AirAsia Rides builds on Gojek’s operations to battle Grab in Bangkok

While AirAsia Rides completes its first quarter in Bangkok, the super app that includes the service has reached 7.67 million downloads in Thailand since it launched in August 2021, according to Data.ai. This also makes Thailand the app’s second-largest market worldwide, accounting for 19.2% of total downloads.

However, there is still the question of whether the expansion into Thailand was a step in the right direction for the ride-hailing service, offered by parent company Capital A. Initially named AirAsia, the Malaysian-listed firm rebranded to Capital A in January 2022, to mark its aim to become more than just an airline.

While the move opened a new market for the service and raised the profile of Capital A’s super app, are the associated costs more than the company can afford?

Drivers keep 100% of fares

Capital A acquired Gojek’s operations in Thailand for US$50 million in July 2021 and then launched its proprietary “Super App” in Bangkok in February this year. The app is built on the infrastructure and resources of Gojek’s Thai operations.

On May 31, Capital A then announced the entry of AirAsia Rides into Bangkok’s ride-hailing scene. However, the market there already has a number of strong contenders, including regional industry powerhouse Grab.

AirAsia Rides launched in this saturated market with 3,000 taxi drivers already flying its flag. The ride hailer aims to capture a market share of 70% of tourists arriving by air to the city – a daunting task, given the dominance of the incumbents.

For perspective, Bangkok saw 25.9 million arrivals by air in pre-pandemic 2019. 70% of that figure would come to 18.1 million tourists. On the other hand, in 2022, Thailand as a whole has seen a total of only 3.8 million tourists visit its shores as of August 17, even after travel restrictions were scrapped.

This, combined with AirAsia Rides’ promise of transferring the entirety of fares received to drivers and charging no booking fees, raises the question of whether this venture into ride hailing will actually turn a profit for Capital A. In contrast, AirAsia Rides drivers in Malaysia pay a 15% commission to the firm.

According to Prabhu Ram, head of industry intelligence at Cybermedia Research, the move to hand over the entire fare to drivers is meant to counter wavering consumer loyalties and shore up AirAsia Rides’ market share.

AirAsia Rides regional CEO Lim Chiew Shan is unwilling to comment on the subject of fare pricing, saying that the calculations for the fare are part of the company’s “secret sauce.” However, he does say that the service’s operations will be profitable, with AirAsia Rides meeting the goal of serving 70% of airport arrivals in Bangkok by October at the latest.

Customers may also be willing to pay for the online travel agent part of the super app: With the addition of AirAsia Rides, the app now offers end-to-end services for customers, covering booking hotels, flights, planning an itinerary, and now, airport transfers. The convenience offered by this combination of services could hold the company in good stead in Bangkok.

The move into Bangkok and Capital A’s acquisition of Gojek’s operations in Thailand are also a step in the same direction, according to Ram.

“AirAsia Ride’s recent entry into Bangkok leverages the extensive strengths and networks that Gojek’s existing ride-hailing business in the city accords,” he says.

Questions over Capital A’s financial wellbeing

However, Capital A may not be in as healthy a financial position as it would like to be, especially after the group, which remains focused on its carrier services, was hit especially hard by the slowdown in travel during the Covid-19 lockdowns.

Strengthening cash position

IPOs to the rescue?

Bangkok: Aye or Nay?