AirAsia's flight to food delivery in Singapore may not be easy, says Momentum Works
THE chief executive of venture builder Momentum Works has panned AirAsia's plan to bag the lion's share of Singapore's food-delivery market, and said that the revenue generated from that is likely to be a drop in the ocean to the Malaysia-based loss-making budget air carrier.
Li Jianggan told The Business Times that it is tough for a new general platform to break into Singapore's competitive food-delivery space, where Grab and Foodpanda already command 76 per cent of the market; he also pointed out that Grab, in particular, has invested a lot to build up its profitability factors.
He noted that AirAsia delivered 150,000 orders for the first quarter in Malaysia - a fraction of the overall market in Malaysia, which is almost wholly occupied by Grab and Foodpanda.
Momentum Works estimated the Malaysia market to be worth US$1.1 billion last year, and the Singapore one, US$2.4 billion.
Mr Li said that a reasonable approach for AirAsia is to be a niche player, as there are small segment-focused players in Singapore that are profitable.
Shukor Yusof, founder of aviation consultancy Endau Analytics, noted AirAsia's move to open a restaurant in Kuala Lumpur dishing out inflight meals, and that it has also dabbled in other non-airline activities.
The Malaysia-based analyst commented: "Whatever revenue it gets certainly won't cover the costs of maintaining a grounded A320 (plane)."
He suspected the carrier is diversifying into non-aviation markets for other reasons: "It's part of AirAsia's move to be more engaged in the digital world but also, I suspect, to distract from its current problems within the aviation sector."
Bursa-listed AirAsia is among the hard-hit airline operators without a state bailout and hanging by a thread in the coronavirus pandemic, as air travel has evaporated amid strict travel restrictions.
The company last week said that there was equity injection from Hong Kong tycoon Stanley Choi, who has emerged as a substantial shareholder with an 8.96 per cent stake.
Lawrence Loh, associate professor of the National University of Singapore's Business School, does not see immediate synergy between AirAsia's food-delivery service and its existing business. He said: "Now they try to build their client base for their other business, so it's just to maintain connectivity with customers."
AirAsia's latest service will be available on its airasia food platform via its super-app, which offers digital travel and lifestyle services.
Mr Li said that AirAsia's game plan for the super-app isn't clear, but that whether its business model makes sense will depend on factors such as customer acquisition/retention costs, unit economics and ancillary opportunity to complement lower take rates or fees.
He noted AirAsia group is "very marketing-savvy with a well-known brand", and its being late to the party gives it the advantage of enjoying a market that is already educated. "Therefore they will probably generate enough buzz to get initial merchants and customers without spending much."
Tony Fernandes, AirAsia's chief executive, in a social media post last week publicising the entry into Singapore's crowded food-delivery space, did not see the group being a late-mover in the market: "Skeptics and naysayers were saying we'd never make it in the airline industry. It took me seven years to get approval to fly to Singapore, but better late than never. So I'd say we're way ahead of schedule on food. I'm sure we're going to get a great welcome."
