AirAsia moves to boost ancillary income

BUDGET airline AirAsia Bhd seeks to increase its ancillary income from services such as in-flight meals, hotel bookings and travel insurance to 13 per cent of its total revenue, from nine per cent currently, to recoup rising fuel costs.

However, no time frame has been specified.

Group chief executive officer Datuk Seri Tony Fernandes said this 13 per cent result is equivalent to RM390 million from the group's annual consolidated revenue of RM3 billion, which includes its Indonesian and Thai operations.

"When we first started, it was one per cent. So 13 per cent pays for a lot of oil," he said after launching AirAsia's latest in-flight menu in Kuala Lumpur yesterday.

He said the airline has to be innovative in dealing with surging oil prices and thus, selling hot meals on board and AirAsia merchandises online are some ways to increase its income.

"A much easier solution is to increase our fuel surcharge, and the harder way is to market yourself out of this," he added.

AirAsia had repeatedly said that it will not raise its fuel surcharge despite the current high oil prices.

Fernandes said contribution per passenger for food sold on board has increased to RM3.12 from RM1 two years ago and he expects it to grow further.

"So what is a cost item for many airlines is a revenue item for us," he said, adding that AirAsia is mulling the possibility of operating its own kitchen.

"Other airlines have even asked us if they can have these food. This will bring in third-party revenue for AirAsia," he said.

Its hot meal items include roti jala, roti canai, chicken rice, Indonesian fried rice with satay, and nasi lemak, which are supplied by local entrepreneurs such as Sri Melur and 1901.

Fernandes believes that offering a varied selection of hot meals will draw a new audience to travel with AirAsia, which inevitably increases its sales.

"This is part of our five-star response. We have seen our audience change as well and more corporations are flying with us," he said.

Passengers can pre-book their meals online when purchasing flight tickets and enjoy savings of up to 10 per cent.