AirAsia's Chief Responds Quickly and With Compassion

Hong Kong: When an AirAsia plane carrying 162 people disappeared from the skies near Indonesia on Sunday, the Malaysian company's chief executive, Tony Fernandes, took to Twitter. "This is my worst nightmare," he wrote.

Within hours, Fernandes was in Surabaya, the missing plane's point of departure, speaking with families of the passengers and crew. On Tuesday evening, after the crash site had been found, he met with President Joko Widodo of Indonesia, who had arrived in Surabaya to visit the grieving families.

By Wednesday afternoon, Fernandes was in Pangkalan Bun, the coastal Indonesian town near where the wreckage of Flight 8501 was found and the center of recovery efforts. In delicate language, he spoke on Twitter about the "soul-destroying" experience of seeing the bodies and airplane parts that had been pulled from the water.

His approach to the crisis mirrors the hands-on philosophy that has helped him to turn what was, 13 years ago, a state-owned airline with millions of dollars in debt into Asia's largest budget carrier. As he built up the brand, Fernandes became synonymous with it - the public face and promoter in chief of the business - sometimes working alongside cabin staff on flights or at reservation desks and even as a bag handler.

The way Fernandes and AirAsia have reacted to the third fatal incident in 2014 involving a Malaysian airline is in sharp contrast to that of Malaysia Airlines - the nation's heavily indebted, state-owned flag carrier, which operated the two other planes involved in fatal incidents.

Officials there were criticized for the confusion and miscommunication that prevailed for days after the disappearance of Malaysia Airlines Flight 370, which was carrying 239 people when it lost contact with air traffic control after midnight on March 8 and is now believed by investigators to have crashed into the Indian Ocean west of Australia. Another plane, Malaysia Airlines Flight 17, was shot down over Ukraine in July.

So far, analysts are impressed with how AirAsia and Fernandes have handled the crisis, which involved the company's 49-percent-owned Indonesian affiliate.

"I don't think this will break them," said Zulkifli Hamzah, head of research at MIDF Amanah Investment Bank Berhad in Malaysia. "I think the main thing right now is to protect their brand, and I think that will be instrumental in the future of their company."

Nonetheless, the biggest challenge facing AirAsia today is a new one for both the company and for Fernandes. The demise of Flight 8501 on Sunday was the airline's first major accident, and is adding to concerns about safety in a region that has experienced a boom in the number of low-cost carriers flying to destinations across Asia.

Indonesia has not fared well in international safety rankings. In 2007, the U.S. Federal Aviation Administration gave the country a Category 2 ranking, which means Indonesia's regulations do not comply with international safety standards set by the International Civil Aviation Organization.

AirAsia and its affiliates have a solid safety record, industry experts say. The company relies on a fleet of relatively newer planes composed of Airbus A320s - a model tried and tested over the years by scores of airlines around the world.

"They haven't had any safety problems," Greg Waldron, the Asia managing editor for the aviation publication Flightglobal, said of the company.

But, he added, there was a "warning sign" in a 2013 near collision between an Indonesia AirAsia jet taxiing on a runway in Yogyakarta and a Batik Air jet that was landing. And on Tuesday a plane operated by AirAsia Zest, an affiliate of AirAsia Philippines, overshot the runway at an airport in central Philippines. No one was hurt.

Fernandes, 50, came to the airline industry as an outsider. He was raised in the coastal city of Malacca, the son of a doctor from Goa, India, and a mother from Malacca who built a business across Malaysia selling Tupperware. He was sent to boarding school in Britain at age 12, and retains a polished British accent.

An accountant by training, he spent the early part of his career in the music publishing business and rose to become Warner Music's top regional executive in Southeast Asia. But the music business was in turmoil because of widespread counterfeiting in Asia and the rise of online file sharing globally. In 2001, after the ill-fated merger of AOL and Time Warner, Fernandes decided to try something different.

"I got tired of piracy," he said at the World Islamic Economic Forum in London in 2013. He was inspired to bring the low-cost airline model to Asia by Stelios Haji-Ioannou, the founder of the British budget carrier easyJet.

He saw his opportunity with AirAsia, a struggling subsidiary of a Malaysian state-owned conglomerate. He agreed to acquire the airline for the token sum of 1 Malaysian ringgit, or 29 cents at today's exchange rates, and signed the deal on Sept. 8, 2001, just three days before the 9/11 terrorist attacks.

For the first few years, he focused on turning AirAsia into a budget carrier within Malaysia by building local allies. Fernandes worked with the former head of Malaysia's Road Transport Department, Datuk Pahamin A Rajab, and brought in former Warner Music colleagues, Asian airline veterans and a top executive poached from Ryanair, the Irish budget carrier. Fernandes also used his position as an industry outsider to take on rivals and shake things up.

The company has been relentless in cutting its cost structure to among the lowest of budget airlines globally, selling cheap flights but lifting revenue by charging customers fees on options like choosing seats or checking in at the airport counter (online check-in remains free). Competition is increasing as more budget operators pile in, but sales rose 2.4 percent in the first nine months of the year to $1.1 billion, and the company continues to make a healthy profit. It reported it flew 43 million passengers in 2013.

Early on, the company began to look overseas for partners to help it expand. Business in Asia is often segregated by national borders, with state-run companies and wealthy tycoons controlling large sectors of many economies. This was particularly true in the airline industry at the time. To succeed, AirAsia expanded by forming joint ventures. It began in 2004 with a partnership in Thailand with Shin Corp., which was controlled by the family of Thaksin Shinawatra, the prime minister of Thailand at the time.

Over the last decade, AirAsia has expanded further. In addition to Malaysia, Thailand and Indonesia, it also has affiliates in the Philippines and more recently, India. A sister company, AirAsia X, operates low-cost, long-haul flights. But growth hasn't always been smooth for AirAsia. In June 2013, AirAsia decided to leave the Japanese market after little more than a year, following repeated disagreements over business strategy with its joint venture partner, All Nippon Airways.

Its entry to the huge, developing India market was also difficult. The venture was announced in February 2013 but AirAsia didn't begin flights until June 2014 after facing fierce opposition from local competitors.

Likely to be facing his toughest challenge now, Fernandes will be squarely - and very visibly - in charge of how AirAsia responds to the investigation.

"I am the leader of this company, and I have to take responsibility. That is why I am here," he told reporters at the Surabaya airport Tuesday evening after meeting relatives of the passengers and crew of the downed plane. He added: "Even though we don't know what's wrong, the passengers were on my aircraft, and I have to take responsibility for that."