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Professional Diploma Program in Logistics and Supply Chain Management
Project Studies – Enabling Technology in Airline Industry By WONG Pui Man, Cary March 2009

...................................................................................................................................................................................................................7 BUSINESS MODEL .......10 CURRENT STRATEGIC IT IMPLMENTATION .....................................................2 CONTENTS CONTENTS ................................................................................................................................................................................................................................................................................................................3 COMPANY BACKGROUND.........11 REFERENCES ...................................................................................9 VALUE CHAIN ANALYSIS ....................................................................................................8 SWOT ANALYSIS ............................................................10 POTENTIAL STRATEGIC IT IMPLEMENTATION...................................8 MAJOR CHALLENGES ................................................................................................................................14 Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .......4 BUSINESS PROCESS AND OPERATION.......9 IT IMPLEMENTATIONS AND STRATEGIC ALIGNMENT ....................................................................................................................Enabling Technology in Airline Industry ....................................................................................................................................................................................................2 ABSTRACT ..........................................5 LOW COST CARRIER (LCC) BUSINESS MODEL .................................................................................................................................................................................................................................................................7 COMPETITIVE ADVANTAGES .......................................................................................................................

This paper will look at the awarding-winning low cost carriers (LCC) in Asia Pacific region – AirAsia. value chain.Enabling Technology in Airline Industry . analyzes the current business environment. competitive advantages. and the recommended future implementation of technology in customer relationship management (CRM) implementation to pursue competitive differentiation and profitability effectively in the future. current implementation of information technology. and facilitates the successful airlines in the future. Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .3 ABSTRACT The use of information technology plays an important role in the strategic and operation management of airlines.

and operates over 400 flights daily from hubs located in Malaysia. assuring lower costs and higher productivity. Providing guests with the choice of customizing services without compromising on quality and services. Thailand. High Aircraft Utilization Low Fare. low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. hassle-free. No Frills Streamline Operations Lean Distribution System Point to Point Network Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . Through the corporate philosophy of “Now Everyone Can Fly”. With a fleet of 72 aircrafts. AirAsia creates values through the following vision and mission: AirAsia Values Vision To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares. AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. AirAsia believes in the no-frills. AirAsia flies to over 61 domestic and international destinations with 108 routes. and Indonesia. embracing technology to reduce cost and enhance service levels • • Mission AirAsia makes the low fare model possible and create values through the implementation of the following key strategies: AirAsia Key Strategies Safety First Partnering with the world’s most renowned maintenance providers and complying with the world airline operations. Applying the point-to-point network keeps operation simple and lower costs. Implementing the regions fastest turnaround time at only 25 minutes.4 COMPANY BACKGROUND AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. Today. To be the best company to work for whereby employees are treated as part of a big family Create a globally recognized ASEAN brand • To attain the lowest cost so that everyone can fly with AirAsia • Maintain the highest quality product. Making sure that processes are as simple as possible. Offering a wide and innovative range of distribution channels to make booking and traveling easier.Enabling Technology in Airline Industry . AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies.

com as the company key channel of marketing and sales. 3.Enabling Technology in Airline Industry .com home page and follow the below 5 steps.com or Online (http://www.Itinerary Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . Exhibit 1 – AirAsia. 2.Guest & Contact Step 4 .Search Step 2 .airasia. 1. customers can either choose the following channels or simply visit the AirAsia.airasia.com Home Page To book a flight with AirAsia.com) in 5 easy steps as shown below. Step 1 .5 BUSINESS PROCESS AND OPERATION AirAsia has fostered a dependency on Internet technology for its operational and strategic management.Payment Step 5 . and provides an online ticket booking services to traveler online. 5. The following shows the home page of AirAsia.Select Step 3 . Call centre Sales office and airport sales counter Authorized travel agents Mobile booking via mobile. 4.

6 The following diagram shows the online electronic ticket ordering process. Exhibit 2 – AirAsia Electronic Ticket Ordering Process Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .Enabling Technology in Airline Industry .

the low cost carriers are now facing some challenges in the market. However. The key objective of low cost carriers is to increase their reach and provide the services to a large segment.Enabling Technology in Airline Industry . BUSINESS MODEL AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry. cockpit training and standby crews due to homogeneous fleet High resource productivity Short ground waits due to simple boarding processes No air freight. especially leisure traffic and price-conscious business passengers Short-haul point to point traffic with high frequencies Aggressive marketing Secondary airports Competition with all transport carriers Low wages Low airport fees Low costs for maintenance. no hub services. which can be characterized as below: Low Cost Carrier (LCC) Business Model Simple Product Catering on demand for extra payment Planes with narrow seating and only a single class • No seat assignment • No frequent flyer programmes • • • • • • • Positioning Non-business passengers.7 LOW COST CARRIER (LCC) BUSINESS MODEL The low cost airlines like AirAsia have changed the definition of airlines that air travel is a luxury and it is only for the upper segment of the population. and high percentage of online sales Low Operating Costs • • • • • • Exhibit 3 – Low Cost Carrier Business Model Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . short cleaning times.

AirAsia SWOT Analysis Strengths • Low cost operations • Fewer management level. a SWOT Analysis of AirAsia can be conducted and shown below. terrorist attack. effective. focused and aggressive management • Simple proven business model that consistently delivers that lowest fares • Penetrate and stimulate to potential markets • Multi-skilled staffs means efficient and incentive workforce • Single type fleet minimize maintenance fee and easy for pilot dispatch Weaknesses • • • • • • • Service resource is limited by lower costs Limited human resources could not handle irregular situation Government interference and regulation on airport deals and passenger compensation Non-central location of secondary airports Brand is vital for market position and developing it is always a challenge Heavy reliance on outsourcing New entrants to provide the price-sensitive services Opportunities • • Threats • • • • • • • • • Long haul flight is an trial to get undeveloped market share Differentiation from traditional LCC model by adding customer services or operation as full service airline with low fare Ongoing industry consolidation has opened up prospects for new routes and airport deals High fuel prices will squeeze out unprofitable competitors Full service airlines start cut costs to compete Entrance of other LCCs High fuel price decreases yield Accident. AirAsia has the following competitive advantages over the competitors in the airline industry.Enabling Technology in Airline Industry . which can be summarized in the following diagram. Exhibit 4 – AirAsia Competitive Advantages SWOT ANALYSIS To figure out the internal factors such as strengths and weaknesses. 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 Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .8 COMPETITIVE ADVANTAGES With the Low Cost Carrier business model. and external opportunities and threats to business objectives.

a value chain analysis for airline industry has been conducted as below to model AirAsia as a chain of valuecreating activities. and Service) is to create value that exceeds the cost of providing the product or services.Enabling Technology in Airline Industry . Marketing and Sales. Exhibit 5 – Value Chain Analysis of Airline Industry Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .9 MAJOR CHALLENGES • • • • • • • Increasing competition because of increasing number of low cost airline competitors. Operations. thus generating a profit margin. The goal of these activities (Inbound logistics. and aggressive competition against the large or traditional airline companies Customer decrease because of poor economy Rising of the fuel prices Higher labor cost Inadequate infrastructure Route and flight utilization Safety and security issues of aircraft crash or being attacked VALUE CHAIN ANALYSIS To better understand and analyze the specific activities through which AirAsia can create a competitive advantage. Outbound logistics.

Open Skies scaled easily to accommodate our growth.Tony Fernandes. call center. Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . The followings are few system implementations that AirAsia has done in its marketing and sales activities as well as operation activity in the value chain. The implementation of information technology in its value chain provides powerful strategic and tactical tools for AirAsia. Computer Reservation System (CRS) • • • An integrated web-enabled reservation and inventory system suite powered by Navitaire’s Open Skies technology that includes Internet.7 million passengers in less than two years.Enabling Technology in Airline Industry . Helps AirAsia to grow at a dramatic pace in the past few years as stated below: "Navitaire's Open Skies technology has truly enabled AirAsia's growth from 2 million passengers to 7. AirAsia is able to successfully maintain process integrity. With the robust ERP technology platform. speeds up reporting and data retrieval process. which if properly applied and used. CEO. Satisfy the unique needs of AirAsia implementing a low-cost business model to transform the business process to efficiently streamline operations. information technology has driven fundamental changes in the nature and application of technology in business. A reservation done at a later date will be charged more than the one done earlier for the same seat Route – By adjusting prices for routes / destinations that have a higher demand when compared to others." . and airport departure control functionality. AirAsia Enterprise Resource Planning System (ERP) • • An integrated ERP solution powered by Microsoft Business Solutions (MBS) on Microsoft technology platform which is implemented by Avanade consultants in Ma 2005. Yield Management System (YMS) • Anticipates and reacts to the behavior of customers to maximize the revenue . CURRENT STRATEGIC IT IMPLMENTATION AirAsia has currently adopted information technologies strategically to integrate the operations and coordinate all the business and management functions. reduce financial month-end closing processing time. more frequently during off-peak times while raising prices only marginally for peak times. • Results increased revenue (3-4%) by taking advantage of the forecast of the high / low demand patterns.10 IT IMPLEMENTATIONS AND STRATEGIC ALIGNMENT In todays globalize economy. could bring great advantages in promoting and strengthening the competitive advantages.taking into account the operating cost and aids AirAsia to optimize prices and allocate capacity to maximize the expected revenues by 2 levels: a) b) Seat – Seats are available at various prices in different points of time. lower prices as YMS has aided AirAsia to increase the revenue by offering higher discounts.

2.Enabling Technology in Airline Industry .11 POTENTIAL STRATEGIC IT IMPLEMENTATION In order to gain market share and sustain its competitive advantages to be the low cost carrier in the high demanding environment. Exhibit 6 – The Strategic Forces of Value Proposition Customer Relationship Management (CRM) In long term. supplier relationships. empowering them with a complete view of the customer and clearly articulating the employee’s role in the CRM strategy. AirAsia must develop new ways to manage both customer relationships and suppliers or partners to optimize customer loyalty. CRM initiative development – to differentiate from other competitors.e. management is recommended the following approaches: 1. The following diagram shows the strategic forces of value proposition of the airline industry. i. and revenue. which respond to the needs and desires of their own customers 3. AirAsia should implement CRM program in favor of investing in initiatives with a high return. AirAsia should not adopt the “fast follower” approach to CRM initiative development. When planning and implementing CRM application. Customer segmentation – mileage-based segmentation is inadequate. learning from other competitors’ approach (e.g. customer relationships should be fostered for AirAsia to maintain competitive advantage and profitability. showing that the focus on Supplier and Alliances and Customers will drive positive values to AirAsia can achieve. installing kiosks for fast check-in). Customer Relationship Management (CRM) application will be one of the area of strategic IT implementation that AirAsia can focus to achieve high values to both shareholders and customers. Organizational design and management – AirAsia needs to train the employees. rather should focused on value-based and needs-based approaches can guide investment decisions and drive greater insight into the needs of highvalue customers. Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .

bundled services information. Dynamic. and gate information displays etc. multi-dimensional reports that helps management to do analytics in various areas such as customer profiles. Web-based self service such as e-ticket booking and reservation. flight notification systems. AirAsia is recommended to look into the ROI and financial impact to shareholder value driven by each of the CRM initiatives. ITA search engines.12 Advanced and sophisticated CRM information system should include the following key functions: Customer Relationship Program (CRM) Key Functions Traveling planning Site personalization for on-line customer to create travel plan. Exhibit 7 – Example of Return On Investment from Selected CRM Initiatives Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . internet in lounge.Enabling Technology in Airline Industry . and phone check-in etc. kiosks. and in air Internet services. updated. internet check-in. RFID baggage tags. roving agent check-in. Email campaigns and promotion. membership-based or point-based rewarding scheme offering to the applicable customers. Reservations and ticketing Frequently flyer program Campaign management Customer care Business intelligence To justify the investment and implementation scope of the CRM program. The followings show some examples of ROI and the financial assessment of selected CRM initiatives. online baggage tracing.

and retain high-value customers. Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . develop.Enabling Technology in Airline Industry . AirAsia will be better positioned to acquire.13 Exhibit 8 – Financial Assessment of Selected CRM Initiatives By taking the steps to implement a truly consumer-centric approach to relationship management.

14 REFERENCES 1. Dimitrious Buhalis.com. 2002. http://www. AirAsia – How to book online tutorial. AirAsia Corporate Website.com/res_and_dist/openskies. Navitaire Open Skies by Navitaire Reservation and Distribution System. 3. 2004.asp Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . University of Surrey. http://www.airasia. The future of CRM in the airline industry: A new paradigm for customer management.jsp?name=HOW%20TO%20BOOK%20ONLINE&id=4d99d08ac0a8c85d-177e6b40-4dab9d31 5. eAirlines: Strategic and Tactial Use of ICTs in the Airline Industry.com/site/en/page. IBM Institute for Business Value. 4.Enabling Technology in Airline Industry .airasia. 2. http://www.navitaire.

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