With competition, the sky’s the limit
Again, he appeared in his signature red hat that he wears to promote his company, and the company logo was splashed across all of his photos. He became instantly famous in Korea. “If we offer ‘honey butter chips’ to our clients,” he said, “we’ll serve them in a package because we are a simple and kind carrier.” He has an amazing sense of humor.
Tony Fernandes, 50, AirAsia’s founder and the group CEO, runs Asia’s largest low-cost carrier. After 14 years as a financial specialist in the recording industry, Fernandes brought no preconceived notions to the airline business. He began with two airplanes and now has 150. AirAsia uses only one aircraft model to reduce on maintenance time and expenses.
Budget airlines’ share of the international aviation market is 28 percent, he said, while in Korea it is just 10 percent. The essence of the problem is a lack of competition. Korean Air may have become a target of public criticism, but it hasn’t lost its customers. If the airline’s image declines and there are other options, more people might choose not to use Korean Air. But the alternatives are extremely limited here. If passengers want to travel in the high winter season and no other airline operates on their vacation dates, not many would give up traveling altogether because they don’t like Korean Air. And accumulated miles are more effective at retaining customers than boycotts are at prying them away.
The KAL flight’s delay - caused by how the nuts were served in first class - has been addressed as an abuse of power. But the fundamental solution is to allow competition by lifting restrictions on entering the industry. Also, the misunderstanding that lifting regulations would only benefit the companies and that regulations are necessary should be changed.
Fernandes’ success was made possible by Malaysia’s decision to allow a 30-something challenger with no experience in aviation to take over a state-run airline. He transformed the debt-ridden company and shook up the market in Northeast Asia. A new competitor can bring drastic changes. A domestic market enclosed within borders could rot without stimulation. Swedish furniture giant Ikea opened a store in Korea, and Korean furniture makers complained. But Ikea will attract many customers, and the furniture industry will change.
When Fernandes founded the budget airline, its slogan was “Now everyone can fly.” He was right. Everyone should be allowed to compete. Only then will existing companies shape up. They would feel threatened and fear failure. When they search for the best answers on how to survive, they will have to listen to entry-level employees as well.
The author is a deputy business news editor of the JoongAng Ilbo.
JoongAng Ilbo, Dec. 19, Page 34
by KIM YOUNG-HOON