Co-founder – Merlion Review Merlion Review (Singapore)
Tony Fernandes, CEO of AirAsia said in an interview that he is analysing the potential of launching an ICO (Initial Coin Offering) for AirAsia (TechCrunch, 2018). I had the pleasure of speaking with cryptocurrency expert Amarpreet Singh to find out the feasibility of this and if ICOs will be the next big thing for the airline industry.
An advisory board member for over 40 ICO projects and invited speaker for a plethora of tech forums, Amar is a seasoned fintech and blockchain expert who has amassed a wealth of tech experience working for international organizations such as Microsoft, Airbus and the World Bank. He also has a consulting house in Singapore and a technology center in India that provides back end and front end blockchain solutions.
TOP-3 reasons to hold AirAsia ICO
In his comments to TechCrunch, Mr Fernandes said that Air Asia’s BIG points can be easily transferred to blockchain and that AirAsia has “a product that can be a currency in Big Loyalty, [and] we’re building a payment platform so the two can marry quite nicely. We have an ecosystem that enables you to use that currency” (TechCrunch, 2018). If this ICO materializes, AirAsia will be one of the largest and most established airlines to adopt this new method of funding. To Amar, this move is wise for three reasons.
1. Adopt or Lag
As early as 2014, Latvian low-cost airline; AirBaltic has been accepting Bitcoin as payment (AirBaltic, 2014). Also, low-cost Japanese airline; Peach Aviation announced last year that they will accept bitcoins as payment (Bloomberg, 2017) and this year affirmed their commitment to launching this payment system despite delays (Cointelegraph, 2018). Other airlines such as Lufthansa (Forbes, 2018), Surf Air (PR Newswire, 2018), S7 (S7, 2017) and SIA (Singapore Airlines, 2018) have also announced plans to adopt blockchain. Therefore Amar sees that moving forward, blockchain and eventually ICOs will become commonplace in the airline industry and by acting quickly, AirAsia can exploit their early adopter advantage and maintain an edge over their competitors.
2. A deluge of ICO funding
In just 2017 almost $5.6 billion was raised from ICOs, a huge leap from $240 million in 2017 (Business Insider, 2018). With so much money going into the ICO space, it makes a lot of sense for an established company like AirAsia to launch their own ICO and grab as many new funds as possible.
3. Eliminate FX risk
Consumers will also benefit as they will be able to use the AirAsia tokens in every destination that AirAsia flies to without being exposed to FX risk. An article by finance writer & speaker; Frances Coppola, also agrees with Amar’s assessment that cryptocurrencies can be used to significantly reduce FX risk; albeit dependent on the stability of the cryptocurrency used in settling the international payments (AmericanExpress, 2018).
The future of ICOs in the Airline Industry
Operating in the highly competitive airline industry, AirAsia constantly has to innovate new ways to offer higher value to their customers or risk losing them to other airlines. With the advent of ICOs, this new source of funding will be a new arena to compete in. However if AirAsia launches an ICO without creating real utility in the tokens, it will crumble into a gambling instrument and AirAsia will not be able to harness the disruptive potential of blockchain as an infrastructure to offer better services. Therefore the challenge for an ICO by AirAsia or any other airlines is to create enough value in their tokens such that passengers will hold onto the tokens regardless of price fluctuations.