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AirAsia opens RedBeat digital arm to investors ahead of possible IPO

Private equity shows interest as carrier takes on Expedia and Booking.com

AirAsia deputy group CEO Aireen Omar said the airline is ready to take on industry giants Expedia and Booking.com with its own online travel business.

KUALA LUMPUR -- Budget airline pioneer AirAsia will open its digital business arm RedBeat Ventures to outside investors within the year ahead of a possible IPO, as it strives to become the "Amazon of travel."

"We will be going to investors, most probably in the next one year," Aireen Omar, AirAsia's deputy group CEO, told Nikkei Asian Review in an interview. "We will do a few rounds of financing, then would decide on an IPO or any other way of monetizing the digital asset."

While an IPO was still several years away, Aireen said RedBeat was always on the lookout for merger and acquisition opportunities within Asia's e-commerce sector, adding that the platform would open for financing rounds similar to any other tech startup. "There are some features to be added and enhanced," she said.

Aireen said RedBeat would soon add its online travel business travel  -- which will sell seats on rival carriers -- to its current portfolio of digital lifestyle brands that already includes air miles program BIGLIFE, card and electronic payments company BigPay, and cargo and logistics platform Teleport.

Travel incumbents such as Booking.com and Expedia.com have questioned whether AirAsia has the resources and expertise to compete. Expedia, Booking.com and China's Ctrip account for more than 90% of global online travel bookings.

AirAsia's plans to expand in online travel comes as its airline profits tumble in the face of rising fuel costs and intensifying competition. Nevertheless, AirAsia's CEO and biggest shareholder, Tony Fernandes, has said he intends to spend up to 100 million ringgit ($22.5 million) a year in order to transform AirAsia into a technology-led company.

AirAsia CEO Tony Fernandes. (Photo by Tsuyoshi Tamehiro)

AirAsia first entered the flight and hotel package business through a 2015 joint venture with the Expedia Group, before selling its 25% stake back to Expedia for $60 million last August as part of its push to develop its own lifestyle brands.

AirAsia also owns a 50% share in travel tours and attractions provider Vidi, as well as a 75% stake in online travel planner Touristly Travel.

With some of Asia's biggest private equity companies already expressing interest in RedBeat, including several sovereign wealth funds, Aireen said the company had so far asked them to wait.

"Sometimes we are approached by some parties, but we have to see their strength," Aireen said. "For us, the partner must complement what we have and vice versa."

Rejecting the skepticism surrounding AirAsia's e-commerce ambitions, Aireen said the company was used to being underestimated by its competitors, adding that they lacked the immense consumer data possessed by AirAsia's booking engine, which currently draws around 50 million unique visitors a month.

"Any startup, or even the existing players, would love the data that we have on our consumers and their behavior," Aireen said.

After AirAsia reported improved earnings for the financial year ended Dec 31, 2018, with a net profit of $475.27 million on $2.56 billion in revenue, online travel giants Expedia and Booking.com warned that AirAsia's plans to compete as a travel and lifestyle company risked destabilizing its core aviation business.

"AirAsia has the ability to benefit from the cross- and upselling services of its parent company," said Chetan Kapoor, a research analyst at travel research company Phocuswright, referring to Tune Group, the privately owned Malaysian leisure conglomerate that has investments in hotels, insurance and loyalty programs, and could help AirAsia develop online products different from those of other online travel agents.

As competition in the online travel industry increases, Kapoor said other tech startups, including ride-hailers Grab, Didi Chuxing and Uber, were also eyeing areas of the travel value chain. In April, Singapore-based Grab announced a $200 million tie-up with Booking.com and its Agoda unit.

Kapoor said: "Having maximum control over the product and direct access to consumers is necessary to succeed in online travel."

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