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Food & Beverage

AirAsia enters restaurant business, hopes to become lifestyle brand

Budget carrier plans to open five eateries, franchise 100 cafes over next five years

Most of the non-airline units are still in the red, except logistics arm Teleport. All in all, those businesses accounted for less than 6% of AirAsia's total revenue during the quarter ended September.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia's AirAsia Group plans to aggressively expand into the restaurant business as the biggest budget carrier by fleet in Southeast Asia is aiming to turn itself into a lifestyle brand, its group chief executive said on Monday.

AirAsia aims to open five restaurants and franchise 100 cafes over the next three to five years globally, said Group CEO Tony Fernandes. The company plans to open outlets in China soon through franchisees and has received a proposal for a master franchise in Australia, he said.

"We can't be a lifestyle brand without food," Fernandes said at a news conference following the launch of the company's first fast-food restaurant. "Our airline food has been successful. [We are] the first airline ever to commercialize food."

The company will park the latest project under RedBeat Ventures, which holds AirAsia's non-airline businesses that also include logistics, financial technology, and loyalty program.

Most of the non-airline units are in the red, except logistics arm Teleport that recorded a small operating profit of 62.12 million ringgit ($14.9 million). All in all, those businesses also accounted for less than 6% of AirAsia's total revenue during the quarter ended September.

"There is potential for non-airline digital businesses to overtake the airline business within the AirAsia Group," said Redbeat Ventures President Aireen Omar. "It could easily be a couple of years down the road for them to becoming more substantial as they grow their presence around the region."

Apart from the key market of Southeast Asia, AirAsia is eyeing the expansion of its restaurant business to London and New York, Fernandes added.

AirAsia's latest venture comes as carriers grapple with fierce competition at a time of overcapacity in the market and soft passenger demand. That has partly forced AirAsia to rein in regional expansion, sell some of its holdings, and shift into an asset-light model in the longer run.

"AirAsia will be able to capitalize on its brand which has become known in the Southeast Asia region," said Maybank Investment Bank's analyst Mohshin Aziz. "They will need to be good at branding and focus on operational efficiency."

Shares of AirAsia have declined more than 15% on Bursa Malaysia so far this year with many analysts, including Maybank's Mohshin and CIMB Investment Bank Raymond Yap, currently rating the stock a "sell."

The company swung to a loss of 51.44 million ringgit in the latest quarter ended September mostly due to accounting losses. The same quarter in 2018 had recorded a one-off gain from the sale of investments in an associate company.

Shares of AirAsia ended flat on Monday at 1.69 ringgit while the benchmark FTSE Bursa Malaysia KLCI was 0.6% higher.

-- Yimie Yong

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