Annual Report 2019

Management Discussion & Analysis (CONT’D) OPERATING ENVIRONMENT As a result of various uncertainties including the US-China trade war, global economic growth contracted from 3.6% in 2018 to an estimated 2.9% in 2019. The region was not spared, with the gross domestic product (GDP) of most Asian countries decreasing year-on-year. Malaysia’s GDP came in at 4.3%, the lowest since the 2008/9 financial crisis. With the aid of government funding, competitor airlines in Malaysia strove to maintain passenger loads by lowering their prices, offering irrational fares. Added to this, the Malaysian Ringgit (RM) weakened against the US Dollar (USD), resulting in significant foreign exchange losses for our Malaysian operation. In Thailand, conversely, the Thai Baht (THB) strengthened against the USD to become the strongest currency in the region. This increased the cost of inbound travel, leading to lower numbers. Meanwhile, outbound travel from China was affected by the country’s soft economic environment, significantly impacting tourism across all our companies with Air Operator Certificates (AOCs). The internet economy, however, continues to grow rapidly; and has been estimated by a joint Google and Temasek study to be worth in excess of USD240 billion by 2025 in ASEAN, USD40 billion more than what was projected in 2018. E-commerce itself is anticipated to hit USD102 billion – comprising more than 40% of the region’s internet economy. OUR GAME PLAN While we adhere to our low-cost model to be able to grow our network and offer an ever-increasing range of exciting destinations for our guests, we are not able to fully cushion ourselves from the vagaries of the operating environment. Natural disasters, viral outbreaks, economic downturns, geopolitical upheavals – all of these can, and do, impact travel. As a means to buffer against factors beyond our control, as well as to leverage the wealth of data we possessed, we embarked on a journey to digitalise our entire business model for optimum operational and cost efficiencies. The plan is to use digital technologies for three main purposes: In terms of improving our airline operations, we have been able to create optimal efficiencies in scheduling, rostering and fuel consumption. Leveraging predictive analysis, we are also enhancing our asset maintenance and better managing our ground and flight operations. Meanwhile, by replacing manual work with digital systems, we are able to release Allstars from the tedium of repetitive tasks that carry a high potential of human error to focus on more satisfying, value-add work. As for our guests, the introduction of more digital platforms serves to greatly enhance their journey with AirAsia. From our mobile app to our artificial intelligence (AI)-powered Allstar Virtual Assistant (AVA) and FACES, we are ensuring AirAsia is the most convenient and hassle-free airline to fly. AVA can handle more than 25,000 chats at a go, greatly enhancing the speed with which we are able to respond to questions and requests. FACES, meanwhile, uses guests’ biometric facial details instead of documents as the last security check before boarding flights. In order to enhance our revenue, the idea is to analyse our data to better understand our guests, and offer them what they want at every touch point of their journey with us. With AI and machine learning (ML), we are able to anticipate guests’ needs thereby increase our online bookings and ancillary revenue. More than that, we have used our rich data to form adjacency businesses that are now under RedBeat Ventures (RBV), including re-positioning AirAsia.com as a fast-growing travel and lifestyle portal. To improve the operations of the airline To provide a seamless experience to guests from the moment they book till they return To increase revenue via higher conversion rates with more personalised communication, and to create new revenue streams Global economic growth 2.9% in 2019 82 MORE THAN JUST AN AIRLINE >