Tony Fernandes: how I brought no-frill flights to Malaysia

Tony Fernandes took Easyjet's low-overheads flights model and transferred it to Malaysia. Now, his Air Asia turns over £500m a year.

Many children want to grow up and become airline pilots. But Malaysian-born Tony Fernandes's ambition was to own an airline. "I was 12 and a student at Epsom College. It was like a borstal, but my father, a communist doctor, said I couldn't fly home to Kuala Lumpur for half term because it was too expensive. There began my quest to start a longhaul, low-cost carrier."

A London School of Economics graduate, Fernandes, now 44, trained as an accountant under Richard Branson at Virgin before joining Warner Music and rising to head its south Asian operation. He left in 2001. Sceptical (rightly, as it turned out) of the firm's plans to merge with AOL, he cashed in $250,000 of stock options and flew home from New York to Malaysia via London.

It was in Britain that Fernandes saw easyJet founder, Stelios Haji-Ioanno, talking about no-frills flying on TV. "I thought, wow, what a great concept." Hopping on a train to the airline's base in Luton, he spent a day talking to passengers and staff, then went back later with a video camera to record it all.

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"If Brits could fly to Barcelona for £9, why couldn't I reproduce the same model back in Malaysia? So I rang my wife and told her I was going to start an airline. She thought I was a lunatic." So did Conor McCarthy, ex-chief of group operations at Ryanair. A friend put them in touch, and McCarthy "told me my plan to fly long haul was rubbish. First, you should concentrate on short haul."

So Fernandes re-mortgaged his home in Kuala Lumpur, raising another £250,000. He bought a struggling state airline with two ageing 737s from the Malaysian government for one ringgit 20p. Assuming £5m worth of debt, Fernandes and his backers repainted the planes red, added more seats, stopped providing a full service and renamed the airline Air Asia. The first flight went out on 8 January 2002.

Before the maiden flight, "I realised we had no food. So I took the crew down to Carrefour and bought $2,000 worth of coke and sandwiches". Initially flying to Kota Kinabalu in east Malaysia, he added routes to other major Malaysian cities, such as Penang.

He "advertised like hell", blitzing every newspaper in the country with ads for fares as low as nine ringgits. But there was no shortage of problems. Bureaucracy made it difficult to secure new routes, while the Sars outbreak, the Bali bombings and 2005's tsunami each knocked him for six. "Sars was the worst, because nobody wanted to fly. But I knew Malaysians well enough. Put a fare low enough and they'll risk their lives."

He was right. By the end of the first year, Air Asia had flown a million passengers and by June 2003 the firm was making 30m ringgits (over £5m) profit on revenue of 310m ringgits (£59m). By 2004, Fernandes had 14 planes leased from GE Capital and had to order more. Last year, the airline had a turnover of £500m.

But it wasn't until earlier this year that Fernandes saw his "dream finally realised", as the airline started its first long-haul flights from Kuala Lumpur to London Stansted. "It's been 32 years in the making, but I'll finally be able to leave London on my own flight, which will be a pretty special moment for me."

Jody Clarke

Jody studied at the University of Limerick and she has been a senior writer for MoneyWeek for more than 15 years. Jody is experienced in interviewing, for example in her time she has dug into the lives of an ex-M15 agent and quirky business owners who have made millions. Jody’s other areas of expertise include advice on funds, stocks and house prices.