1. What are the major elements (mission /vision, objectives and strategies) of Air Asia’s strategy?

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. Mission: • 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 Air Asia • Maintain the highest quality product, embracing technology to reduce cost and enhance service levels Objectives: • Provide full fledged training and development to Air Asia pilots, aircraft engineers, cabin crew and guest services staff. • Develop the Academy as an aviation training ground towards fulfilling Air Asia's aspiration in becoming a regional aviation training hub. • Serves as a platform to keep Air Asians on track with the latest industry developments and to incorporate best practices into their operations. Air Asia strategies:

• • • • •

Safety First: Partnering with the world’s most renowned maintenance providers and complying with the world airline operations. High Aircraft Utilization: Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity. Low Fare, No Frills: Providing guests with the choice of customizing services without compromising on quality and services. Lean Distribution System: Offering a wide and innovative range of distribution channels to make booking and traveling easier. Point to Point network: Applying the point to point network keeps operations simple and costs low.

Management/ culture: The corporate culture of the company is flexible, open, strong and team-oriented. Because employees are aware of the company’s core strategy, they actively focus on maintaining low costs, and this leads to high productivity. Employees are rewarded with bonuses based on individual performance. In all, the culture shows enthusiasm, commitment, honesty and transparency amongst staff and with third parties. The management also fosters a non-discriminatory, meritocratic environment that is dedicated to constant high quality. 2. Did these strategies make sense? Air Asia is need to aware and consider with the strategic management. The reason of the airline industry is a unique and complex industry, not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, and the last one is because the effect of globalization and E-commerce becoming an effective tool in a company nowadays. 3. Conduct a SWOT analysis of Air Asia?

Alliance with Galileo GDS (Global Distribution System) that enables travel agents from around the world to check flight details and makes bookings have also contributed to their string brand name. Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years. with few hubs (Malaysia. The links with Manchester United (one of the world’s most famous football teams) and AT&T Williams Formula One team have further boosted their image to a greater extend beyond just the this region • Air Asia is the low cost leader in Asia. car rental). Their partnership with other service providers such as hotels and hostels. • AirAsia’s brand name is well established in Asia Pacific. with their strong working relationship with Airbus. It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. landing in secondary airport). Shin Corp (formerly owned by the family of former Thai Prime Minister – Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. With the help of Air Asia Academy. But now. The workforce is very flexible and high committed and very critical in making AirAsia the lowest cost airline in Asia. • The excellent utilization of IT The excellent utilization of IT have directly contributed to their promotional activities (email alerts and desktop widget which was jointly developed with Microsoft for new promotions). Air Asia’s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) has successfully elevated the brand to become a regional brand beyond just Malaysia. This has helped AirAsia to open up and capture a sizeable market in Thailand. Air Asia has successfully created a “low-cost airline mentality” among their workforce. It is a competitive disadvantage not to have its own MRO facility. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe. car rental firms.Strengths • Air Asia has a very strong management team with strong links with governments and airline industry leaders. AirAsia’s top management also capitalized on promotions through news by being very “media friendly” and freely sharing the latest information on Air Asia as well as the airline industry. This is partly contributed by the diverse background of the executive management teams that consists of industry experts and ex-top government officials. brand building exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well keep the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent fees. repair and overhaul (MRO) facility. They are Ryanair’s operational strategy (no frills. Besides the normal print media advertising & promotions. they managed to get big discount for aircraft purchase which is also more fuel efficient compared to Boeing 737 planes which is being used by many other airlines • The management team is also very good in strategy formulation and execution. Citibank (AirAsia Citibank card) has created a very unique image among travellers. For example. Weaknesses • Air Asia does not have its own maintenance. hospitals (medical tourism). Southwest’s people strategy (employee comes first) and Easyjet’s branding strategy (linking with other service providers like hotels. . And also. AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low.

security charges and landing charges are beyond the control of airline operators This is a threat to all airlines especially low cost airlines that tries to keep their cost as low as possible. with the “first mover” advantage as well as its strengths in management. • Users’ perception that budget airlines may compromise safety to keep costs low 4. is the “ASEAN Open Skies” allows unlimited flights among ASEAN’s regional air carriers beginning December 2008. is the ever-increasing oil price. Second. Threats • Certain rates like airport departure. being charged for a lot of things and not able to change flight or get a refund if customers could not make it. • Fair availability The availability of AirAsia is not good as traditional airline as it only provide unique aircraft. However. The increasing oil price at the first glance may appear like a threat for AirAsia. For example. Most of the full service airlines have or planning to create a low cost subsidiary to compete directly with AirAsia. The degree of barriers to entry depends on the strength of:- .• AirAsia receives a lot complaint from customers on their service. Opportunities There are 2 major events that are taking place now or going to take place in this case study period. How does the competitive environment of Air Aisa look like? Use Porter’s fiveforces framework to analysis it competitive environment? Threat of new Entrants Threat of new entry is moderate. Singapore Airlines has created a low cost carrier Tiger Airways. AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline’s customers. • AirAsia’s profit margin is about 30% and this has already attracted many competitors. because it requires high capital to support and government barrier is high such as the air service agreement can build barriers to those new entrants. Examples of complaints are around flight delays. However. First. This will definitely increase the competition among the regional airlines. The population of Asian middle class will be reaching almost 700 million by 2010. Second. landing rights and landing slots (time to land). this agreement can be seen as more of an opportunity. This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia. strategy formulation. there will be also some reduction in overall travel especially by casual or budget travelers. Thus. As Virgin to tap into they exist strengths or competitive advantages such as brand name. But being a low cost leader. Good customer service and management is critical especially when competition is getting intense. However. focus on a specific customer may avoid straddling. For example. is the “ASEAN Open Skies” agreement that has been reached. it cannot be the cost leader if it offers customized features or comprehensive support which will result in increasing operational cost. strong brand and “low-cost” culture among its workforce. However. There is also some opportunity to partner with other low cost airlines. Changi airport in Singapore charges SGD21 for every person who departs from Singapore. AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. strategy execution.

Beijing. • Offered different product AirAsia offer different product to compare with other competitors in Asia. people is afraid to fly after the September 11 terrorist attacks incident. the global economic crisis has limited the new entrant and also reducing the upgrade of planes in the immediate future. hiring pilots and others staffs like air stewardess and etc incur a high start-up cost. Power of the suppliers is important as it will affect the industry. However. Bangkok Airways. then the threat of new entrants will be very high. Therefore. the power of suppliers is quite high since there are only two major suppliers which are Airbus and Boeing hence there are not many choices to airline industry. • Government Legislation Air Asia very difficult gets a new route from government because Malaysian Airlines System (MAS) has been protected by Malaysia government on the route to Sydney and Seoul Incheon. AirAsia as an industry company which is more focusing in the low cost carrier airplane industry need to consider making the lowest possible cost to compete with the other competitors in . secondary airports. If customers of AirAsia do not have brand loyalty. Landing charges at so-called "gateway airports" and navigation charges are often prohibitively expensive. both suppliers provide almost same standard aircrafts and hence the switching to Air Asia is low External Environment Analysis Political Flying outside Malaysia is difficult. 5. Thus. Nevertheless. So that. this is the limited of the new entrance duo to government policy.• Customers have a little bit of brand loyalty. In airline industry. The cost of setting up of offices. The budget airline industry in south-east Asia has been underdeveloped because the aviation market is tightly regulated by bilateral air rights agreements. Tiger Airways. What are the current challenges/ issues facing Air Asia? The issues in AirAsia Company are more focused in the competition of the cost among an airplane industry. the threat if AirAsia is low. New competitors which want to come in the industry need to spend a little to compete with AirAsia. Hong Kong and Singapore there are no cheaper. for example. buying or leasing air craft. and in key destinations like Bangkok. it will affect the time line set by AirAsia and the most important is also influence their profit. and Air Philippines. • Higher Capital Requirement The airline industry needs large volume of start-up capital. But the higher numbers of competitors in the industry also will decrease AirAsia’s customer loyalty. Due to most of the travelers prefer low cost. Bilateral agreement is one of the obstacles in the way of truly pan-Asia budget carriers. Threat of terrorism. Bargaining Power of suppliers Every industry has someone to play the role as suppliers.

To achieve the lowest possible cost. In this system. airport departure control and more. and enterprise resource planning (ERP) system. 6. to maximize their IT. AirAsia believes with the lowest fare that they are offering to the customer. and the last one is implemented outsourcing in the AirAsia business. Explain the strategy Air Asia follow to solve the issue? The strategy that AirAsia was implementing to make they are being a successful in low cost carrier and can compete with other competitors in this field of business are: • Maximized IT and implementing E-commerce in AirAsia business Nowadays. How AirAsia can solve the current issues to be a low cost carrier leader in airplane industry? First is to identify and analyze the SWOT analysis. fast and secure in buying a ticket already met. they can attract customer more than their rival in the airplane industries. Enterprise resource planning (ERP) is the system that integrated comprehensive software to make the IT system is more effectively and efficiently. By implementing this package AirAsia is looking to successfully maintain process integrity. The lowest possible fare that AirAsia was implementing is the best strategy that they are used to compete with their rivals in the airplane industries. E-commerce has become a vital strategic management as it is minimizing the expense and cumbersomeness. It includes Internet. - Yield management system (YMS) as revenue management system it understands.their airplane industry. Moreover. AirAsia implemented current IT such as yield management system (YMS). AirAsia Company has some strategy to achieve it. It means the lowest cost can possibly achieve. Operation effectiveness and outstanding efficiency. By using this system effectively. anticipates. which is implementing E-commerce and maximized their information technology usage to make the efficiency and effectively in their company and make possible low cost carrier in their business. It is a direct sales engine that effectively eliminates the middleman (travel agents) and the sales commissions that need to be paid to them. and speed up reporting and data retrieval processes. and reacts to the behavior of customer to maximize revenues for the organization. customer satisfaction. computer reservation system (CRS). improved products. and than to solve the current issues with some strategies such as Maximized IT and implementing E-commerce in AirAsia business. AirAsia used it to takes into account the operating costs and aids AirAsia to optimizes price and allocate capacity to maximize expected revenues. • Operation effectiveness and outstanding efficiency - - - AirAsia move from the traditional business into modern business by implementing Ecommerce and maximize the information technology (IT) in their business. . efficiency. 7. call center. Customer reservation system (CRS) is an integrated web-based reservation and inventory system. and higher profitability. AirAsia is one of the airplane companies. reduce financial month-end closing processing times.

• Low distribution cost . By implemented outsourcing in the IT field. AirAsia also trying to reduce by using better maintenance management. and less of ticketing paper cost. and also can easily control by AirAsia and than more fast in AirAsia Company. half that of Malaysia Airlines and Ryanair and a third that of EasyJet. AirAsia can lease the B737-300s aircraft at a very competitive market rates due to the harsh global market conditions for the second-hand aircrafts because of the September 11th event in 2001. more effectively and efficiently. On the other hand. By implemented outsourcing better than in house operation. It can give competitive advantage in AirAsia because the strategy can be greater rather than created by AirAsia itself. What are the Success factors in AirAsia? Absolute Cost Advantage • Low cost per average seat kilometer AirAsia focused on ensuring a competitive cost structure as its main business strategy. and it can make AirAsia not spend their financial to cover the risk factor in this strategy. and than implementing enterprise resource planning (ERP) by Microsoft Corporation. because it can give lowest cost. The best philosophy of AirAsia ‘now everyone can fly’ means to giving an opportunity to all the people to flight with the lowest possible fare and making them can flight even they only have the less money. It has been able to achieve a cost per average seat kilometer (ASK) of 2. the operating cost of the company is also dropped drastically. AirAsia also choose the route by adjusting prices for routes/destinations that have a higher demand when compared to others. • Implemented outsourcing in their business By implemented outsourcing in their business strategy will provide: Cost benefits to AirAsia because it can be eliminated in more resource consumption (time financial). Some of outsourced example that AirAsia did are in AirAsia computer reservation system (CRS) by Navitaire Open Skies Technology Company. 9. reduce risk. AirAsia also can reduce cost in IT system activities which is can make possible more cost in their business. The control in this strategy also gives benefits because AirAsia function only to be a controlled a system that is AirAsia used. AirAsia can easily to control all the system that is outsourced to another vendor or company. AirAsia was becoming an Airline company that is chosen by so many customers. As Air Asia continuously strives to promote air travel. AirAsia also seek to create excitement amongst their guests with the range of innovative and personalized service. 8.The implementation of E-commerce can reduce the cost of travel agents.5 cents. How does Air Asia attract their customers? With believes to make a low possible fare for to the customer. AirAsia also can reduce risk. More and more people around the region choosing AirAsia as their preferred choice of transport. and also implementing AirAsia X.

Reasons why AirAsia more stressed to be low cost carrier in airline industry? 1. For example. It is debatable whether expanding its operations to the long-haul is profitable or whether it will result in a loss of focus and a decreased margin. the fare for the trip from Kuala Lumpur to Penang on AirAsia starts from 39 ringgit. AirAsia should stick to its vision to run long-hauls because the company has the capacity to offer these flights at lower costs than competitors. it can be the great opportunity for AirAsia Company to run their business. AirAsia has been able to achieve strong market stimulation in the domestic Malaysian air market. Operation effectiveness and outstanding efficiency are the two main characteristics of low cost business including in AirAsia. if any. its growth rate. The demand for lowest cost carrier is will be growing rapidly. The effect of attractive low fare is more travelers switching from bus to air. Southwest people strategy and an Easyjet branding strategy. it must be cost-efficient and profitable. And than the best philosophy of AirAsia ‘now everyone can fly’ means to giving an opportunity to all the people to flight with the lowest possible fare. AirAsia needs to leverage its competency in creating cost advantages across multiple value chains. What Air Asia does to sustain its competitive advantage in the market?/ Comment on Air Aisa capabilities core competence and competitive advantage. AirAsia was able to achieve such cost efficiency due to many factors inherent to a short-haul operation. For instance. Comparing to trip by bus charge 40 ringgit and 80 ringgit by car. • Good Management Team AirAsia value proposition is more sophisticated than Ryanair placing equal emphasis on brand reputation and customer service/people management. Costs that do not add value must be contained. and customer-service awards. AirAsia pursue a Ryanair operational strategy.AirAsia focus on Internet bookings and ticketless travel allowed it to lower the distribution cost. In order to sustain its competitive advantage. and only one type of aircraft (decreased maintenance costs) decreases costs. Should AirAsia expand its long haul business and to what extent should AirAsia and AirAsiaX be integrated operationally? AirAsia has had success with its short-haul operations in South-East Asia based on the LCC business model. 2. However. Demand for low cost carrier (LCC) industry will keep growing rapidly. Some of its greatest achievements have been its excellent cost efficiency. it is important to expand strategically in order to keep the . 3. • Attractive ticket price With the average fare being 40-60 % lower than its full-service competitor. and it must create value. An amalgamation of the AirAsia and AirAsia X brands will reduce brand confusion. having no meals on flights (with the option of purchasing food). 12. reduced and even eliminated. 10. AirAsia believes to compete in the airline industry. similar case as Ryanair in Europe. 11. by a senior advisor to AisAsia’s top management team.

light snacks also available for purchase onboard Aircraft Seat Type Seat Type Seat Option In-flight dining Single seat Single seat Free seating with Xpress Boarding option Range of light meals and snacks available for purchase onboard . Compaer between the Air Asia and Aire Aisa X ?/ What are the principle differences in Aire Asia and Air Asia X’s operations? Concept Flying range Air Asia Low cost haul. I suggest that AirAsia limits its long-hauls to countries with favourable weather conditions and similar socio-economic conditions. vegetarian and kid’s meal. Western.integrity of the LCC strategy. no frills More than 4 hours flying time form departing city Airbus A330 with more than 330 seats Airbus A330 with more than 330 seats Economy seat and XL seat Assigned seat with advance seat request option Pre-ordered full meals available including Asian. no frills Within 4 hours flying times from departing city Airbus A 320 with 180 seats Air Asia X Low cost long haul. Advantages: • • • New markets and growth opportunities Expansion of trunk routes Increases market share Disadvantages: • • • Moves away from successful LCC strategy Difficulties with external factors Loss of competitive advantage 13.

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