How AirAsia could become the Netflix of Travel
If AirAsia was based out of San Francisco it would be worth $60bn not $6bn. Not because it is somehow anything of a lesser entity, but that world spotlight has yet to shine on their story.
When Netflix began its journey, it would mail DVDs. Nothing special about that, there were 100s of mail-order movie rental companies, all struggling to make ends meet. But, in 2009, Netflix had a major shift in strategy. Netflix held a competition and offered a prize of $1,000,000 to the team that could write them a better algorithm to recommend movies. The check was awarded to BellKor’s Pragmatic Chaos on Sep 21st, when NFLX was trading on the NASDAQ at $5.85. Netflix stock had traded in a similar range for the last 5 years, making no significant moves either up or down. Analysts were underwhelmed by their prospects.
What followed in the years 2009 was the beginning of Netflix’s meteoric rise. By 2014, NFLX crossed $40. By July 2018, NFLX crossed $400, retreating to the $300s where it stands today.
Leadership in the Exponential Era Book
DVDs and movies don’t excite investors. There is money to be made, but where is the growth story? The same could be said of an airline. AirAsia trades at 10x its earning (the PE ratio), which is at the higher end of the PE scale for an airline, but nowhere near Netflix territory. Analysts have suggested that if AirAsia was to get its data play right, it could see its PE ratio rise by 3x. Amazon trades at 80x PE, while Netflix around 150x.
It would take AirAsia 100 years to double its valuation flying more planes. But by becoming a data company, it could achieve that growth in less than 5.
By telling the right story, AirAsia could become the Netflix of Travel.
I’m not a stock analyst, but I get the general idea of what data could do for AirAsia. AirAsia 2.0 will no longer be an airline, but a data company. All that data will allow it to provide services like Meituan-Dianping to Asia’s $30 trillion middle classes. And if that’s the longer term game plan, for a company that already serves 100 million customers a year, has a payment card, a VC arm, a growing ecosystem of partner and a high profile frontman like Tony Fernandes, 3x seems very conservative.