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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

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

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

With a fleet of 72 aircrafts. Today. assuring lower costs and higher productivity. Implementing the regions fastest turnaround time at only 25 minutes. Making sure that processes are as simple as possible. Providing guests with the choice of customizing services without compromising on quality and services. 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. High Aircraft Utilization Low Fare. Offering a wide and innovative range of distribution channels to make booking and traveling easier.4 COMPANY BACKGROUND AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. 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. low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. hassle-free. AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies.Enabling Technology in Airline Industry . 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. No Frills Streamline Operations Lean Distribution System Point to Point Network Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . AirAsia flies to over 61 domestic and international destinations with 108 routes. Through the corporate philosophy of “Now Everyone Can Fly”. and operates over 400 flights daily from hubs located in Malaysia. and Indonesia. Thailand. Applying the point-to-point network keeps operation simple and lower costs. 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.

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

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

cockpit training and standby crews due to homogeneous fleet High resource productivity Short ground waits due to simple boarding processes No air freight. 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 . The key objective of low cost carriers is to increase their reach and provide the services to a large segment.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. short cleaning times.Enabling Technology in Airline Industry . However. 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. 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. the low cost carriers are now facing some challenges in the market. no hub services. BUSINESS MODEL AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry.

Enabling Technology in Airline Industry . a SWOT Analysis of AirAsia can be conducted and shown below. AirAsia has the following competitive advantages over the competitors in the airline industry. terrorist attack. which can be summarized in the following diagram. effective. Exhibit 4 – AirAsia Competitive Advantages SWOT ANALYSIS To figure out the internal factors such as strengths and weaknesses. 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. 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 . and external opportunities and threats to business objectives.8 COMPETITIVE ADVANTAGES With the Low Cost Carrier business model. AirAsia SWOT Analysis Strengths • Low cost operations • Fewer management level.

Operations. Marketing and Sales.Enabling Technology in Airline Industry . The goal of these activities (Inbound logistics. and Service) is to create value that exceeds the cost of providing the product or services.9 MAJOR CHALLENGES • • • • • • • Increasing competition because of increasing number of low cost airline competitors. 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. a value chain analysis for airline industry has been conducted as below to model AirAsia as a chain of valuecreating activities. Outbound logistics. thus generating a profit margin. Exhibit 5 – Value Chain Analysis of Airline Industry Professional Diploma Program in Logistics and Supplier Chain Management Project Studies .

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. With the robust ERP technology platform. CURRENT STRATEGIC IT IMPLMENTATION AirAsia has currently adopted information technologies strategically to integrate the operations and coordinate all the business and management functions.Tony Fernandes. Open Skies scaled easily to accommodate our growth. • Results increased revenue (3-4%) by taking advantage of the forecast of the high / low demand patterns.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.7 million passengers in less than two years. CEO. Computer Reservation System (CRS) • • • An integrated web-enabled reservation and inventory system suite powered by Navitaire’s Open Skies technology that includes Internet. 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. speeds up reporting and data retrieval process. 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. call center. Satisfy the unique needs of AirAsia implementing a low-cost business model to transform the business process to efficiently streamline operations. 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. reduce financial month-end closing processing time. which if properly applied and used. could bring great advantages in promoting and strengthening the competitive advantages. Yield Management System (YMS) • Anticipates and reacts to the behavior of customers to maximize the revenue . The implementation of information technology in its value chain provides powerful strategic and tactical tools for AirAsia.10 IT IMPLEMENTATIONS AND STRATEGIC ALIGNMENT In todays globalize economy. information technology has driven fundamental changes in the nature and application of technology in business. Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . lower prices as YMS has aided AirAsia to increase the revenue by offering higher discounts." . more frequently during off-peak times while raising prices only marginally for peak times. AirAsia is able to successfully maintain process integrity.Enabling Technology in Airline Industry .

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

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

and retain high-value customers.Enabling Technology in Airline Industry . Professional Diploma Program in Logistics and Supplier Chain Management Project Studies . develop. 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.

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

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