How small businesses in Singapore are especially at risk of being impacted by this financial crisis

Compared to banks, alternative financing platforms have less dry powder to pass around. But they have the flexibility to tweak their credit criteria or issue loans to sectors deemed too risky for banks. With these risks, SMEs must contend with higher interest rates, but it’s still a lifeline when they need it most.

Barriers that prevent small businesses from accessing alternative lending

Funding Societies sees its efforts as complementing government measures, which may not be enough for SMEs. The platform is helping to provide “deserving SMEs with short-term bridging loans to tide over the short-term cash-flow concerns,” said Jain.

Unlike banks, alternative financiers offer short-tenure loans and invoice financing to all SMEs. They can help SMEs tide over short-term cash-flow concerns. June Tang, director of honey wholesaler Xali Pte Ltd, said she uses banks for import financing but turned to Finaxar for invoice financing.

The pandemic looks set to be an inflection point for the alternative financing sector. There is a fast-growing mismatch between supply and demand. With the economic downturn, there is more demand for working capital due to increased liquidity challenges. This also means lenders’ risk appetites are declining, resulting in less funding available for SMEs.

Companies like Validus are poised to capitalise on this situation. The institutional lenders and high net-worth individuals that lend on its platform are looking to target SMEs, seeing them as opportunities to diversify from volatile markets.

Validus, however, is still likely to be affected by the liquidity crunch to some extent. Investors who might lend through its platform are smarting from losses in the stock markets. Finaxar, on the other hand, is more insulated from this since it co-funds loans with development funds. It is essentially tapping on funds that are already available just for this purpose. And as businesses look to keep the lights on, options like Finaxar, Validus, and the like are more likely to be considered than ever.

Managing risks

Managing risks

Even as the SME lending opportunity looms large for the alternative lending companies, though, risk looms larger.

Lending in a downturn has obvious risks. With companies in sectors such as oil and gas turning insolvent, banks are increasingly seeing their non-performing loans (NPL) rate rise. SMEs, which are looking for cash loans rather than invoice or contract financing at the moment, are likely to further contribute to this.

At the beginning of the year, there were more contract and invoice financing requests, said Funding Societies’ Jain. But March and April saw a significant reduction, with Covid-19 disrupting trading activity.

Banks are already steeling their books for NPL increases caused by Covid-19 by increasing their general reserve to absorb credit losses. MAS has also adjusted regulatory requirements, such as tweaking banks’ capital and liquidity requirements to sustain lending.

Alternative lending platforms have also tightened their lending criteria during this period. Funding Societies said its NPL percentage has only gone up marginally; its default rate currently stands at 1.3%. It expects a marginal increase in defaults in the near-term as a majority of the loans it gives out are of short tenure. “We have and will continue to provide restructuring options to qualified SMEs as a means to assist them during this trying time,” said Jain.

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Already, signs of this rise are visible. Demand has been on the uptick even before the pandemic struck, according to Funding Societies, a P2P financing platform founded in 2015.

January 2020 was Funding Societies’ best month for loan disbursals, according to senior commercial director Vikas Jain. February saw a slowdown due to the Chinese New Year, but March brought a 50% spike month-on-month in financing requests.

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“April has shown a slight reduction compared to March, perhaps due to the various government schemes (grants and loans) being announced across the three markets (Singapore, Malaysia, and Indonesia) that we operate in,” Jain added.

With supply chains affected by the widespread disruption of business and consumer activity, Funding Societies has seen more working capital requests compared to invoice financing.

Validus Capital, another five-year-old P2P lending platform, also saw an increase in its pipeline of credit-approved unsecured loans in recent months. The platform claimed it recorded a 50% spike in disbursement compared to the same period last year.

Finaxar, a four-year-old lending infrastructure startup, also saw a 2X-3X demand spike in the last month, according to co-founder Tan Sian Wee. “It was building up from February onwards,” he said. “In March, you could see demand come in; in April, when the circuit breaker was announced, there was a jump.”

Whether the alternative financiers can fulfil the rise in demand is a different matter. In these pandemic times, they could end up deciding which SMEs are able not just to survive the downturn, but also gear up for the future.

Short on cash

As Covid-19 shut down the country, the Singaporean government moved quickly to ensure SMEs had access to the cash they needed for survival. It increased its risk share of loans to SMEs from 80% to 90%. The central bank, the Monetary Authority of Singapore (MAS), is providing money to banks at an interest rate of 0.1% per annum. Enterprise Singapore initiative for SME loans are funded through banks and financial institutions.

Local banks have also taken steps in this direction, going on a lending spree. As of 30 March, SMEs made up between 10-15% of the local banks’ loan books. That’s set to increase drastically. For example, even with the government’s 75% subsidy for wages of local and permanent resident employees, SMEs still need to come up with the rest.

OCBC Bank expects to disburse S$1 billion (US$700 million) in government-assisted loans to SMEs, which is more than what it lent during the 2008 global financial crisis. The United Overseas Bank (UOB) allocated S$3 billion (US$2.11 billion) to SMEs, offering loans up to S$550,000 (US$387,000) with no collateral required. DBS, the biggest local bank, has availed $3.2 billion (US$2.25 billion) for SMEs under the government relief programmes.

However, bank loans are subject to credit scores. Only those SMEs with a good credit rating can avail larger loans, in line with the risk that banks are taking on. Even if banks are extremely generous, the loans will have to be on their balance sheets. Which means there will not be enough credit to go around.

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That was the case for Chasen Holdings Limited, an SGX-listed firm that provides engineering, logistics and relocation services across Asia. “Prior to using Lark, we found it difficult to navigate the China firewall, leaving us with very limited solutions,” William Soo, the firm’s Group HR & Admin Manager, told us. English-Mandarin text chat translation is also a key feature, he added.

Everyone wants to be Zoom

Everyone wants to be Zoom

Zoom has become a household name worldwide and that has inspired Chinese companies to offer meeting services for free. Alibaba, ByteDance and Tencent have all released free video conferencing services both in China and for overseas audiences.

“Companies often try to implement services like Teams or Slack, but wonder how they can get the local Chinese team to use them,” he said. “Chinese colleagues will prefer tools for locals.”

WeChat—China’s most popular messaging service—often becomes the platform used, added Tay. This would leave sensitive company information exposed outside of their IT system, which makes services like Lark, DingTalk or Tencent’s WeChat Work appealing alternatives.

On the flip side, however, the China link could put off enterprise customers who are concerned about where data is stored and whether it can be accessed, Tay said. Two IT managers at regional technology firms based in Singapore told us that they opted for Western tools rather than Lark because of its links to China. Neither person would comment on the record as they are not allowed to discuss company IT strategies in public.

Tough battle

Messaging apps have become ecosystems, with WhatsApp looking to enter payments in India and WeChat pioneering the concept of ‘super apps’ in China. Productivity tools, too, can be valuable at scale.

In China, for example, it is common for merchants who sell on Alibaba services to use DingTalk to communicate with suppliers or even customers, said Leilei Wang, a China-based analyst with consultancy firm Kapronasia. Wide adoption of DingTalk has boosted Alibaba by driving traffic to its services, which range from business-to-business sourcing to social media and video streaming.

Alibaba could be hoping to do something similar with SMEs in Southeast Asia. Its affiliate, Ant Financial, is among the bidders for a licence that would allow it to offer digital banking services in Singapore.

But efforts to cross-promote Alibaba’s Southeast Asia services—Lazada and Alibaba—with DingTalk haven’t been fruitful. Two merchants told us that they prefer to use Western consumer messaging apps and have little need to contact merchants directly. Customers, they pointed out, can be reached through e-commerce app messaging features.

Online learning push

Built as management tools, the services have been adopted by schools, and not only in Covid-19 times. In one example, the Universitas Islam Negeri Sultan Syarif Kasim Riau—an Indonesia-based university—used Lark to onboard 30,000 students across nine faculties within three days after toxic haze in Indonesian province Riau made turning up to class hazardous.

The firm currently uses a free version of Lark, but Soo told us it plans to upgrade in the future.

Even without the internet restrictions, there are also local consumption habits to overcome, according to Gartner’s Tay, and that can favour tools with a Chinese footprint.

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Building bridges to other products is not new. Not only does Slack boast a directory of over 2,000 apps and integrations, but also its own fund that invests in promising companies that build software for its service. These integrations, however, are mostly done by third-parties.

Like Slack, Lark also lets outside developers build on its platform. Given its Chinese roots, this could help it “build productivity that’s more leading edge,” said Gavin Tay, an analyst who covers the digital workplace industry for research firm Gartner. However, understanding that it needs to make up ground, ByteDance has also actively built out integrations itself. It tapped its in-house development team to build ties with services like project management apps Jira and Asana.

Let there be Lite

Let there be Lite

“ByteDance is willing to do the nitty gritty and grunt work of integrations,” the former employee added. “The product is still young and yet there are thousands of integrations.” This hands-on approach to adding bells and whistles gives Lark a fighting chance of appealing to potential customers.

Singapore-based Tay points to features like digital punch cards—popular within DingTalk—and biometric entry as differentiators that US companies aren’t likely to add. That’s alongside more local features in Lark like chat message translation for Chinese, English, Japanese, and Thai. Subtitles for video calls do not presently include translation, but one would imagine it is on the horizon.

Similarly, DingTalk Lite is available in Japanese, English, and Traditional Chinese for users in Japan, Malaysia, Singapore, Hong Kong and Macau, said Alibaba. It also said it offers local customer service with a focus on Malaysia and Japan. The Lite version is a response to demand, Alibaba said, but it could also serve as a feeder to the core DingTalk app and paid services.

Dingtalk Lite is not Alibaba’s first effort at reaching businesses in Southeast Asia. It initially went after overseas users in 2018 when it launched a version of DingTalk for Malaysia and other parts of Southeast Asia.

China interface

Alibaba and ByteDance are both helped by the economic importance of China to countries in Southeast Asia. China is a key trade partner, accounting for a double-digit percentage of trade in the region’s six main countries: Singapore, Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. During China’s stand-off with the US government, ASEAN nations’ imports to China surged further, cementing their economic ties.

This economic closeness gives Chinese productivity apps an advantage over US tools in Southeast Asia. Companies that have business or clients in China struggle to find communication platforms that work both in and outside China due to Beijing’s internet censorship.

Like consumer apps Facebook and Twitter, business services like Google’s productivity tools and Google-hosted email remain blocked in Mainland China. Virtual Private Networks (VPNs) that allow companies to subvert China’s internet censorship apparatus are increasingly difficult to find, and are technically illegal. Even Western services that aren’t blocked today could be blocked in the future or may be too obscure for China-based employees.

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Targeted at larger enterprise customers, Lark offers unlimited video calls for up to 100 people, 200GB of cloud storage, synchronised calendars and company-wide chat, all in one app. Still, a spokesperson said it is seeing increased adoption among SMEs, startups and educational organisations.

“We offer the full version of our service for free so customers can start this digitisation process,” Joey Lim, Lark’s commercial lead for the Asia-Pacific region, told us in an interview. “Most business technology is built for large organisations which have the resources. The smaller enterprises are those who suffer, yet they need to communicate and collaborate.”

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But Lark does make money, with enterprise customers paying for additional services such as cloud storage. And it is actively cashing in on that opportunity in Southeast Asia. Lim, who joined after a decade of sales roles with US enterprise software giants ServiceNow and Salesforce, leads a growing Singapore-based sales team that also works with resellers. It touts 6,000 customers, including ad firm dentsu X in Singapore and Indonesia-based IT provider Weefer.

ByteDance and Alibaba see the current situation as a wedge to access Southeast Asia, but adoption remains a tall order. While the region’s digital economy is forecast to boom to US$300 billion in 2025 from US$100 billion in 2019, SMEs have been slow on the digital uptake. We recently wrote about how Singapore, arguably the region’s most tech-forward economy, has fought a years-long battle to get SMEs to digitise.

The Chinese giants will also have to face off against incumbents like Slack, Google’s corporate services, and Microsoft Teams. Zoom, the US-based video conferencing service, has shown new entrants can win market share. It grew from 10 million daily meeting participants in December 2019 to 300 million as of April 2020. Zoom, though, is a nine-year-old business and success didn’t happen overnight.

Western leaders

Western leaders

Microsoft Teams Southeast Asia downloads in April 2020 (according to Apptopia)
Google Docs Southeast Asia downloads in April 2020 (according to Apptopia)
There is promise. Downloads of Lark across Southeast Asia surged from nearly nothing at the start of 2020—just 22 per day on 1 January—to over 5,500 daily at the end of April, according to data from app analytics firm Apptopia. DingTalk and DingTalk Lite downloads doubled to over 3,000 daily by early April. But building on that surge—which saw both outpace Slack—is a tough task.

Standing out

Realising what they are up against, the Chinese duo are leaving no stone unturned to become the de facto productivity apps in the region. “US services are often take-it-or-leave-it in terms of product, but Chinese companies will always do more,” a former ByteDance employee told us.

Take Lark, for instance. While it began as an internal ByteDance tool before being spun out in September 2019, it rivals most competitors by offering cloud documents, internal communications, and video calling. Apart from slotting multiple features into its product, it has also worked to integrate thousands of other tools that companies may find utility in.

How Indonesians Sell Produce Online

For the switch to B2C, Tanihub had to quickly restructure its warehouses. The frequently ordered items needed to be placed so that pickers can reach them immediately. Tanihub has six warehouses in several cities and they were initially laid out to handle some 100-150 bulk orders a day, which can take a longer time to pack. Now, they were peaking at 2,000 to 3,000 of individual orders a day.

By buying directly from farmers and introducing a higher level of transparency into the system, Tanihub can keep prices more stable.

Right now, it sells 5kg of medium-grade rice for IDR 57,000 (US$3.8)— IDR 11,400 (US$0.76) per kg—on its platform, with free shipping for orders above IDR 100,000 (US$6.70). The market price in Jakarta for the same grade is currently at IDR 13,900 (US$0.93) per kg.

Adapting to circumstance

Adapting to circumstance

Some innovations Tanihub has introduced in its supply chain have helped it get there:

Farmers like to work with Tanihub because it’s one destination that buys the whole range of products—from grade A to F—from them at a fair price. Indonesian farmers don’t use the best seeds and don’t have the best fertilisers or techniques, according to Wineka. This results in varying quality: some apples may have a different colour; the skin of an avocado could have a mark; an egg might not be the right size. In the conventional system, a buyer would give the farmer a fixed, usually low, price for the entire harvest, no matter what quality. Tanihub sorts the harvest by grade and pays the farmer accordingly. A Grade-A apple fetches more, but Tanihub also buys the lesser apples and sells those to food processing companies.
Like Sayurbox, Tanihub also organises its own logistics because it’s more reliable and provides transparency in the whole chain. Tanihub has six warehouses near the cities it services, and several packing facilities near its farms. Farmers let Tanihub know a few days ahead of the harvest how much to expect; and Tanihub informs them when there’s a demand surge or lull for certain products from its clients.

A lasting change

Venture-capital backing also means startups like Tanihub and Sayurbox can afford to resist the heavy price fluctuations, while simultaneously offering farmers and customers a better deal.

“For some commodities where Sayurbox has secured good supply sources, they are able to pay farmers higher prices and sell at a slightly lower price than comparable modern markets, and make better margins too,” says an early investor in the firm who asked to remain anonymous.

Profitability, however, will only come at scale, the investor adds. Which is why harnessing the Covid-19 opportunity just right is so important for these companies. Never have the costs of customer acquisition been this low.

Tanihub secured US$17 million in venture capital amid the pandemic. Sayurbox hasn’t disclosed funding, but it’s reportedly backed by Indonesia’s largest e-commerce platform, Tokopedia.

Both companies are experimenting to reach new buyers. Tanihub is learning to harness the B2C space, while Sayurbox is currently trying to capture resellers. The latter is offering a model in which one person can buy in bulk to supply to a group of people in a neighbourhood.

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“Earlier in the year, the Ministry of Agriculture assured there’s enough supply of rice and other staples to last through August, but in the last few days the President warned that provinces are seeing deficits.”


The price rollercoaster started around January and February. The skyrocketing garlic price, for example, was because there were delays in shipments from China, from where the bulk of the import comes. Indonesia imports 95% of its garlic, which doesn’t grow well in tropical climates.

Even domestic products are impacted, although to a lesser degree. The average price of rice across Indonesia during the first week of April rose to IDR 11,900 (US$0.79) per kg, a 1.28% increase from December 2019, according to research by the Centre for Indonesian Policy Studies (CIPS).

In provinces that have imposed partial lockdowns, which includes Jakarta, rice prices are even higher—averaging IDR 13,500 (US$0.90) per kg in traditional markets.

The problem isn’t bad harvests—they were good and are expected to remain reasonably good this year, says Felippa Amanta, a food security expert at CIPS. It’s an accumulation of little things. The pandemic is throwing more sand into the already creaky machinery of food distribution.

There are fewer people working in facilities like storages or slaughterhouses; there are fewer surveyors inspecting goods arriving at the ports, which causes jams and delays.

In theory, food distribution should go ahead without disruption, says Amanta, because it is exempt of all work and travel restrictions. However, regional travel restrictions do make logistics unpredictable. Some cities introduced curfews, which means trucks have to wait overnight before they can offload.

“We don’t have figures, just anecdotes,” says Amanta. “We’re hearing that truck drivers are simply afraid of going around, and some local communities aren’t allowing food distribution coming into the region because they are afraid.”

This has meant there are also fewer trucks on the road than before the pandemic.

Closer to the source

Sayurbox hasn’t faced these logistical challenges, says Hernis. Its trucks are registered with authorities and drivers carry documentation as proof that they’re transporting food.

Agritech startups like Sayurbox attempt to reduce some of the friction in the supply chain by building relationships with farmers and linking them directly with the end-buyer. In Sayurbox’s case, these are individual customers in the Greater Jakarta area. The startup chose to focus on this demographic first.

Five-year-old Tanihub, another agritech company from a similar cohort, chose to focus on enterprise clients: food processing firms, resellers, hotels, and caterers. The company is present in several cities.

Tanihub’s model was initially more adapted to bulk orders, says Pamitra Wineka, its president and co-founder. But the startup was affected by the pandemic. After movement restrictions set in, its B2B arm saw less and less activity because businesses, especially in the hotel and restaurant sector, were winding down. Tanihub’s B2C arm simultaneously saw more demand.

B2C was never Tanihub’s strength, says Wineka. The firm introduced it mostly for branding, so that there’d be a reason for people to know Tanihub.

The problem with their domestic food supply chain is providing varied produce at competitive prices to out-of-reach markets

By mid-March, however, as more and more people in the Greater Jakarta area self-isolated at home, Sayurbox suddenly got more than 5X the usual number of orders. Fruits and vegetables were piling up at its Jakarta warehouse. Delivering the last of the day’s boxes would take till well after 10PM. Sayurbox was struggling to keep up.

On 2 April, it capitulated: “Sayurbox will rest for a moment and prepare a better service for you,” the company announced to its customers. The team desperately needed to clear the backlog and streamline operations so that it could tackle the 5X-higher order volumes without delays.

Indonesia’s Food Problem of Varying

Indonesia's Food Problem of Varying

In the few days after Sayurbox’s customer-facing app hit the pause button, work behind the scenes was frantic, says Oshin Hernis, the startup’s head of communications. Sayurbox opened and stocked a second warehouse, hired and trained 25 new people. By 10 April, it was ready to resume orders. Luck was on its side: the rapid scale-up was possible because Sayurbox was already eyeing a location for its second warehouse before the pandemic. Covid-19 just accelerated that process, says Hernis.

The behavioural shifts created by the crisis could be a catalyst that accelerates the adoption of online grocery services in Indonesia. With roughly 30% of Indonesia’s population working in agriculture—the vast majority in small, family-operated farms—an overhaul has been long due for the sector.

A farmer’s produce can go through up to eight or nine different intermediaries before it reaches the market. Farmers get paid little, while the end-price for customers can be high. The supply chain puzzle also means prices can fluctuate wildly. For example, the price of garlic increased by 35.6% to IDR 43,200 (US$2.9) per kg between December and mid-April.

If there’s anything positive to come out of this crisis, it’s that Indonesia has been forced to pay close attention to its inefficient food distribution system. Agritech startups like Sayurbox and Tanihub, which help farmers sell produce directly to customers, can play their part in bringing innovation and efficiency to the system.

The price rollercoaster

Price fluctuations for basic commodities are common in Indonesia, even without a crisis. They’re a recurring theme around the Ramadan fasting month, when demand is high.

Indonesia relies on a mix of domestically produced commodities and imports to keep its people fed. The country is almost self-reliant in rice and poultry. Beef, salt, and sugar are a mix of local and imported. It heavily depends on imports for onions and garlic.

The complicated supply chain means there’s always a hiccup. Factors such as a bad harvest, an outdated licence, stalled negotiations over import quota, or an unexpected port closure, can lead to delays, distribution hang-ups and, eventually, shortages. Usually, the turbulence is temporary and prices go back to normal.

However, experts fear that the pandemic, which happened to peak just as Indonesia entered Ramadan season, could keep things out of whack for months to come. It can potentially cause serious problems if people can’t afford basic staple foods.


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Malaysia-headquartered research firm CGS-CIMB estimated AirAsia’s total monthly cash burn rate to be around RM527 million (US$122.3 million). In a research note published on 7 April, it assumed if 20% of the cash balance was refunded to consumers due to flight cancellations, the remaining kenbalance of RM2.4 billion (US$560 million) will last AirAsia less than five months. Realising that giving cash refunds would further drain its coffers, Fernandes offered credits for replacement flights instead.

The core business of AirAsia

The core business of AirAsia

To conserve cash flow, the airline will not take in any new aircraft deliveries this year, leaving it with 242 aircraft, one less than 2019. It is also relooking its orderbook with Airbus and has restructured a major portion of the fuel hedges—all with an expectation to reduce 30% of its year-on-year cost for 2020.

It also doesn’t help that its overall earnings are constantly dragged down by AirAsia X. As of 31 December 2019, AirAsia X had a cash balance of only RM358 million (US$83 million) and borrowings of RM6.32 billion (US$1.5 billion).

Its net loss widened 62% year on year to RM489.5 million (US$113.55 million) in the year ended March 2019, while revenue fell 4% year on year to RM4.4 billion (US$1 billion). Which is probably why Fernandes is seeking out a loan from the Malaysian government to cushion the blow. But it won’t be easy.

AirAsia was said to be exploring options to fundraise for ‘X’. It could seek help from Malaysia’s sovereign wealth fund Khazanah Nasional Bhd, integrate AirAsia X into the parent group, or shut the division down altogether. But the government is already straddled with the ailing national carrier Malaysia Airlines Bhd that is fully owned by Khazanah, and it may not have enough resources to support other local airlines.

It would be a wise move for AirAsia to shut down the long-haul unit, says Shukor Yusof, founder of aviation consultant Endau Analysis. “Whether the owners have the courage to do that remains to be seen.”

While the albatross around AirAsia’s neck remains its problem child ‘X’, it also has other pressing concerns to address in the short term. Especially now that it has resumed its domestic flights within Malaysia and Thailand. (AirAsia’s domestic flights in the Philippines, Indonesia and India remain grounded, at least till mid-May.)

Not everyone can fly

For the first quarter of 2020, from January to March, AirAsia recorded 80% group-wide load factor—which indicates the airline’s capacity utilisation—ahead of its 77% target. Higher load factor is positive because it increases revenue and profitability. But the coming months or years will not be as rosy.

For one, airlines are recommended to practice social distancing for each passenger flight by emptying one-third of plane seats. However, such a move will render the airline business uneconomical. In turn, to ensure a minimum profit, airlines will then have to increase ticket prices by at least 50%.

In other words, cheap travel is over. This would be the biggest blow to low-cost carriers, who rely on cramming as many people as they can into their flights. AirAsia, which has shaped its entire business around the motto of “now everyone can fly”, will have to brace for a huge hit in its future earnings.

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“We continue with diversification of our revenue base during this tough period, with a more rigorous and market-friendly approach to further expand our digital and ancillary businesses such as [AirAsia’s in-flight many brand] Santan, Teleport, and BigPay,” he said.

In 2019, Teleport also managed to achieve profitability after a full year of operations, making it the leading digital business of AirAsia. During Covid, while over 96% of AirAsia flights were grounded, Teleport has stepped up its services and tapped into the food delivery and e-commerce space.

It’s not to say that the company hasn’t met its own share of Covid conflicts.

While AirAsia has managed to retain all of its staff, they have been taking pay cuts ranging between 15% and 75%, depending on seniority. The co-founders Kamarudin and Tony Fernandes are not taking any salary at all.

It’s a problem across the board

In March, local airline Malindo Air said it would cut up to 50% of its employees’ pay in addition to reducing their number of working days by up to 15 days a month. Meanwhile, national carrier Malaysia Airlines is reducing senior management’s salaries by 10% and waiving allowances for all of its 13,000 employees.

But unlike its competitors, AirAsia has been ramping up its non-airline businesses from before the pandemic. Thereby reducing its dependency on the core business in the long run.

It has invested heavily in technology in the past few years, starting with transferring all of its non-airline businesses to RedBeat Ventures in December 2018. AirAsia also reshuffled its leadership to facilitate a digital transformation in August 2019 and launched a US$60 million tech fund in partnership with Silicon Valley-based 500 Startups.

Its foresight of banking on tech seems to have given it an advantage over its peers.

British budget carrier Virgin Atlantic—whose founder Richard Brandson is apparently a dear friend of AirAsia’s Fernandes—is reportedly seeking a buyer as it fails to lobby for a government bailout.

Singapore Airlines, which owns Scoot—the budget carrier that competes directly with AirAsia—had to turn to the city-state’s investment fund Temasek Holdings to raise US$6.2 billion funding to keep its operations afloat. It got US$13 billion instead.

Although it sits on a RM2.6 billion (US$600 million) cash reserve, AirAsia is still mulling a government loan to lend a helping hand to its business. The reason? AirAsia’s long-haul unit, AirAsia X, is bleeding out the company—it’s listed as an airline on the brink of bankruptcy.

But AirAsia still has a few tricks up its sleeve. Starting with its ability to Teleport.

Hot iron struck

In 2019, the first full year of its operations, Teleport generated US$114 million of revenue at a growth rate of 125% year on year. It actually beat its initial target of RM400 million (US$92.8 million). It also claims that it is profitable.

The logistics arm also contributed about 4% of AirAsia Group’s total revenue. And despite the impact of Covid-19 in China, Korea, and Southeast Asia, the business grew over 30% year on year for the first quarter of 2020, between January and March.