Tony Fernandes - Group Chief Executive Officer, AirAsia HARDtalk


Tony Fernandes - Group Chief Executive Officer, AirAsia

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Welcome to HARDtalk. I am Stephen Sackur. There is a special breed of

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business leaders who acquire a public profile far beyond their core

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business. Think of Donald Trump, Richard Branson, and many others. Is

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a flamboyant style and versification into sport and media necessarily

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good for the bottom line? My guest today is one of Asia's best-known

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businessmen, Tony Fernandes, boss of AirAsia, Formula 1 investor,

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football owner, and dabbler in reality TV. Is it easy to lose sight

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of what matters most to the success of business?

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Tony Fernandes, welcome to HARDtalk. Thank you very much. You have been

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in business for three decades now. Is the Tony Fernandes that does

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business today different from the young man who set out? I had to

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think a little bit smarter, a little bit older and wiser, but in

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principle the same Tony Fernandes from 30 years ago. What about the

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attitude to risk? Umm, maybe a little bit more cautious, thinking

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it a bit more. But overall I don't see much difference. I think

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decisions have to be made critically. I think changing

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management is critical, especially in this day and age, and sometimes

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procrastination, analysis, paralysis by analysis, is a detriment to

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business. That is what I call it. I talk to my management team all the

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time about changing and adapting quickly. One of the fascinating

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things about you is cultural as much as business. You, and I said it in

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the introduction, you made your fortune and your name by introducing

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a new form of cheaper budget aviation travel to Asia. And you are

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of course proud to be again. And yet as people listen to your voice in

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the attitudes as well, you seem culturally quite Western educated,

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in the UK, working for Branson for a while. -- Asian. Do you see yourself

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as a combination of East and West? Yeah. I never thought I would work

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in Malaysia. But business is business. I have the ability to be a

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chameleon. You can put me in any part of the world, China, Korea,

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humour is humour, businesses business... Is that really true?

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From the little time I spent in cultures like Japan, for example, it

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struck me, not speaking Japanese, but Japanese business culture is

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fundamentally quite different to Europe. That is true, that is true,

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but alcohol is a great leveller. It is also big in those countries.

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Fine, social occasions, I bring to business a lot of the relationship.

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Much of it is done socially. Creating relationships goes beyond

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the office. It doesn't matter if you are in Japan, India, the Middle

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East, people would say they want all the frills, low-cost will never

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work, they say. They are surprised. When you get something in Japan they

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wrap it in 35 pieces of paper. But if you strip it down, people want

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simplicity and a low fare, and... Did you make enemies in Asia? You

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brought a European model of airlines to Asia. Be transformed it. You had

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seen what O'Leary was doing in the US and the UK with SouthWest

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Airlines. I wonder how much difficulty you had persuading Asian

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consumers and governments there was a market for a low-budget concept in

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Asia. Consumers were easy. Governments were much tougher. In

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our part of the world, governments own the national carrier is 90% of

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the time and the airports. I am only beginning, after 15 years, people

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are starting to say, wow, this will make a difference to our economy.

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But it has been hard and we made many enemies, definitely. Also, you

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learn some of your marketing skills at the feet of Richard Branson,

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working quite a while for Virgin Records. Was he an inspiration for

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you? You model yourself on his iconoclastic approach to business? I

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always say the last person I want to be is Richard because I have no

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preconception of going into a balloon at dirty 6000 feet, or even

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a balloon... -- 36,000 he was definitely an inspiration. He

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challenged the norm. He set up AirAtlanta to do something different

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against British Airways at that time. Anyone who said he was not

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inspirational who worked for him, they are lying. He set a new

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paradigms. He challenged the establishment. In some ways that

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affected me. And he also saw there was a value to projecting a very

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strong personal rant to drive the business. -- brand. Have you done

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that yourself? That came out of necessity. We had no money when we

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started AirAsia. My marketing director said we have to make some

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controversial statements. They will take photographs of you. I am a

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gregarious person anyway. It wasn't difficult to do that. Ego-driven

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business can go too far. 100%. As soon as used start believing your

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own press, that is the end of his. Let us talk about the fine line

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between being a successful brand yourself, using that to drive your

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business, looking like an egomaniac, let's look at you in 2013, like

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Donald Trump, you wanted to get into the business of reality TV. Here is

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a promotional video of a show he launched in 2013. He asks the hard

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questions. Whose fault is this? He is very sharp? Either ganging up a

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new? It was messy. Who is telling the truth? It is a disaster. And he

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will fire someone. I have had enough. You are fired. Tony

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Fernandes. Compared to Donald Trump you are actually quite polite. It is

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funny you say that. A couple of things, looking at that makes me

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cringe, to be honest the big I turned it down for two years. I kept

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saying I am not a Donald Trump. In the end they said do it how you want

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to. The marketing team in AirAsia were very keen for me to do this.

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Did you get bored running AirAsia? Is that why you began to look for

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these other things? I will talk in just a moment about your activities

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in sports and the whole diverse idea of your brand you have. Is that

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because you got bored? My first global event was sponsoring

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Manchester United. It was painful for me because I hate that football

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club. That became, umm, building a brand. Based in the UK, Richard gets

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a phenomenal amount of media. Ourselves in Malaysia, it is hard to

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get heard. We saw sport and music as a way to build the brand. It is

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about priority is getting distracted. -- priorities. You are

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committed to aviation. But as you become more ambitious and take more

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on, you, watcher three, I telling the staff you have taken over a

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football club. -- Tony Fernandes. You are correct. I did it for 11

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years. I felt it was time for me to move other things. Formula 1 was

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getting involved in a business we still have. Football was a passion.

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There was no business sense in football. On this programme I have

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said it many times publicly, focus is key. Did you lose it? AirAsia

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suffered a little bit, yeah. In Indonesia we lost an aircraft. 160

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people died. It brought me back to reality. I felt I needed to refocus.

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Since then that has been my number one priority, exit Formula 1.

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Football is run by Les and the boys. Yes. Is football like any other

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sport? Two days ago it was very moral. It was a great ad for

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football. It is the market. If someone wants to pay ?200 million

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for the player, that is the market. I am for the free market. It has

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immense highs and lows. I have been incredibly high and incredibly low.

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It is a phenomenal passion. It can be run as a business, and many are

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running it very well as a business. You have lost money big-time.

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Big-time. This is from the Times newspaper us. This was written

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almost two years ago. It was talking about your first four years at QPR.

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He promised to rough up the diamond. The debts were 20 million. Now they

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are ten times that thanks largely to money wasted on the wages of players

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and agencies. Tony Fernandes has practically nothing to show for it.

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I obviously disagreed that the many people went down that road. We had a

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solid squad, a nice academy, we are well on our way to building a new

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stadium. You have not got the Premier League. Without it the

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income is not there and you will lose money. We still have good

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income from the Paris payments. Two years. We want to get back to the

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Premier League, without doubt. You also stand accused of flouting the

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financial rules that govern how much clubs can spend. The financial fair

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play rules means you are still in dispute with the football league,

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facing a vast fine which could kill off the club if you are forced to

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pay it. We will wait for that to come. Ever since we have been

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completely aligned with the rules. I don't want a comment. There must be

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a Plan B. It would be insane to bet the house. We would not be in the

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airline business to be didn't have a Plan B, C, D... That goes for QPR as

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well. Lots of potential. Five years is the life of a football club. They

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have been around for a long time. Southampton was down in the third

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division. You have to be strategic. A basic problem is the stadium for

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Queen's Park Rangers does not hold a thousand people. Arsenal built one

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for 60,000 people. You cannot survive in English football without

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a decent stadium. What will you do? I agree. That is why we have been

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working busily with the Mayor of London and the local authorities.

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Your original plan was knocked back. No, it is still there. No one I

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speak to things it will be built. That is what they said to Daniel at

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Tottenham and he is on to building. Building in London is tougher than

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building an airline. With patience and the right emphasis we will get

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there. Will you sell the club given everything we have talked about, the

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frank admission that you have lost money every year, will you sell

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Queens Park Rangers? No. In the same way with the airline has had other

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and downs and people asked us to close down AirAsia Indonesia and

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Philippines and we said no, we are not a short-term quarterly company,

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I am not a short-term person. We see a plan and so we will see the plan

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through. And I remain positively optimistic. No plans to sell. Let's

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get back to aviation and something that you alluded to earlier. That is

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the personal impact and perhaps the worst thing that has happened to you

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in your business life, which was the crash of one of your aircraft, which

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I believe was flying from Indonesia to Singapore. It crashed into the

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Java Sea, loss of more than 160 lives. You took it very personally.

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Absolutely. You know, it was a body blow. Probably the worst nightmare

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of any CEO. We are one big family in AirAsia. We lost four crew, two

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pilots and an engineer and all those families. You gave the families your

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mobile phone number at one point, saying if you want to reach out, if

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you want to call you can reach me direct. It is an extraordinary thing

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for a boss to do. We were sitting in Malaysia, and the lawyers were

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saying don't go out, it is an Indonesian airline, you don't need

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to go out. I sat there for five minutes and I said, this is our baby

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and brand. I have to go out. I have to go out there for the families.

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They all know about me. And I have to go out there for my staff. You

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can't just be there for the good thing. You have to lead from the

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front for the bad things. Was there an element of guilt in the way that

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you responded? Obviously you didn't know at the get go what caused it.

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It has become clear that your two pilots, I am quoting the

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investigation, this is not to be taken lightly, the investigation did

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indicate that the pilot and the co-pilot had frankly mishandled what

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was a technical problem with the writer. And it raised questions

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about the training of your staff -- rudder. I don't think that is

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correct. It was cataclysmic, loads of things happening at the same

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time. The pilots were one element of many things that had not gone right.

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And so, no, there wasn't killed. My job, though, I was determined -

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safety is a marathon. No airline can say it is safe. You have to keep

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looking at things, how to make it better. I am determined for the

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people we lost that we will do the very best that we can. In that sense

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aviation is probably more sensitive to safety issues than any other

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industry that I can think of. 100%. Have you fully recovered from the

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perception fallout of what happened? In some ways we came out of it quite

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well, the way we handled it. And in Indonesia we were very popular. From

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a financial perspective, we had our best year last year and we are

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looking very good this year. We are growing. You never come out of it.

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You know. It is in the back of your mind all the time. All you can do is

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to make sure you do the best at whatever you do. There is no

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guarantee. There is no guarantee, and it was me every day. Does it?

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Without a doubt, it does. You say you are determined to keep growing.

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Aviation is an interesting crossroads right now. You know, a

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lot of people travel. But the number is still forecast is a lot of

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potential to grow. But for you, you haven't succeeded in getting into

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international long haul. I think you looked at flying Europe... We have

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two airlines, AirAsia, easyJet and Ryanair, then AirAsia X, which has

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grown to over 40 aircraft. I have always said it was a medium haul

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model, so, four hours to about eight or nine, we do 10-hour flight.

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Europe is a bloodbath right now. All the Middle East carriers, you know,

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you look at the results. You are not interested in Europe to Asia? Not at

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the moment. Let them clean it up. The competition will sort itself

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out. Then we will go in. We are happy going to Asia and Australia

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and creating something we haven't before, and hub in Bangkok and Kuala

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Lumpur. If you want to grow rapidly in Asia it means, and I think your

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strategic view is the same, it means you are going to have to get deep

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into China, and the sort of secondary and tertiary airports in

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China. Correct. The problem there is the Chinese government clearly

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favours its own big three state airlines. I don't... How are you

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going to move into China? We are the first airline to be given a foreign

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airline, the first foreign airline to be given a local licence. China

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and certainly the state government see the tremendous value we give to

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the tertiary cities. We have gone into cities that have never had

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direct connectivity. So, China values us. Asia is not a one trick

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pony. India, we are also in. The first airline in India and China

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with a fantastic south-east Asian market and Japan starting in two

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weeks. We are nicely covered in Asia. A transport analyst in

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Singapore says the risk for AirAsia is that it will spread itself too

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thin. That has been set for 16 years. I have been written off many

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times. It could come true. Could do. 16 years... I have been through

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everything, earthquakes, bird flu, tsunamis, HARDtalk. We are still

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here. Before the end, as an aviation boss I need to ask you about

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emissions and your view of your responsibilities when it comes to

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climate change. The Paris accord tells us that there will be a

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wholesale de-carbonisation of the world economy by 2050. Aviation is

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one sector which, unless technology fundamentally changes, cannot

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de-carbonise. Well, no, aviation gives off 3% of nitrous oxides.

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Right now. The share of aviation is emissions is going to go

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exponentially up as other people massively cut their emissions.

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Yours, relatively... As they do. That is really out of my hands. The

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manufacturers will have to do it. From our part we have the newest

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engines in terms of the new GE engines. And we probably have the

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most seats per square foot of any airline. So we are doing. You mean

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you cram people in like cattle? Not like cattle but we don't put them in

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like FirstClass for instance. We are flying economically well and we work

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well with aircraft. Do you think the climate change moves that are being

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made is that passengers, looking forward to 2050, will have to accept

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they will have to pay effectively as sort of carbon price on the airline

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ticket price? 100%. I think that goes without doubt. I think the

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manufacturers have to find ways. We are working with a manufacturer who

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has taken a Formula One technique and trying to establish that on

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breaks to use that power. All our vehicles on the ground will be

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electric very soon. So we are working with the manufacturers to

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find ways. We have a lightweight seat which is three kilograms versus

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a normal seat of eight kilograms. A final thought for you which takes us

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back to the beginning of this conversation. I wonder whether one

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of the life and business lessons you have learned through these 30

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dramatic years is that you from now on will focus like a laser beam on

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your core business, aviation, or will you develop an interest? While

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I am at AirAsia that is my priority and I am laser focused on that. I

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won't be doing this for ever. You know, and when I do I have the

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dreams and passions. But they have to be done one at a time, or get the

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right management to do it. AirAsia, we are the lowest cost airline in

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the world is by far. We still have the best margins. A lot of growth. I

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don't think we are spreading ourselves thin. And I am very

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excited. One great aspect of aviation is data and that is going

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to be a very exciting times for airlines because we have fantastic

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data. If you want to share with us your next dream, do you want to do

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that? I would love to do low-cost hospitals. That would be a dream. My

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father was a very left-wing doctor and never believed in private

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medicine. I believe medicine is as inefficient as airlines were when I

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came in from the music business 16 years ago. And when you move into

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that sector, we will have you back on the show. But for now, Tony

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Fernandez, thanks for being on HARDtalk. Thanks very much. Thank

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you, Tony. Hot on the heels of

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Hurricane Harvey comes Irma, and this has the potential to be

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a catastrophic hurricane. Already a Category 5,

:24:30.:24:34.

we have sustained winds of 185mph,

:24:35.:24:37.

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