Tuesday, October 16, 2018

Airasia: The Maybank analyst may have gotten it wrong

The Maybank analyst in putting his opinion after a change in board and management structure in Airasia India may have gotten his analysis wrong. India despite opening up its doors for foreign participation is still a nationalist country. There are already rumors that Tony Fernandes is wielding management power over Airasia India and that does not bode well with the community in India.

The thing that Tony or rather the Malaysian team can do is to take its hands off the management control from within Airasia India. Just look at Airasia Thailand's board, it does not need to have board and management control.

I think the poor opinion over Airasia refocusing into 2 markets is wrong. What Airasia has developed is a franchise, and in a franchise, what is really needed is the development of its business culture and systems. Airasia as a company - believe it or not is the system, some initiatives as a group and then proliferate them towards their business units. Purchasing of planes, booking systems are for example centralised. Ground management are better off left it to the ground managers anyway.

This is what Airasia has done well and many investors do not see that this is highly valuable. One can put in the system and then deploy them to the subsidiaries. Many successful multinational companies have successfully managed their operations overseas these way and that is why several of these US companies are hugely successful as compared to Japanese and Chinese companies i.e. overly dependent on their people rather than local people. Seeing Tony and his team, he is very good at having hands off when things can be run without his local team.

As it is Airasia India is facing criticism over control from Malaysia and that is the best way to fend off that rumor. India being India will find new stories to attack and that is India.

If one tracks Airasia well, the demand on planes will also depend on the performance and need of each country. As it is I do not see there is less planes being allocated to Thailand despite Airasia Group does not have management control over that country. That is the way the franchise is being managed. Another thing which I am amazed is the appointment of a Thai national for its Group CFO position. Very rarely in Malaysian companies, we see that.

Hence, I do not see India is being forgone by Airasia but more of letting the locals manage the show.

As it is, as I have always said, Airasia is a different company. It is not just a Malaysian company but also a regional company. I just wish more Malaysian companies especially the ones that have regional operations to have such structure. The stock market needs more of this than the typical old structure. Without this, our country capital market will not be able to grow.

3 comments:

reyes430 said...

hi felicity,

would like to ask about airasia, i see on their corporate structure there, india, indonesia, philiphines or even thailand, they do not hold more than 50% of stake, so do they consolidate these associates into airasia group berhad? How about AAX since they have stake as well.

Thank you

felicity said...

Hi Reyes, I think AAX is taken as an investment. They own below 20%.

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