AirAsia Group Berhad - Annual Report 2017

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MANAGEMENT DISCUSSION & ANALYSIS
In October, we entered into a 50%
partnership for our ground handling
business (Ground Team Red Holdings
Sdn Bhd) with Singapore-based SATS,
a gateway services and food solutions
provider. In return, we acquired 40%
effective stake in SATS Ground Services
Singapore Pte Ltd (SGSS), which serves
Changi Airport’s new Terminal 4, and
retained 51% of Ground Team Red Sdn
Bhd, our Malaysian ground handling
operations, for SGD119.3 million in cash,
which was received in January 2018. Our
joint venture, SATS Ground Team Red
Holdings Sdn Bhd, will take over ground
handling of all AirAsia stations in Malaysia
and Singapore. With SATS as our partner,
we expect to drive down our unit aircraft
turnaround costs by approximately 16% in
the first year of operations.
Additionally, during the year, the team
at our leasing arm Asia Aviation Capital
Limited (AACL) worked around the clock
to finalise a deal with BBAM Limited
Partnership (BBAM) for selected aircraft
leasing portfolio. On 1 March 2018, we
were able to announce an agreement
reached worth USD1.18 billion. For us,
this deal validates the huge investments
we made over the years in aircraft
acquisitions, and is a clear indication of the
strategic thought behind all our actions. As
a result of various transactions contained
within the agreement, we will receive
USD902 million cash in the later part of
2018, while eliminating residual risks and
reducing our debt significantly.
In the midst of these monetisation deals,
we also acquired a 50% stake in travel
start-up Touristly, which offers attractive
promotions on tours, attractions, activities,
spas and restaurants around the region.
Touristly will take over and manage
and the online version
of our travel magazine,
to present a comprehensive site where
holiday-makers can discover interesting
places to visit, exciting things to do while
they are there, and even book their
activities. It represents a new stream of
revenue under an increasingly more digital
AirAsia.
DIGITALISATION
Since setting up our Digital and Data team
in 2016, the process of digitalising AirAsia
has been gaining momentum, and has
accumulated a number of snapshot wins.
Our mobile conversion rate has increased
70% from 3.39% in 2016 to 5.75%. Since
digitalising our ancillary business in
September, the take-up rate of products
has improved by 6.6% with an estimated
revenue generation of USD1.7 million
per month. From the recently launched
simplified payment enhancement, our
booking conversion has increased from
7.46% to 8.57%, with an estimated
incremental revenue of USD30 million a
month.
These, however, represent just the tip of
massive changes that are taking place
at deeper levels, where entire systems
and processes are being digitalised so
that every bit of information, or data,
concerning AirAsia will be captured on
one platform to guide all our actions and
decisions. Our ultimate objective is to
create optimum operational efficiencies
while enhancing the customer experience
– by ‘customer’ here we do not mean
only our guests, but also our employees.
Although our journey has begun in
earnest, it will take time to complete given
the extent of what we hope to achieve, with
our team targeting the magic year, 2020.
“SINCE SETTING UP OUR DIGITAL AND DATA
TEAM IN 2016, THE PROCESS OF DIGITALISING
AIRASIA HAS BEEN GAINING MOMENTUM,
AND HAS ACCUMULATED A NUMBER OF
SNAPSHOT WINS.”
[ ] AirAsia Group Berhad PERSPECTIVE 96