Launching AirAsia
It was through Datuk Pahamin A. Rejab, the former secretary-general of the Malaysian Domestic Trade and Consumer Affairs Ministry that Fernandes came to meet with then Prime Minister, Tun Dr. Mahathir Mohamad in October 2001.
Instead of starting from scratch, Mahathir advised Fernandes to buy an existing airline instead. AirAsia, the heavily-indebted subsidiary of the Malaysian government-owned conglomerate, DRB-Hicom, was quickly losing money. Fernandes mortgaged his home and used his personal savings to acquire the company, comprising two ageing Boeing 737-300 jets (9M-AAA and 9M-AAB) and US$11 million (RM40 million) worth of debts, for one ringgit (about 26 US cents), and transformed it into an industry player.
Coming just after the 11 September attacks of 2001, everyone thought that Fernandes had gone "crazy", predicting that the company would fail miserably. Yet, just one year after his takeover, AirAsia had broken even and cleared all its debts. Its initial public offering (IPO) in November 2004 was oversubscribed by 130 per cent.
Fernandes says his timing was in fact perfect: after 11 September 2001, aircraft leasing costs fell 40%. Also, airline lay-offs meant experienced staff were readily available. He believed Malaysian travellers would embrace a cut-rate air service that would save them time and money, especially in a tight economy. That was why he copied one of the world's most successful no-frills carriers, Ireland's Ryanair (which is in turn modelled after Southwest Airlines in the United States). Fernandes estimates about 50 per cent of the travellers on Asia’s budget airlines are first-time flyers. Before AirAsia, he estimated that only six per cent of Malaysians had ever travelled in a plane.
Read more about this topic: Tony Fernandes