May/June 2005 INFLIGHT PROFILE AirAsia MUSICK raises the volume at AirAsia By Hui Min Neo AirAsia, based in Malaysia, is Asia s first low-cost carrier, the brainchild of the dynamic entrepreneur Tony Fernandes. In just three years it has had a dramatic impact on the region s aviation sector, one that is set to grow with the advent of Chinese flights. Onboard revenues, especially F&B, are a big and growing slice of the commercial pie as Bruce Musick, CEO of Air Asia s commercial arm CrunchTime Culinary Services, tells Hui Min Neo. At the Bangkok offices of low-cost carrier AirAsia, Bruce Musick never runs out of food. As CEO of AirAsia Inflight Services, he is surrounded by food from the inflight menus. But, more importantly, his Thai colleagues are constantly offering him things to eat. In Thailand people snack throughout the office hours, he tells The Moodie Report. The staff at our Thai office are always coming to me with different kinds of food: Do you want this? Do you want to try that? This national preoccupation with snacking has led Musick and his team to develop a popular food & beverage menu onboard Thai AirAsia flights called Snack Attack. The items offered in the menu are all easy-toeat, no-mess meals. There is a desire to consume. Great importance is placed on food in the culture here. Even people who aren t hungry buy, because snacking is part of the culture, says Musick. The menu varies from flight to flight, but there are generally sandwiches with fillings that pique the local tastebuds such as tom yum tuna, sesame chicken and spicy cabbage slaw, each going for about THB60 (US$1.50). There are also SnackPacks costing THB100 (US$2.50), with each pack containing a chocolate, a savoury and a beverage. Critics were sceptical that passengers flying low-cost carriers would pay extra to consume onboard rather than eating or drinking only at their destinations, says Musick. The Moodie Report 121
INFLIGHT PROFILE AirAsia May/June 2005 Chinese travellers prove to be demanding inflight customers It is early days in AirAsia s dealings with Chinese customers. But Bruce Musick already has this observation to make: They almost demand to buy. If the trolley is going too fast, they will make you stop. They want to know what is this and what is that. The low-cost carrier started to fly to Macau from Kuala Lumpur December last year, but its real contact with mainland China is just beginning. Approval has been obtained for flights to Chinese cities, including Kunming and Xiamen, by May. Musick s current preoccupation is not how to get the Chinese to consume, but how to get enough items onto the planes. They are a different group of customers, says Musick. They travel in groups. If you have three or four rows seated together, and one person buys something, all will buy. It s a generalisation of course, but it s true. If one buys a hat or a T-shirt, it drives a lot of interest among the others. In some instances the crew have run out of stock. When we start flying from China, it s going to be quite a task to figure out how to manage it all how to store the merchandise on a 737, he says. To get around the problem of air stewardesses who do not speak Mandarin, AirAsia has produced a Chinese catalogue and menu. These are not kept in individual seat pockets, but stored at the back of the cabin. They are then provided to any Chinese who may be onboard the plane. They are big consumers, and we will have to track them very carefully, says Musick, adding that the catalogue for Chinese flights is likely to be very different. Cigarettes and liquor, not available on Malaysian flights due to religious sensitivities, will be an important part of the Chinese inflight service. As long as we re time efficient and process efficient, I m very bullish about our inflight offer on Chinese routes, he concludes. But his reply to the doubters was simple: You don t understand. It isn t need; the issue is desire. It s not a practical issue, it s food and culture. He may be right. Led by food and beverages but with proprietary merchandising close behind, inflight sales for AirAsia s Thai operations have been posting double-digit growth monthon-month for five of the past six months. Thailand is our number one market. Sales per flight have been +25% higher than on Malaysian and Indonesian flights, says Musick. The carrier s Malaysia operations have posted an average +40% growth in sales this year over last year. But despite these monthon-month improvements, says Musick, The first six months haven t met our sales objective. He declines to give exact figures but adds: We went into this without a trial programme. It took us a few months to figure it out. Now we are quite clear about what we want to do. Without a precedent in the region, Musick and his team had to develop their own inflight programme. After all, AirAsia was southeast Asia s first low-cost carrier when it started three years ago. Based in Malaysia, it is now listed on the Kuala Lumpur Stock Exchange. The company has also started operations in Thailand and Indonesia. It began its foray into Greater China when the first flight took off from Kuala Lumpur for Macau last December. AirAsia CEO Tony Fernandes says the carrier has secured approval from the Chinese authorities to fly from Bangkok to five cities in China by early May. The destinations include Kunming and Xiamen. He adds that the carrier is also exploring flights from East Malaysia s Kota Kinabalu to the Pearl River Delta in southern China. The rapidly growing network means that AirAsia has had to lease more and more planes to cope with demand. And as the cost of leasing planes rises, Fernandes says that the company is looking at new income sources, including inflight sales, onboard advertising, travel insurance and car rental tie-ins in quite a big way. Novel experience The low-cost carrier markets in North America and Europe are well developed, but Musick notes that there are distinctive differences between AirAsia s customers and those of its European counterparts. So many of us fly so regularly that taking a flight is now like taking a taxi, says Musick, who has toured 13 European 122 The Moodie Report
May/June 2005 INFLIGHT PROFILE AirAsia low-cost carriers, including Germanwings, the UK s bmibaby, and Ireland s Ryanair. But with our customers there s still room to find excitement in flying. In Thailand, when we first started our proprietary merchandise, we found that customers were buying pilot mini bears, plane models and so on. Merchandise associated with the airline proved an instant hit. Why were they buying all this stuff? Many of our customers were new to flying, not regular flyers. It was something quite exciting for them. They wanted to take the flying experience back with them, he says. The novelty of the flying experience was also a catalyst for them to consume food and beverages onboard. People Customers on our flights are interested in the trolleys coming down the aisles, says Musick. The menu varies from flight to flight, but there are sandwiches with fillings that pique the local tastebuds and SnackPacks costing THB100 (US$2.50), with each pack containing a chocolate, a savoury and a beverage think it s exciting, so they are in a condition in which they feel happy spending their money, says Musick. Musick recalls that when he was first planning the F&B menu, sceptics told him that with prices higher than Proportion of total sales by category across AirAsia s network 40% 15% F&B Proprietary merchandise Duty free goods 45% those in downtown Bangkok or Kuala Lumpur it would be hard to push the food and drinks. But now, Musick notes, We do not encounter price resistance. Nasi lemak (rice in coconut milk, often served with egg and fried fish) may be MYR15 (US$0.38) at the market stall, but you are not in a market. Having a meal on a plane is an experience. We have to set our prices against our competitor the airport. If the cost of our items versus the airports is reasonable, we have to get that message to our people. It has to be measured against where else the passenger would consume during this period. A typical flight departs from KLIA at between 7 and 8.30 a.m. That means that customers would be waking up at between 4 and 5 a.m. They would not have breakfast at home, and there would be no time to stop on the way. Typically they would not arrive at their destination until about 11.30 to 12 noon. So they will have to eat something during that period. The airport, then, is our competitor, says Musick. To let consumers know that food onboard is cheaper than that sold at the airport, AirAsia puts up posters at the check-in counters. But even when the customer is booking his flight over the Internet, an e-mail confirmation details food and beverages available on the flight. We re looking at pre-order at the airport, but this is limited by what the airports will allow us to do. The Moodie Report 123
INFLIGHT PROFILE AirAsia May/June 2005 Short of time Beyond the excitement of boarding a flight for the first time, Musick points out that the curiosity factor plays a very important part in the company s inflight sales. People are far more curious than in Europe, says Musick. Customers on our flights are interested in the trolleys coming down the aisles. on our experience of the relationship between crew and customers. Speed is important for us. My enemies are time and space. We have limited amounts of both, so I can t justify 200 items, he said. A supermarket, for example, could stock a row of different detergents. But a 7 11 convenience store would have perhaps only one brand on offer, he says. That works for his team, but the typical duration of the short-haul flights doesn t help sales. Generally, the longer the flight, the more we sell. The more time the cabin crew has to sell, the more they are likely to sell. It s down to the pace at which they push the trolley down the aisle. If it s moving too fast, it s almost as if they are bothering the flight, interrupting it. The more time people have to ponder, the more likelihood there is of them buying, says Musick. To give individual customers enough time to consider the items on sale, Musick and his team also decided that the menu has to be more selective than it was at first. One of the lessons learnt is that the offerings have to be streamlined. In Thailand we started with 25 beverages. This was slowing sales. It was taking too long for the crew to explain what we were selling. So we tailored a narrower menu, he said. He is now working on cutting the duty free items (handled by concessionaire Inflight Sales Group) on offer from 54 to about 30. Team effort: Without a precedent in the region, Musick and his team had to develop their own inflight programme. AirAsia was southeast Asia s first low-cost carrier If you fly Singapore to London you can have 200 products, but on a two-hour flight to Bangkok there is no time for that luxury. I know certain people in the industry who disagree, but I have to rely There are no absolute must-haves. There s nothing that would stay on the trolley unless it s earned its place. If it doesn t sell, it doesn t move, and it doesn t stay Lean catalogue To critics who say that there are certain favourites which have to be in every inflight catalogue, he says: We have to be disciplined about it. I have a little cart, and my view is that everything on that trolley has to sell. There are no absolute must-haves. There s nothing that would stay on the trolley unless it s earned its place. If it doesn t sell, it doesn t move, and it doesn t stay. As he cuts back on offers in the duty free catalogue, Musick also intends to bring in more novelty things. People want products synonymous with the market they came from, so for AirAsia s Thailand flights we may add products like Thai spa treatment soaps more local, gift products. The curiosity factor is important they stimulate impulse purchasing, he says. And with the carrier set to begin its business in China soon, inflight revenues are set to grow sharply. Inflight sales will be different in China compared to Thailand or Malaysia, and more adjustments will have to be made. Liquor and cigarettes, which are not offered on the Malaysian menu due to religious sensitivities, are likely to be an important part of the Chinese duty free catalogue. What is certain, however, is that the catalogue will be lean. We ve tried so many things; we ve tried a wide range of merchandising. It s getting rather complex, and it s set to get more complex with potentially major Chinese consumers, while storage remains limited on a small 737. We ve tried to do everything, maybe too much. We will try to bring it back to focused products less diversity, but more focus on things that sell. 124 The Moodie Report
People buy from people they like As of May 2 nd 2005 A&E Petersen changes name to Valora Trade Travel Retail A natural new identity as A&E Petersen has been part of the Valora Group since 2000. Valora Trade is one of Europe s leading distributors of FMCG s representing in total 335 brands in 14 countries. www.valoratrade.dk