Please fasten your seat belts

:References
Corporate profile. (2012). AirAsia. Retrieved from
http://www.airasia.com/ot/en/about-us/corporate-profile.page.

Clerment. Ong & Ivy Wong . Power Point Presentation on Air Asia

Dr. Abang N Dahlan . (2013). Seminar 3 Topic 5 Strategy Research

Lawton, T. & Doh, J. The ascendance of AirAsia: building a successful

budget airline in Asia. Ivey Case Study No. 2.
 Introduction
Increasing liberalization of the regulatory environment in
which regional and global airlines compete has created
challenges for major carriers as well as opportunities for
carriers that are able to deliver high-quality services at the
lowest possible price.

As a result, low-cost airlines are an increasingly common

sight in airports around the world where no-frill air carriers
are providing reliable service at a fraction of the price
charged by full-price competitors. such as AirAsia
 Air Asia , Profile
Established in 1993 and commenced operation on 18 November
1996.
2001, it was purchased by former Time Warner executive Tony
Fernandess company Tune Air Sdn Bhd from the ownership of HICOM
Holdings Bhd for the token sum of only RM1, and with only 2 Boeing
737-300 aircraft together with RM40 million in debt.
AirAsia Berhad is a Malaysia-based low-cost airline.
The largest low-fare, no-frills airline and a pioneer of low cost travel
in Asia.
Operates scheduled domestic and international flights to over 400
destinations spanning to 25 countries.
Had flown over 100 million guests upon the core believe that Now
Everyone Can Fly.
Main terminal hub is the Low-Cost Carrier Terminal (LCCT) at Kuala
Lumpur International Airport (KLIA).
AirAsias associates companies- AirAsia X, Thai AirAsia (TAA), Indonesia
(IAA) and Malaysia AirAsia (MAA), and VietJet AirAsia.
 Key Strategies
Safety First
High Aircraft
Utilization
Low Fare, No
Frills
Streamline
Operations
Lean Distribution
System
Point to Point
Network Air Asia.com 2012
Root of Competitive advantage of Air Asia

Adapted from Study slide For Dr. Abang, 2013

 Capabilities
Foster a dependency on Internet technology, eg. online booking,
online checking (flight status, promotions).
Investment in the AirAsia Academy.
Dynamic environment between employees.
No communication barriers between employers and employees,
friendly.
Aggressive marketing tactics, massive advertising, promotional
packages etc
Employees motivation- rewards free flights for their staff.
Offer customers the ticketless concept.
Low operating cost- wages, airport fees, short ground waits due
to simple boarding processes.
Keeping cost low- uses one type of aircraft, Airbus.
CORE COMPETITVE OF AIR ASIA
1- Usage of one type of aircraft

Economies of scale

Cost can be cut by 50%

Small inventories ( cube-square rule, power of purchasing)

Reduce time on employees training and learning curve

ASK: Available seat kilometers, which is the total number of

seats available on scheduled flights
multiplied by the number of kilometers these seats were flown.

Cost per ASK: Total operating expenses (excluding finance costs

and taxation) divided by ASK. In the
airline industry, this is comparable to unit cost.
Air Asia.com 2012
 ,,,, CORE COMPETITVE OF AIR ASIA Cont
2- Synergy between the AA management and the employees

Management support and motivate employees to work and creativity

Competitors find it hard to follow

3- Productive and Skillful employees

Employees create tips to help in procedures and save time, costs.

example: the one type concept

4- Limited passenger service

Food and beverages are not included , transportation from the

airplane to the airport not includes etc .

Airport tax
COMPETITVE ADVANTAGES LOW COST

Product and
skillful employees
Courteous,
and simple but limited
aggressive and passenger
focused service ( eg.
management
structure No Meals)
Short Haul ,
point-to- point
High aircraft routes, often
utilization to secondary
airports

Standardizatio Frequent,
n fleet of Reliable
aircraft Schedules

Developed for this presentation

 Strengths
Strong management team consists of industry
experts and ex-top government officials
( all the board of directors have outstanding
portfolio
Weaknesses
Service resource is limited due to low costs
Government interference and regulation on
airport deals

Low cost operations (ticketless, online Non-central location of secondary airports

booking, online check-in, quick turnaround of
25 minutes, low fares and no frills) Heavy reliance on outsourcing

Using single aircraft fleet (reduce the Complaint from customers regarding the
maintenance and training costs) current overcrowded LCCT (handled about 17
million passengers instead of its capability to
Enter and focus on potential market (lower and handle 15 million passengers)
middle income group)

Multi-skilled and well-trained staffs to

enhance the efficiency
Strong brand recognition, marketing approach
and awareness
 Opportunities
Expansion to new routes based on low cost
philosophy (exploit growing markets like
China, India)
Higher fuel costs means less profitable
competitors may be forced out of business
Partnerships with Virgin airline to use
existing strengths (brand recognition, landing
rights)
Differentiate from old LCC model (include
customer service and operation as full service
airline)
Long haul flight to approach undeveloped
market (Air Asia X to Europe)
Threats
Accident and disaster affect customer
confidence (Example: an aircraft skidded off
the runway while landing at KCH
International Airport on Jan 2011)
Aviation regulation and government policy
(barriers in new routes expansion)
Full service airlines start cut costs to
compete (MAS offered discounted fares with
meals and comfortable seats)
Entrance of other low cost couriers (Firefly,
Tiger Airways)
Will Air Asia be able to sustain its
?Core
 : Achievements
Year 2003-
2010
 Success factors
Combination of good timing, entrepreneurial vision and
some blind luck that may have run out
Testament to Fernandess capabilities as a effective leader
in a wide range of settings.
The one thing the company managed to keep consistent
was its no-frills model and always offering value in low
fares (Lawton and Doh, P435)
 Air Asia
Airlines over
the years
Dates and years Milestones
April 2002 18 .AirAsia became Asias first airline to go ticketless

May 2002 10 .It introduced its first online booking

August 2003 19 .It introduced worlds first SMS booking

December 2003 8 .Its first international flight took off to Phuket

8 December 2004 It announced a joint venture with PT AWAIR of

.Indonesia
February & 29 March 2005 21 .Launched Go-Hostel & Go-Car

Year 2007 The lowest cost in the World, 51 000 passengers per
.day, 54 planes
Year 2008 .Launch of Air Asia X
 Business Strategy
and Operations
FREQUENT FLIGHTS SAFETY FIRST LOW FARE NO FRILLS
Faster turnaround time
Improving aircraft utilization Ticketless
service
Crew efficiency Internet booking
Using one type of aircraft forReservations
and sales office
saving training cost Easy payment channels and authorized
travel agents
Nationwide call centers

The airlines complies with the

The airline ensures fast turnaround of Its fares are significantly
conditions of the International
about half-an-hour which is the lower than those of other
Aviation Safety and is regulated by
fastest in the region operators
the Malaysian Dept. of Civil Aviation

COST OPTIMIZATION OPERATION GUESTs CONVENIENCE

ANALYSIS
 SWOT ANALYSIS OF AIRASIA
Growth in revenue OPPORTUNITY
Low distribution cost Increasing competition
Low operational costs Increasing oil price

External Environmental Factor

Attractive ticket price Substitute products
Strong Brand presence in Asia Increasing of maintenance cost
Malaysian government support
Diversification strategy + Joint ventures

WEAKNESS Internal Comp- -etence Factor STRENGTH

Liberalization of ASEAN capital

routes
Does not have its own maintenance, repair Asias middle class growth
.and overhaul (MRO) facility The ASEAN Open Skies allows
Receives a lot of complaints from unlimited flights among ASEANs
.customers on their service regional air carriers beginning
THREATS .December 2008
 PORTER ANALYSIS
OF AIRASIA
Potential Entrants
Many customers but high sensibility New
Threat of Medium
.to prices Entrants
Train, bus and car travel are
Medium
..developing Industry
Development of substitute products Bargaining
Competitors
Power of
Suppliers Buyers
Buyers
Bargaining
Power of
Suppliers Rivalry Among
Existing Firms Hard competition Medium
between Airbus, Boeing, ATR
Full services Air Line might .and others
Low Threat of Substitute
.consider going low cost
Development of new low-cost Products or Services
.companies
Substitutes
 BCG Matrix analysis of AirAsia
according to the country that their fleets are operating

Malaysia
Indonesia

Brunei

Macau and

Thailand Singapore
FUTURE ANALYSIS
 SWOT Analysis
15 years Down the Line
 STRENGTH
Brand Name
Long-term future
Strong management team
Strategy formulation and execution
Low cost leader in Asia
Excellent utilization of IT
OPPORTUNITY
Demographic advantages
Growing of Middle Class
Partner with other low cost airlines
High fuel prices will squeeze out
unprofitable competitors
Air Asia will get inherent advantage in
long distance travel
Developed innovation technology
WEAKNESS
Relatively high price
High operation cost
Investment cost in high technology
Strong competition
THREATS
Entrance of other LCCs
High fuel price decreases yield
Accident, terrorist attack and disaster and
affect customer confidence
Aviation regulation and government policy
Increase in operation cost in producing
value-added services
System disruption due to heavily reliance
on online sales
 FUTURE STRATEGY

Layered Adaptive Security

Travelling planning
Equivalent Visual Operation
Reservations and ticketing
Super Density Airport
Frequently flyer program Operations

Campaign management Airborne Information Net

Customer care
Yield Management System (YMS)
Business intelligence
Computer Reservation System (CRS)

Enterprise Resource Planning System

(ERP)
 FUTURE PLANNING
. To maintain the high level of profitability
:Act on the prices .1
Expensive tickets to be distributed when the demand is high (week-
.end)
.Prices increasing according to the demand
.Cheap tickets available during the middle of the week

: Act on the cost .2

.Offer more on board services/ products to the passengers
Taxi booking service
Internet WIFI access on board Newspapers
Place advertisings on the planes cabin
 FUTURE PLANNING
Fund-raising
.Fresh money could be used to finance strategic projects

. Invest in joint ventures

Maintain international development across Asia in association with
.local budget airlines
.It would increase the airlines offer

Diversification
Acquire new know-how in a view to offer more service to the
.consumer
.E.g. To take over an online travel agency
 Conclusion

The strategies of Air Asia focus more on the management and access of information rather

.the creation of irrelevant airline services

For this reason, Air Asia has developed a unique set of guiding principles - simplicity, cost-

.efficiency and effectiveness

Total commitment to these principles makes the airline services of Air Asia very user-

.friendly to its customers

SWOT analysis of AirAsia with reference to sustainability and future growth shows more

.opportunities than threats

AirAsia is fully determined to exploit these opportunities and convert more threats into

.opportunities for success

 Conclusion
AirAsias air fleet has grown with routes servicing 400
destinations in 25 countries with hubs in Malaysia,
Thailand and Indonesia today. In addition, Tony Fernandes
is responsible for this impressive rate of growth, with many
analysts citing his no-frills, low-cost business model as
some of the best industry practices.
!Thank You

NOW EVERYONE CAN FLY