Following is the transcript of CNBC's exclusive interview with Tony Fernandes, CEO of AirAsia at the Credit Suisse Asian Investment Conference in Hong Kong. The interview was broadcast on Squawk Box on 20 March 2018.
All references must be sourced to a "CNBC Interview'.
Interviewed by CNBC's Bernie Lo and Akiko Fujita.
Akiko Fujita (AF): Let's start on the latest news. AirAsia moving into Myanmar. This is a, you know, relatively untapped market right? When you think about, not just low cost carriers, but international carriers in general.
Tony Fernandes: I mean I think you know I had this great ASEAN kind of master plan, if you look at the big populations - Vietnam and Myanmar would be the last two. That would mean we cover all the major population countries that would only leave Brunei, Singapore, Laos out of the equation. So it's initial discussions, and I also think we invest for the long term, it's not going to be a big airline for us if we go in there but the future could be quite positive for us. And it creates a better network, which is all I'm trying to do here.
AF: What kind of time line are you looking at?
Tony Fernandes: No real timeline. We've started some discussions. This hasn't gone to board or anything like that. So, I was just talking to the press about our aspirations but we have started some discussions, some airlines, let's see where it goes.
Bernie Lo (BL): Tony, would this be accompanied by a streamlining or changing corporate structure? Because right now you've got individual units of Malaysia, Thailand, Indonesia, et cetera.
Tony Fernandes: So you know you've been following this for a while, I mean we've been talking this for a while, but I think the light is finally coming out at end of the tunnel. One of the reasons I think our share price has always been held back a little bit is that we have a complicated structure. I've done a lot of, we've done a lot in terms of cleaning it up. But now with the formation of AirAsia group I've really got the currency to talk to various leaders to try and create a 100 percent owned ASEAN airline. So the AirAsia group could own hundred percent of Malaysia, could start to own 100 percent of Thailand. So the Thai shareholders could trade their shared shares up to AirAsia Group. Lots of work to do. Lots of challenges. But I do think there is light at the end of the tunnel which will give a very strong structure for us to grow.
BL: Your staying power is nothing short of amazing in many ways because since that first plane, since the first crew, cockpit and cabin crews, I mean the airline industry has just completely blossomed. I mean it has exploded. Every country has got LCCs or variations of budget carriers. Surely the competitive environment is getting tighter and tighter as the years go by?
Tony Fernandes: Actually in the Credit Suisse presentation I've been saying that it's the best competitive environment I've been in. I came in running around with a T-shirt and cap, I put a jacket on for you guys...
BL: Yeah, what happened to that?
AF: The big red cap.
Tony Fernandes: And, well CNBC, well you've got the red dress. We're ok. Didn't need the red cap. And everyone thought this was easy. So loads, loads of capital piled in, on top of that government airlines were hugely subsidized. So it was a very wasteful era similar to Europe maybe 30, 40 years ago when British Airways had a low cost carrier, Air France did and everyone.
But now I think we've got sensible competition. In every country, there's one or two airlines but everyone wants to make money. And that means we have a good space. So we've gone through that huge amount of 'I want to own an airline'. So now, there's sensible operators, professional operators, government owned airlines are professionally run, and so we've got a very good competitive marketplace and that's enabling us to grow at about 30 planes a year.
AF: Let's talk about some of your new ventures as you recently announced a payments platform? That you're pushing along with a potential coin offering - ICO? How does this all connect to the broader strategy?
Tony Fernandes: So we have now three verticals. We have the airline business, we have a very strong ancillary income business, and then we have a third pillar where I utilize the assets of the airline. So I pile as many passengers into the airline growth. And we this year will carry 89 million people in the group. That 89 million people generates us a good margin in making profits. I then sell my ancillary income services to those 89 million people and we make a fantastic margin from ancillary services. But then I have all these assets - old assets, my academy, my ground handling business - which could be used by others. So I create joint ventures, let it be managed by someone else. And what was a loss making, a cost to us, becomes a profit center. And then at some point we exit that business. But the biggest asset I have is data. So while Uber and Grab and all these digital companies are building a platform they have to go and acquire customers which is very expensive. We have those customers and we have that ecosystem.
AF: And so you have the data, but you're talking about potentially offering loans, insurance services as well?
Tony Fernandes: Correct, I mean eventually this will be spun off into something else. But in the first instance we're going to remove cash off the plane. So you'll buy food, you'll trade with us using our payment system. And then we'll also bring in our points. Our points is really a digital currency. And that's where the ICO comes up. And as it matures - our passengers use foreign exchange services a lot, they remit money, many of our passengers are migrant workers - so we provide them that ecosystem. And finally we can give small loans as well. But by then, we would have partnered someone else in the business. It would probably be spun off.
BL: You say by then, but I'm kind of wondering at the outset why take on that kind of risk because that's not vertical, that's lateral.
Tony Fernandes: At that point it would be spun off into a different business and there would be a strategic partner there et cetera et cetera. For us in the airline business, it's getting rid of cash, it's getting rid of, it's making money from FX. There's a huge amount for us to be made on FX.
AF: Ok, we'll have to leave it there. Tony Fernandes, always great to have you on, thank you.