelerated a shift into non-passenger services. Earlier this year, for instance, the company said it had invested into local online delivery platform Swift247 and will in the near future target the express delivery market.
VietJet is also expected to ramp up promotion of its ancillary services, such as souvenirs and in-flight food. In 2020, ancillary revenue accounted for close to 50% of total revenue
VietJet would not be the first airline in the region to open these new revenue streams. In 2020, Malaysia-based budget carrier AirAsia expanded its cargo and logistics division into cross border e-commerce transportation and last-mile delivery. Also last year, AirAsia launched its own digital travel and lifestyle platform and super app, offering non-flight related services such as e-commerce and food delivery.
Ultimately though, what matters for an airline is getting passengers on seats, and once international routes open up, analysts expect VietJet to expand further its overseas operations, helped no doubt by its positive financial performance in 2020.
“Asian nations have dealt with COVID-19 better than other nations and regions, so an expected return to travel for VietJet will come, benefiting the airline and ensuring its success,” Findlay says. “Wealthy Asian markets will be tempting focus areas for expansion as they focus on core historical visitor markets, while the back-order of aircraft that offer the opportunity to fly further in more economical and lower cost aircraft provides scope for growth into new and existing markets.”
The COVID-19 pandemic proved not only how interconnected our world is, but also just how dependent we are on supply chains functioning smoothly and predictably. From toilet paper shortages in early 2020 to vaccine logistics now, the world’s supply chain has been in the spotlight both directly and indirectly for more than a year now.
Insider recently selected top people from North America, Europe, and Asia Pacific who have been transforming the transportation industry. Three of those Transformers recently joined us for a virtual roundtable on the state and future of supply chains: Hannah Kain, founder and CEO of supply chain management supplier ALOM Technologies; Peter Evans, CEO of sustainable supply chain technology company Orderly; and Mei Yee Pang, the head of DHL Asia Pacific Innovation.
They discussed everything from early pandemic disruptions and adjusting to new industry norms to corporate social responsibility and the future of sustainable packaging in a world where lockdowns have rapidly increased how much stuff we’re ordering online.
You can read about all that and more below in the transcript from Insider’s Supply Chain Transformers roundtable.
Transcript has been edited for clarity and length.
Insider: Peter, can you tell us a little bit about where you thought this business was going before COVID-19 hit? What did your five-year plan look like this time last year or a little bit earlier?
Peter Evans: So our five-year plan was almost the same, but little bit slower than the way we’ve progressed in the past year. I think the pandemic’s just sped things up for us, really, in terms of growth of our company and growth in the supply chain as a whole.
We were getting traction, supply chains were moving toward automation, but not quite in the way they are now. People were beginning to understand the benefits of big data.
Many of these shocks that came into the food supply chain, we saw happen in February. We knew what was going to hit in March. Yet the reality really hit that the lower-tier suppliers are really critical to the overall supply chain.
Insider: Hannah and Mei, does that track with what you’ve found over the past year – that COVID and the pandemic in general, putting all this stress on supply chains, ended up being more of an accelerant of existing trends that you’ve been tracking in years prior?
Hannah Kain: Yes, I think that’s correct. Now, again, we’ve got to remember that it’s very easy to talk about COVID and the pandemic all the time, but we had another trend that heavily impacted the last year, which is the geopolitics and the trade wars. And those two things ran parallel. And what happens to a lot of people in supply chain is it gets co-mingled, everything gets confused and changed, et cetera, but I think it’s important for supply chain practitioners to think that it is really two different events and they just coincided the time-wise.
So I think the entire geopolitics, and the trade wars, and the nationalism, and the added complexity of cross-border trade really exploded this last year. If you look at it until very recently, the supply chain COVID story is a story of demand shift, not of supply problems. Demand shifted so dramatically – you know, sometimes with demand shifting 50% or a 100% compared to forecast. The supply really got constrained, right? So if the demand had not shifted, the supply side would have been difficult, but it would still have been flowing really, really well.
Insider: Can you give us some specifics on that? Was it that everyone was looking for more toilet paper?
Hannah Kain: Yes, we can talk about the toilet paper. I never thought I would be interviewed so much about toilet paper. [laughs]
The paper crisis is certainly a good example, but so is home electronics, right? People buying home electronics, the tests that people all of a sudden have at home with a lot of shifts going on, which is causing the chip crisis right now. So what’s happening is you have the change in two levels, really, if we want to be very simple about it, it’s: “Which products do people buy?” But the other thing that happened was that channels shift. We used to go and buy things in malls, et cetera, and all of a sudden we go online and we buy differently. So those are the two big demand shifts.
With the panic, toilet tissue demand for consumers went up by 700%, and the journalists I’m speaking to, many of them say, “But why don’t they just make more?”
I’m like, “Well, guess what, you need equipment to make more toilet tissue, and where do you get the equipment from?”
A lot of times, from China, but even if you use a local equipment maker, they need spare parts from all over the world and it just takes time to deploy it. So certainly the demand shifts were huge, and in any world that would have been almost impossible to meet 100%.
Insider: Mei, can you expand on that coming from the Asia point of view specifically? How did you see that demand shift change over time, especially in a part of the world where it seems maybe the pandemic hit harder earlier and maybe the the recovery curve came a little faster or a little earlier?
Mei Yee Pang: I would say that supply chains today are so global, you see pretty much the same phenomena everywhere we go. We too had our toilet paper issues. We too had glassware issues, because there was at some point in time a global shortage of glassware because everybody started making jams at home and needed glass jars.
So we do see very interesting demand shapes and a lot of them, looking back are something that we can expect. That’s where big data potentially in the future can come in more, better forecasting some of these effects that we normally wouldn’t have expected.
But I think what came out of this whole thing is, I think there’s a newfound respect for the sector from the boardroom to the individual consumers at home. There’s a newfound priority placed on the sector to put in more technology, to put in more innovation, to put in more R&D into making it more agile, more prepared for situations like this. So I’m quite optimistic about what we can see from the sector in the next few years.
Insider: Peter, I’m curious. I think a lot of people were surprised – people who are not involved on the supply chain – were surprised to learn how a lot of things work over the last year. Like people asking Hannah, “Well, why can’t you just make more toilet paper?” But what surprised you the most over the last year?
Peter Evans: I think it was the resilience for me.
Probably to start with, the impact of the pandemic didn’t feel too great. It was kind of running in and around the team and our clients rising to the challenge and getting down and sourcing the problems. I think it’s not about how enduring we were as a company and supply chains were during the initial crisis, but it was more about how fast someone can recharge their batteries and get ready for the next event and then the next change, which for us, especially in the UK, was a borderline crazy, to be honest. It was one supply shock after the next. The rules were changing like we’ve never seen before, and a lot of the politics were quite fast moving compared to what was happening in some of other countries as well.
I think most people now have a mantra of “Expect the unexpected,” and people are more resilient to things regarding the supply chain as a whole. I think it surprised me how disconnected everything actually was.
So we’re technology and we’re AI, and we already work with organizations that are quite forward-thinking. Some of the organizations we’ve run into during the pandemic saying “Can you please help me?” was quite shocking. We were seeing shortages of certain products where one client had exactly the right product that another client could have, and food and processes were just going to waste, which was unbelievable, so we did everything we could to help during the time.
Since then, we’ve done a lot of work around supply chain visibility, workflow management, but also creating sales and being able to help our clients to share stock and food and beverage with each other. But yeah, the waste was the main one for me.
Hannah Kain: If I had to pick one thing, it’s how little collaboration there was globally around finding solutions to the prices. It’s been fairly disjointed. And also the regulations, how fast and furiously different regulations came and with how little understanding of how the supply chain really works and how it’s impacting everybody.
Mei Yee Pang: It was just quite amazing how we as a company, the entire industry, and our customers just switched gears from one day to another – literally to change business practice, to switch on their business continuity plans, to really deal with the pandemic.
For example, our customer service, which was predominantly an in-person, in-office kind of setup in most parts of the world, literally overnight had to switch to work-from-home setup. We were literally bringing our laptops and computers from the office to the homes, bringing chairs and things like that. And in the context of Singapore, houses are not too big.
At DHL Consulting, we see ourselves championing some of these new practices that we would like to inspire our organization to do, one of which is the continuation of this work-from-home concept. I think the whole real estate of offices, the whole concept of working, and the tools that we would be using for offices will change. At the shop floor, there’s a lot more focus on health and safety and cleanliness, so I think a lot of the safety distancing and the use of technology like autonomous bots for the cleaning will become a lot more quicker to deploy and [there will be] a lot more acceptance for these investments.
Another thing that I think will keep coming at us is this increased e-commerce. I took a quick look at what Peter is doing in the area of packaging. I really like the topic. It’s a big topic now, because every time I receive a parcel, I feel bad about it because I’m contributing to waste. I think this is something that needs to change. We can’t be sending individual shipments using partially utilized vehicles to send stuff around to individual homes. I think that that kind of system needs to be seriously thought through. It’s not easy, but I think as we go more and more from a less than 20% e-commerce channel to now, some companies are having that switch around to e-commerce as a major channel, we are going to see a lot of waste coming into play and it’s not sustainable.
Insider: And it creates this really new calculation that I at least find myself making, which is: “Do I order this package from a store knowing that it’s going to have these effects on the supply chain and I’m going to have this packaging, or do I go to the store myself and my car pollutes the pollutes this much?” And I have to factor in the risk of: “What if I’m sick and I’m spreading a virus?”
Hannah, can you pick up on this idea of packaging that Mei brought up? With this rise in e-commerce, how do we keep things more sustainable and more possible at a practical limit? What changes are you seeing there?
Hannah Kain: I do think that the switch to e-commerce is here to stay, but there’s another really interesting and very positive thing coming out over the last year as people have been thinking more about their relationship to companies. Global social responsibility, corporate social responsibility has become a way more important for decision makers. It’s driven by consumers, and we want companies to be in sync with our values. We don’t want them to be out of sync.
For instance, early in the pandemic, there was a survey done in the US showing 87% of consumers did not want to buy product from companies that did not keep their workers safe. Even if they needed the products, they would not buy them if they had an inkling that the workers were not safe.
We’ve never seen sentiments like this before, and it’s very healthy and good, and it’s forcing the corporations to think differently about their supply chain in a very healthy manner. In any crisis, there’s a silver lining, and I think that’s it – that we are getting way more corporate social responsibility and it’s pushed by the consumers and it’s becoming important for decision-makers.
In terms of packaging, we are a little bit in a tough spot right now because recycling and return packaging is of course a big issue because of the risk of infection, et cetera.
I think this is something that we’ve got to develop over time. There’s, in my best opinion, no easy solution that’s coming up. But I do think that the big carriers are going to come out with support in this area.
Mei Yee Pang: Analytics will help in this front. In our organization, we start looking at how we can help our customers look at packaging and use data information to optimize the way we pack, the way we pelletize – every small bit counts to really reducing our footprint, and at the same time, lowers cost. So what’s not to like about this sort of solution?
Hannah Kain: The other thing that I think is going to be a trend is – Peter was talking about the food industry, but if we go to things like consumer electronics, everything was packaged for the retail shelves. Maybe now you have a shippable box and you don’t have a box inside a box.
Peter Evans: The main tool and the main product we create is something called a scorecard. It rates everyone who manages supply chain operations – from someone in a warehouse to the CEO – on a scale of zero to five. Zero being “You’re wrecking the planet and you’re wrecking your business,” five being “You’re really making some decent change here.” We use AI against all this data we pull in to give each person two recommendations each week on what they can do to provide the biggest, most sustainable impact to their supply chain.
So I think for us, it’s changing people’s mindsets on an individual level, showing them what can be done in the world as well – what can create the biggest benefit.
Under the leadership of co-founder and CEO, budget flyer AirAsia has been disrupting the Asia airline industry since operations first began in 2001. The Malaysian company was last year named the world’s best low-cost airline at the Skytrax World Airline Awards. This was the 11th consecutive year it had picked up the award.
Despite its pioneering success, AirAsia has in recent years been implementing strategies to pivot toward a unified, all-in-one digital travel and lifestyle platform. Business Insider looks at how Fernandes and AirAsia are looking to redefine the role of an airline in a post-COVID world.
Moving from budget airline to digital travel and lifestyle platform
AirAsia has from the outset put digital and innovation at the heart of its operations. It was, for example, the first airline in the region to focus on selling tickets directly online through its own website, and today around 85% of its customers book directly through its website.
From 2018, the company saw the potential to drive new revenue streams by building an ecosystem of businesses, all anchored on travel and all leveraging off each other. The arrival of COVID-19 and the subsequent downtime of flights provided the company with the opportunity to fast-track this digital transformation strategy.
“As I always say you have to evolve or you die in this industry,” said Tony Fernandes. “The decision to pivot into a digital travel and lifestyle platform actually commenced in 2018, well before COVID-19 hit. One silver lining of the pandemic was that it allowed us to focus on and fast-track our digital transformation by growing our non-airline businesses which not only provides new revenue streams, but also creates new job opportunities for our staff to be upskilled and pivot into new roles within the company.”
The airline saw digital transformation as a natural progression. Pre-COVID-19, the company’s website had 60 million monthly visitors, which adds up to a powerful database of loyal customers.
“I’ve always been a firm believer in the digital revolution,” adds Fernandes. “Today, data is king and we realised we had a huge opportunity to extend our own assets and leverage our strong brand in Southeast Asia with our own big and rich data.”
Expanding the AirAsia product offering
To facilitate the company’s digital transformation, the AirAsia Group split its operations into two main divisions – the airline itself and the digital businesses under AirAsia Digital. Under the digital banner, the company now has four key offerings:
airasia.com In October, AirAsia re-launched the airasia.com brand around the central concept of enabling its customers to fly, to stay, to shop and to eat, all from the convenience of one platform. There are now 17 lines of business available on the app including airasia food (meal deliveries), airasia fresh (groceries) and airasia shop (retail), powered by AirAsia’s logistics arm Teleport. In addition, there is airasia Health, which promotes medical tourism, Islam-compliant service IKHLAS, SNAP (flight and hotel bundles) and more.
Teleport AirAsia’s cargo and logistics division has transformed into a major Southeast Asian e-commerce transportation provider. The entity first focused on a cross-border e-commerce delivery service, leveraging AirAsia’s flight networks to enable businesses to conduct cross-border trade anywhere in Southeast Asia within 24-hours. Adapting to post-COVID reality and recognising customers’ preference for home delivery orders, Teleport pivoted once more to concentrate on last-mile deliveries, transporting parcels, restaurant orders and fresh produce from airasia shop, airasia food and airasia fresh. Teleport now has over 5,000 delivery partners, with deliveries available across 70 cities.
BigPay AirAsia’s digital payment service started out life as a simple debit product but now offers money transfers, with remittances available in 10 countries including Malaysia and Singapore. The company says that loans, marketplaces, insurance and wealth products are all in the pipeline, and that BigPay is on track to become Southeast Asia’s first virtual bank. BigPay has received a provisional license for lending and users will soon be able to apply for fast loans at low interest rates. BigPay is also targeting key digital licences in the Philippines and Thailand. The payment service currently has 1.2 million users.
BIG Rewards Already one of Southeast Asia’s largest travel and lifestyle rewards platforms with over 35 million members, BIG Rewards has evolved from an airline loyalty program to a broader lifestyle rewards service, offering points redemption on a range of dining, shopping and entertainment deals. The platform includes BIG Xchange, the first airlines points exchange platform, which allows BIG Members to convert credit card loyalty points from participating banks into BIG Points.
Digital transformation already beginning to pay off
As a result of its accelerated digital transformation, AirAsia says it has seen significant growth in terms of customer base, as well as revenue and other key metrics, for all non-airline business divisions in 2020. According to 2020 third-quarter results, the non-airline subsidiaries grew by 182% and almost all non-airline business divisions are now profitable.
The company says it expects non-airline revenues to contribute up to 50% of total AirAsia Group revenues in the next three to five years and gradually overtake the airline revenues in the longer term.
“As I always say, never waste a crisis,” says Fernandes. “We have lived through many before and this will be no different. We will use the opportunity to extend our assets and leverage our big and rich data and go places we have never been before. For AirAsia, nothing is off the table anymore. We will consider any opportunity that makes commercial and viable sense. We are already selling flights for other airlines, including our competitors on airasia.com and providing last mile deliveries.”
In terms of the future, AirAsia says demand for travel is still huge and that people still want to fly. Noting the pent up demand for travel, the company says it is already seeing with strong demand for our domestic flights in its key markets of Thailand, Indonesia, Philippines, Malaysia and India.
Given that during an economic downturn, low cost airlines are generally more popular, AirAsia believes it is in a strong position to recover faster than many of its competitors. The company points out that 50% of its traffic is domestic short haul, while the majority of its customers travel for leisure rather than business, both advantageous for fast recovery. In addition, many of its key international markets are in COVID-19 Green Zones, areas that are likely to reopen first.
“Air travel is here to stay and it will bounce back,” says Fernandes. “I do believe we have weathered the storm. The worst is over. Our comeback is the best part of the story and I see this as a never ending story. No virus will kill the spirit of AirAsia. We will continue to innovate, adapt, recover and come back stronger.”