March 4, 2019 / 2:24 PM / in 3 months

AirAsia launches venture capital fund to back startups in Southeast Asia

(Reuters) - Malaysian budget carrier AirAsia Group said on Monday it was launching a venture capital fund in the United States to invest in startups seeking to enter or expand in Southeast Asia.

FILE PHOTO: A man walks past the logo of AirAsia at Don Muang International Airport in Bangkok, Thailand, June 14, 2016. REUTERS/Chaiwat Subprasom

The fund, called RedBeat Capital, will focus on post-seed-stage startups in travel and lifestyle, financial technology, artificial intelligence and cybersecurity.

AirAsia is partnering with San Francisco-based 500 Startups, which invests in young fast-growing companies.

RedBeat Capital will have a base in San Francisco and access to 500 Startups’ deal flow, AirAsia said.

The airline group has initially allocated about $10 million, and the fund has already invested in a couple of companies, Aireen Omar, deputy chief executive, told Reuters.

AirAsia, which pioneered budget air travel in Asia, is broadening its reach to include a payments company, logistics, food and beverages brands and a loyalty program.

A year ago, it placed these lifestyle assets including the BIG Loyalty scheme and a Wi-Fi service, in which it typically has stakes of 80-100 percent, under RedBeat Ventures.

The new fund RedBeat Capital will house smaller investments in startups of anything up to around 20 percent, Omar said.

Together, these could be listed separately in future.

“We don’t have a timeline (for a listing) yet because our focus is to build a business fast,” she said in an interview.

AirAsia has been trying to re-invent itself as a travel and technology firm to exploit data and offset cyclical volatility in airline earnings.

The group last week posted a fourth-quarter net loss, its first quarterly loss in over three years, citing higher fuel prices and lease costs.

Non-flying ancillary revenues currently make up about 20 percent of group revenue.

The digital drive can improve ancillary revenues by using machine learning to better understand consumer trends, Omar said, adding that investments via the new fund should also help the core business.

“I would imagine that with what we are building here, the ancillary part will be increasing to more than 20 percent – it is not impossible for it to reach 50 percent at some point in the future,” Omar said.

Southeast Asia, with a young population and more internet users than the United States, but relatively little exposure in Silicon Valley so far, is among the fastest-growing tech markets, according to 500 Startups.

“We have noticed our own partners turning an eye toward Southeast Asia. It seems like a greenfield,” the startup accelerator’s chief executive Christine Tsai told Reuters.

Some network carriers such as Singapore Airlines are also ramping up investments in digital technology.

Reporting by Sanjana Shivdas in Bengaluru; Editing by James Emmanuel and David Gregorio

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