Tony Fernandes has been involved in Formula 1 for a several years as a sponsor via his Air Asia business, but he is now moving into team ownership as he heads the new Malaysian-backed Lotus project that will join the field in 2010.
At the Motor Sport Business Forum in Monaco, Fernandes discussed the challenges and opportunities arising from entering a new F1 team.
Q. Why get involved in Formula 1, and why now in particular?
Tony Fernandes: I started the airline business from the music business. I signed it three days after 9/11, and everyone said that's a crazy time to start an airline, it's in crisis, etc., etc. But I thought it was a great time, because the incumbents were in a little bit of a state of flux, and it gives a new entrant such as us with very little capital the chance to go in there and try and start something.
Formula 1 is nowhere near the state that the airline business was in after 9/11. But we see opportunities – I think things are going the right way. Costs may be coming down. I still think it's a phenomenally successful sport. There are still lots of ways of making this a really good business, and it's a great business for other businesses to sit on, on a platform. So those are the three main things that got us involved in this.
Q. What is your initial investment going into 2010?
TF: We have a budget of £55 million ($89m) this year to get the team going. That involves a lot of start-up costs. We are obviously the latest entry vis-a-vis a new team, because obviously Sauber has come in – but they've got all the infrastructure in place. We have had to build everything from scratch.
But we took a little bit of a risk – I started investing in the car and people even before we had a grid slot. I told [Mike] Gascoyne, 'If this doesn't work, I'm going to have some very expensive pictures, and not very nice pictures either...' But that paid off, so we're looking confident and we're about a week ahead of schedule for being on the grid.
Q. What about the business opportunities that you see in Formula 1?
TF: We have a great opportunity because Air Asia sits on massive market. We started eight years ago with 200,000 people flying with us. Eight years later, we carry 25 million people and we sit in a playground of 600 million people in south east Asia, and a billion in China and India that we fly to us. So the opportunities to do things together are wonderful, and that's what we're looking at.
I'm not so sure that the traditional form of just sticking the name on car for branding purposes will be enough going forward. I think Formula 1 teams have to look at other revenue streams as well and over the next three or four years we have many ideas.
Q. F1 has been based in Europe so far, but you're moving to Malaysia in time. What opportunities do you think a move outside Europe presents to you and F1 as a whole?
TF: For the sport it is important, even though people think it's a global sport with lots of circuits around the world – you can build stadiums all around the world, but people still come to see the participants – it's still really predominantly European-based. Even Force India is really a British team with Vijay [Mallya] running around.
So, we think it is important for the sport that, for it to be truly global, it needs to have teams outside of Europe. Recently in Malaysia, we sponsored a wild card entry for MotoGP. That created the largest audience ever for a 125cc race in Malaysia and, in fact, for MotoGP because there was a lot of local interest.
I dare say next year with both Singapore and Malaysia there will be a huge amount of additional interest. So, having a circuit is one thing, but having your own team with local involvement will create much more excitement. Hopefully us and US F1 are the start of many more national-based teams, which I think will be great for Formula 1 going forward.
Q. Sponsors like to be in a "peer group" with other prestige brands. How important do you think the loss of manufacturers is? Is it a blow?
TF: No, I don't think so at all. If you look at a lot of those brands, Formula 1 created them as well and I think, in this case, there will be many brands that will become as big as some of these other guys. McLaren is looking at making a [road] car; obviously we have a relationship with Lotus.
But I think Formula 1 is big enough, anyway. With or without manufacturers, people will still come – it's not because of BMW or Toyota or the other manufacturers that people came to Formula 1. They came before the manufacturers, they came after the manufacturers left, and they will come back again. It is the sport that people come to, not the teams. As long as the sport's exciting and there is a lot of interest and personalities in it, people will come. I have no fear about that.Q. Can you explain the ownership structure of your team and how the Lotus brand fits in?
TF: Lotus is a complicated brand. Obviously Proton in Malaysia owns Lotus, and we have a licensing agreement with them. I think, over time, that relationship will solidify more and more, and Group Lotus will probably buy into the team at some stage. More and more technology from our side will go into Lotus cars, we will promote Lotus Cars closely, and I see it in time being no different from how Ferrari works.
Q. To what extent can you claim the heritage of Lotus in Formula 1?
TF: I don't think we can claim any of the heritage but we obviously have a great relationship with Clive and Hazel Chapman. We're in Norfolk and a few miles from Hethel. We are very clear about making sure we don't destroy any of the prestige. We have an advisory council to make sure that we protect what has been built by Colin Chapman and the people at Lotus.
So I don't think we can claim [Lotus heritage] but we'll certainly celebrate it and work with it. We have lots of ideas. We've talked about doing something like the Goodwood Festival at this year's Malaysian Grand Prix and have lots of Lotus enthusiasts bring their cars down to Malaysia. There are lots of ways to celebrate the heritage. It's phenomenal history, a phenomenal brand. We can't claim it, but we will work with it, we'll celebrate it and we'll honor it.
Q. What have you learned from being a sponsor that you can take into team ownership?
TF: It has been a fantastic relationship with Williams, it started as a very small sponsor. I think we're a great example of how it worked. We were a small brand, we sponsored a Formula 1 team, we grew it and we added more. In eight years, we have built a brand that is second to none. We've started another airline called Air Asia X, which really almost mirrors the Formula 1 circuit. Williams has helped us tremendously. They worked very hard on building the brand.
But I do think there are more things that can be done. I think generally Formula 1 teams are really race teams. I think the business side of Formula 1 hasn't always been exploited for the best ability of sponsors. Being on both sides, I think we know what sponsors want and now we have a team so we'll try and marry the two and give more value to sponsors.
Q. What does the Resource Restriction Agreement mean for a new team like you?
TF: It gives us everything we need. Obviously, at one stage we were ready to put a team out at £40 million ($65m) because that's what we were told the cap was going to be. Obviously, we're in favor of having less money to build a car, but it's still exciting.
I am still confused as to where all the extra money goes when you have a team with £150 million ($245m). I'm still trying to understand my £55 million.
We think we are going to have a very reasonable car. We know we aren't going to be competing [at the front] in year one, but it takes time and we'll have a good basis for moving forward. But the idea of capping costs is a good one, because you do need good teams, you do need a competitive grid.
If you look at American sports, the NFL has got it right, because you never know who will be the Super Bowl winner – the way they draft-pick, the way they cap salaries, etc. So it's always exciting because you could be right at the bottom and a few years later you could be winning the Super Bowl. In English football (soccer) it's very different. I support, for my sins, West Ham United, and all we do is sell players to everyone else to survive. I could never dream of winning the Premiership. The gap between Premier League sides at the top and bottom is massive. And I think long-term that damages the sport.
Q. What's your target for 2010? How close do you expect to get to the existing teams?
TF: I honestly have no idea, we haven't even got the finished car yet. For me – make sure I'm ahead of Richard Branson. I used to work for him, we partnered together in an airline. So I'd like to see him behind me, that would be nice, not physically.... I think a good target would be to be the best of the new teams and I'd like to finish every race.
This Formula 1 thing is not about next year for us, it is about building a good package for both sponsors and our team, building a good team and building a solid structure. Building a house is about putting the right structure in, so this year's about putting the right structure in, having realistic targets, and moving ahead slowly. The great thing about it is that we can dream in the morning and say, 'Maybe we have a chance,' but we're realistic and I think as long as we have realistic goals and we have a plan, we'll get near the top.
We haven't come here to be in five years' time still at the back of the grid, that's very clear. No one remembers people who come second. If I say, 'Who came second in the 100 meters at Beijing?' you don't know. Everyone just remembers the man with the golden shoes. We're here to make sure we can compete, but we're also realistic. It may take us a bit of time, but we'll be there in the end.