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1.

0 INTRODUCTION
Based on this assignment, detailed information of award winning low cost carrier (LCC) in
Asia Pacific region- AirAsia are discussed. This assignment analyzes the current business
environment in local and international market, competitive advantage and SWOT analysis of
AirAsia.

2.0 COMPANY BACKGROUND


AirAsia was established in 20 December 1993 with commenced operations on 18 November
1996. It was founded by government owned conglomerate (DRB-Hicom) but the airline was
bought over on December 2001 by former Time Warner Executive Tony Fernandes of Tune
Air Sdn.Bhd literally for a token of RM1.00. AirAsia was suffering with an accumulated RM
40 million debt. The airline operation scale started small with only 2 planes when the current
management (Tune Air Sdn Bhd) took over in 2001 from DRB-Hicom. Ever since then AirAsia
grew under the wings of Tony Fernandes and his management team. Currently, AirAsia has
over 17,000 employees over the world. AirAsia managed to transform into a powerhouse as it
is today and now owns a fleet of 176 aircrafts.

AirAsias first and main base is the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur
International Airport, while its secondary hubs are located at Kota Kinabalu International
Airport, Senai International Airport, Penang International Airport, Kuching International
Airport and Langkawi International Airport. Being the home of AirAsia, the LCCT is the
budget terminal in KLIA, opened on 23 March 2006.

AirAsia is a prestigious low cost airline based in Malaysia and headquartered near Kuala
Lumpur, Malaysia. AirAsia primarily serves Southeast Asia and the surrounding regions. The
airline is no stranger to Malaysians as it is known to be Asias largest low fare, no frills, hassle
free airline that has been vastly expanding since 2001. The airline claims No Admin Fee
surcharge on its customers but has some fees on certain services which are free on other
airlines. AirAsia slogan is Now Everyone Can Fly that sparked a revolution in air travel
industry with more people opting AirAsia as their preferred choice of airline to their designated
travel destination. Tony Fernandes exposed a five-year plan to further enhance AirAsia's
presence in Asia at the end of 2006. AirAsia Company planned to connect all of its existing
destination over the region and expanding further into Indonesia, India, Vietnam and Southern
China. Rapid advancement of AirAsia has earned them a reputable image in the air travel
business whereby AirAsia now flies to over 120 domestic and international destinations
spanning 24 countries. AirAsia covers 108 routes and operates over 400 flights daily. AirAsia
has flown over 55 million guests across the region and continuously create more extensive
route networks. The AirAsia subsidiaries consists of Thai AirAsia, Indonesia AirAsia, AirAsia
India, AirAsia Japan, Philippines AirAsia. AirAsia associate companies includes AirAsia X,
Thai AirAsia X, Indonesia AirAsia X, Tune Hotel and Tune Money.

In August 2011, AirAsia agreed to form an alliance with Malaysia Airlines (MAS) by means
of a share swap but it was struck down by the Malaysian government in effect voiding the
agreement of both airlines. Besides that, the 2012 World Airline Awards at Farnborough
Airshow ranked AirAsia as the worlds best low-cost airline. It has also been named as worlds
best low cost carrier (LCC) for 8 years in a row including the latest award in 2016. AirAsia is
also the sponsor of Malaysias national football team, Singapore national football team and
Queens Park Rangers. AirAsia is also a former sponsor of Manchester United football
association and Asia Red Tour.

AirAsia Company signed an agreement with financial services firm Tune Money to launch its
own frequent-flyer program (BIG). BIG is the first global loyalty program where customer will
earn BIG Points with every transaction and enjoy perks as an AirAsia BIG Loyalty Member.
Besides, AirAsia Airline is also known as the first airline in Malaysia to offer WiFi services on
board which is only equipped in 4 aircraft.

AirAsia aims to create value through their vision and mission statement:

2.1 VISION
To be the largest low cost airline in Asia and serving the 3 billion people who are currently
under served with poor connectivity and high fares.

2.2 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 AirAsia
-Maintain the highest quality product, embracing technology to reduce cost and enhance
service level.
3.0 ENTRY MODE TO INTERNATIONAL MARKET

(BESIDES JOINT VENTURE, DOES AIRASIA ACQUIRE OTHER AIRLINES TO


EXPAND INTERNATIONALLY? RESEARCH ON THIS. For example: AIRASIA
TAKE OVER ZEST AIRWAYS INC.)

3.1 JOINT VENTURE


AirAsia Berhad uses joint venture mode to enter international market. AirAsia Berhad typically
pursue joint ventures to access a new market. AirAsia Berhad headquarters is located at Kuala
Lumpur International Airport (KLIA).AirAsia Berhad form a joint venture between Thai
AirAsia, Indonesia AirAsia, AirAsia India, AirAsia Japan and Philippines AirAsia to expand
globally.
3.1.1 Thai AirAsia

Established in 2003 as a joint venture between Asia Aviation and AirAsia


Investment, and was listed on the Stock Exchange of Thailand in May 2012. Thai
AirAsia begins its inaugural commercial flight on 4 February 2004 from Bangkok
to Hat Yai, and now operating from hubs in Bangkok, Phuket and Chiang Mai.

3.1.2 AirAsia Indonesia


Established on December 8, 2004, through a joint venture between AirAsia
International Ltd. and PT. Awair International, where the main base is at Soekarno-
Hatta International Airport (Jakarta) with hubs in Bandung, Bali, Surabaya and
Medan.

3.1.3 AirAsia India


Established in 2013, AirAsia (India) Limited is a joint venture between Tata Sons
Limited (30% stake but no operational role) and Telestra Tradeplace (21% stake).
The airline currently operates flights from its current base in Bengaluru and Delhi
to Chandigarh, Goa, Guwahati, Imphal, Jaipur, Kochi, Pune and Visakhapatnam.

3.1.4 AirAsia Japan


AirAsia has joint venture with All Nippon Airways (Japan airlines). On 6 October
2015, it was announced that AirAsia Japan has received their air operating license
to start operating flights, as well as announcing Sendai, Sapporo, and Taipei,
Taiwan as their first three destinations from Chubu Centrair International Airport.

3.1.5 Philippines AirAsia


Philippines AirAsia (PAA) is a wholly owned subsidiary of AirAsia Inc., which is
a joint venture company between Filipino investors; Antonio O. Cojuango
(Associated Broadcasting Company), Alfredo M. Yao (Zest-O Corporation),
Michael L. Romero (real estate developer and port operator), Marianne B.
Hontiveros(music industry executive and TV host), and Malaysias AirAsiaBerhad.
PAA operates domestic and international flights out of Manila, Cebu and Kalibo
(gateway to Boracay). Philippines AirAsia is part of the AirAsia Group that has
been awarded the Worlds Best Low-Cost Carrier for seven consecutive years, from
2009 to 2015, by Skytrax.

Meanwhile, AirAsia X is a sister company of AirAsia, founded in 2007. It is the medium and
long-haul, low-cost affiliate carrier of the AirAsia Group and currently flies to destinations in
the Asia Pacific region, including Sapporo, Tokyo, Osaka, Seoul, Busan, Taipei, Xian, Beijing,
Hangzhou, Chengdu, Shanghai, New Delhi and Kathmandu), Australia (Sydney, Melbourne,
Perth, and Gold Coast), New Zealand (Auckland) and the Middle East (Jeddah).

3.1.6 Thai AirAsia X


Established in 2014, it is an extension of Asias leading low cost carrier, AirAsia,
and seeking traveler to destinations that is greater than four hours flight time
from its hub, Bangkok Don Mueang International Airport.

3.1.7 Indonesia AirAsia X


Indonesia AirAsia X is joint venture with AirAsia X. It is Indonesias first long-
haul, low-cost carrier and an affiliate of the AirAsia Group. The airline currently
offers direct flight from Denpasar, Bali to Taipei, Taiwan and Melbourne,
Australia.
Moreover, when online travel bookings are exploding in the region, AirAsia
Berhad considered the convenience for customer book flight tickets and planed
their schedule, AirAsia Berhad offers a huge opportunity to develop a set of
loved consumer brands. Under the joint venture agreementin 2011, a new
company formed to operate Expedia, Inc.s Expedia branded businesses in
Japan, India, Southeast Asia and other East Asian markets, as well as AirAsias
AirAsia Go and GoRooms businesses. The new venture between Expedia and
AirAsia will build on unique local marketing expertise, along with Expedias
world leading technology, and both companies quality travel products in the
region and beyond. This new venture provide travel packages, taken together
with over 130,000 hotels worldwide, this will create a unique set of packages
for Asian customers at incredibly low rates on both the AirAsiaGo and Expedia
sites.

Travellers can access to AirAsia.com, AirAsiaGo.com and Expedia website to


book their tickets. In addition to being the regions leading low cost carrier, the
airline also shares Expedias aspiration to make travel accessible to
everyone. Thus, AirAsia has made it possible for everyone to fly. Partnership
with Expedia makes AirAsias brand experience further, farther and wider.

The joint venture between Expedia and AirAsia enable to offer travellers world-
class travel products at an unparalleled value and in the same time the services
that provided is upgrading the customer level of satisfaction. This collaboration
allowed customers to enjoy every journey without worries. Therefore, AirAsia
and Expedia are launching a revolution in online travel for Asia.

AirAsias branded websites www.airasiago.com and www.gorooms.com and


Expedia, Inc.s existing Expedia branded businesses in Japan
(www.expedia.co.jp), India (www.expedia.co.in) and Singapore
(www.expedia.com.sg) along with Malaysia (www.expedia.com.my) and
Thailand (www.expedia.co.th) will be operated by the joint venture.
3.2 PARTNERSHIP
AirAsia forged partnership with Think Big Digital Sdn Bhd and introduces a
loyalty programme called AirAsia BIG which aims to provide a richer
experience to customer and give rewards to loyal customers. Members have a
chance to redeem AirAsia flights, seats, meals, insurance, baggage and hotel
packages for over 85 exotic travel locations by collecting BIG Points. Klook
has also joined forces with AirAsia BIG. The partnership allows AirAsia BIG
members to earn 200 BIG Points when they make first purchase on Klook
websitewww.klook.comor mobile app. Additionally, members are able to
use their BIG Points to redeem selected Klook products via AirAsia BIGs
redemption portal such as tour, activities and entrance ticket purchase.

Moreover, PHAR joined forces with AirAsia to build South East Asia's
largest publisher trading desk. PHAR combines the reach of traditional media
with the accuracy of data-based digital execution to target travellers on the
move. PHAR utilize programmatic advertising via their own DSP to achieve a
truly connected journey. AirAsia has been unveiled as the official airline of
Taylor Swifts RED Tour throughout South East Asia with collaboration
PHAR. To celebrate, AirAsia has painted one of its 180-seat Airbus A320
aircraft in a special Taylor Swift livery
(https://www.youtube.com/watch?v=Vb8JItjlX4w&feature=youtu.be).
4.0 How do the international market/ culture, management styles and business system
affect the company performance? Do they need to adjust/alter their product or services
to fit with the host country market needs? How does the company face the competition?

4.1 How do the international market/ culture, management styles and business system
affect the company performance?

4.1.1 International market/ culture

AirAsia is set to expand and take over the international market. As we are aware, no-frills
operation was launched by AirAsia from Kuala Lumpurs main airport (KLIA) in the early
2002. The airline is poised to overtake Malaysia Airlines (MAS) as the biggest carrier (in terms
of weekly seats) at the countrys busiest airport just after 13 years. Last week, AirAsia launched
its latest route from the airport to Visakhapatnam, India, its 62nd destination in total, and
seventh in India.

In KLIA, AirAsia flights now account for just over one-third of all seat capacity. Not at all,
other airlines which are part of the AirAsia Group of airlines account for another 11.4% of seat
capacity at the airport, giving the group control over around 45% of all seats at KLIA.

In KLIA, AirAsias seat capacity at KLIA has increased almost fourfold from just under three
million departing seats per annum to almost 11.5 million between year 2005 and 2015. The
capacity has grown at a slower rate in recent years after annual growth of more than 20% up
until 2009. After that, AirAsia even experienced a tiny decline in 2014. Capacity growth is
currently planned at around 5% for this year.

The number of destinations served from KLIA is from 27 to 52 that is virtually doubled
between 2005 and 2009. At the end of this year, it will have increased of the rate of adding new
destinations by just a dozen more to 64 since then the rate of adding new destinations has
slowed. There will at least twice-daily flights of these 35 will be served. Besides that, AirAsia
plans to add two further new destinations this summer which is Manila in the Philippines and
Mal in the Maldives after the adding of Visakhapatnam. Relatively few routes have been
abandoned over the last decade, but these do include Bangkok Suvarnabhumi (replaced by
flights to Bangkok Don Mueang), Colombo (now operated by AirAsia X), Dhaka in
Bangladesh, Haikou in China, Kuantan and Manado in Indonesia and Thiruvananthapuram in
India.
Local carriers created when AirAsia is involved in joint ventures for Indonesia and
Thailand. The country that leading international markets is Indonesia and Thailand. Then, the
international markets followed by Singapore, India and China. There is the total of 14 countries
from KLIA to outside of Malaysia in the operation of international flights, the only new
addition in 2015 being the Maldives. Service to Mal is scheduled to begin in July.
From the schedule data for this August in 2015, AirAsia provides the service of 64
destinations non-stop from KLIA while Malaysia Airlines provides the service of 59
destinations. Both of the airlines serve 32 destinations. But the flight flown by AirAsia only
half of the total routes, and there is 74% of AirAsias seat and flights at KLIA from these 32
routes. For Malaysia Airlines the corresponding figures are 70% of flights and 61% of seats.
AirAsias next two new routes from KLIA, to Mal in the Maldives and Manila in the
Philippines, are both currently served by Malaysia Airlines.
For AirAsia, there is two important celebration of milestones in a journey that has seen
it firmly established as the largest low-cost airline brand across Asia and one of the most
recognized brands in the world. AirAsia has been On November 18, 2016 it will be 20 years
since the carrier first inaugurated operations in Malaysia on November 18, 2016 while it has
been 15 years since former Time Warner executive Tony Fernandes secured control of the
business and transformed it into a low-cost carrier later on December 2, 2016 that is just a
couple of weeks from November 18, 2016..
He says that, "It really was a little bit of stick your finger in the air and hope for the
best. But we were good marketing people from the music business we just went out there
and felt the market and said if you halve the fare, there's a huge enormous untapped market,"
The leading of Fernandes was a regional revolution. From India, Indonesia, Malaysia,
Philippines and Thailand, AirAsia Group is profiting from the evolution having grown from a
small Malaysian airline to a group that encompasses operations. Together they operate a
combined fleet of around 170 Airbus A320s firmly establishing AirAsia as largest airline
customer for the Airbus single aisle product line through joint ventures with local business
partners. So AirAsia is now ready to develop its penetration across North Asia since the
Southeast Asian markets are already matured.
The second chief executive officer that followed by Fernandes to AirAsia Expedia,
Kathleen Tan successfully turned around the loss-making joint venture within eight months,
delivering a net profit of S$20 million in her second year. She accelerated growth and establish
AirAsia Expedia as a major player in North Asia especially in key markets such as Japan,
Korea, Hong Kong and Taiwan.
Kathleen Tan takes a new role as president of North Asia and replicates her success at
AirAsia Expedia. In China, Hong Kong, Macau, Japan, Korea and Taiwan, she builds the
airlines market. Fernandes explain that Kathleen Tan lives and breathes North Asia. She was
the first to spot the massive potential of China when no budget airlines operated to it. She made
sure we were the first low-cost carrier to fly to China and built a strong network there.China
currently contributes nearly 40% of AirAsias revenue. Anyway, there is still a lot of
opportunities to develop further across North Asia. North Asia is an important long-haul market
and it will take on greater significance once AirAsia Japan launches.
4.1.2 Management Styles

Every leader has a unique style of leadership to manage and lead their subordinates in
the workplace.Superiors must decide on the future course of action as per the existing culture
and conditions at the workplace. The nature of employees and their mindsets also affect the
management style of working.

AirAsia is a huge company with many employees. Employees are front liners that are
essential for a companys growth. At AirAsia, the bond between subordinates and other
stakeholders is considered to be the strongest. Levels of hierarchy is nonexistent that means no
ranking discrimination happens. The staff and crew understand their roles and responsibilities
and understand the basic strategy of the company that is low cost maintenance resulting in high
productivity. AirAsias employees are self-motivated and take an initiative for the betterment
of the company. In management, motivation defined as a power to force someone to work in
certain way so that it able to reach certain desired goal. As what people always said, motivated
people always work harder as compare with those unmotivated people. AirAsia gives rewards
and incentives to its employees to maintain the level of motivation in them. The company
favors the employees by giving them incentives, in return AirAsia demands for staff loyalty
and credibility.

From AirAsia point of view, they believe that their entire staff act as contributor for the
company, therefore, they always been treated as a big family and equally. This is an example
of empowering employees. The company encourages its staff to have an open communication
in order form a better understanding between each other. AirAsia inculcates an environment of
zeal and enthusiasm and expects its employees to work in the same way. They organize various
different social events such as a monthly staff forum and create some fun programs to help
them release their working stress as well as to social and interact with each other. These kinds
of events contribute in maintaining healthy and friendly working environment. Secondly,
AirAsia believes in honest and transparent relations with customers, staff and even with its
partners. AirAsia encourages an environment that is free of racial, ethnic and cultural
discrimination. AirAsia strives hard to maintain the quality of its services and operation
nationally and internationally.

According to Tony Fernandes, he wanted a company where people can pursue


their dreams. The culture that we have stems from the fact that we want openness and we want
people to be creative and passionate about what they do. In order to do that, weve got to inspire
them. Allstar (what AirAsia calls its team members) love their jobs at AirAsia due to the
environment where everyone can learn and pursue their passions. AirAsia has a very team-
orientated corporate culture. Tonys employees understand the companys strategy and
actively focus on maintaining low costs and high productivity. Tony motivates his employees
by awarding bonuses based on each employees contribution to AirAsias productivity, and
expects to increase loyalty through its ESOS (employee share ownership scheme) which will
be given to all employees. They also provides his employees with non- financial rewards such
as free flights and up to 90% of discount for their employees on concession travel. AirAsia also
awarding long service awards for their employees who work more than 10 years. This
encourages employees to put more effort on their responsibility in order to get the rewards and
indirectly develop an intrinsic motivation in the employees. This type of management inspires
open communication which creates a vibrant working environment. The employees can
communicate directly with Tony and provide suggestions on how AirAsia can be more
productive and efficient.

AirAsia employees are able to perform in multiple roles in flat organizational structure
because the airline has implemented a flexible work rules (Zhu, 2010). Flexibility motivates
employees to work harder because they are contented with all the flexible rules given and thus,
they can gain more experiences in that industry. Even though AirAsia always try to minimize
their expenses cost, but they are very determined on employee work ethic. Therefore,
AirAsiaprovides their employees the best training and ensure that they are happy in their
working place. (Foo, 2012) This can be called as redesigning jobs. As a result, AirAsia gets to
establish a numbers of quality and excellence employees because the employees are satisfied
with their jobs that are always fresh to them. This type of management style makes AirAsia
being more productive and efficient.
4.1.3 Business System

The business-system literature is essentially an exercise in exploring and categorizing


institutional variations across societies, determining their impact on various outcome variables
such as social equality or comparative advantage, and understanding processes of institutional
change. Culture rarely enters the picture (exceptions include Redding 2005; Redding and Witt
2007; Witt and Redding 2009).

Since 2001, AirAsia has been expanding rapidly by being the largest low fare airlines
in which everyone can travel with affordable price and AirAsia has also awarded for the world
best low cost airline in year 2010 (Miller, P., 2010). Let's put it in this way with a simple slogan,
"Now Everyone Can Fly", AirAsia has successfully carried out and position themselves in
customer's mind as the airline that provides low-cost flying trip hence AirAsia managed to
capture large customer base.

'Go Holidays' offered by AirAsia at the low-cost flying trip, whereby they also offer
hostel, hotels, car rental and holiday packages at discounted rates. Booking or reservation of
airplane tickets can be done at www.airasia.com. Besides, AirAsia provide services such as
Low Cost Carrier Terminal (LCCT) and AirAsia's bus travel to KLIA at the lower cost.
According to The Star report under the business section, AirAsia is now announced that several
airports in Malaysia and regional countries will offered a self check-in service and for more
convenience, customers can also use web-based check-in service (The Star, 2010).

There are few types of Information System were in use in AirAsia, such as Computer
Reservation System (CRS), Customer Relationship Management (CRM), Enterprise Resource
Planning (ERP) System, and Advanced Planning and Scheduling (APS) system.

Computer Reservation System (CRS) is a computer system used in travel industry that
allowed storing, retrieving data and conducting transactions. This system used by AirAsia
allows users to access and check seating availability, flight schedules, airline fare, booking
reservations and generating tickets.With the adoption of IT system, AirAsia is able to run their
businessefficiently and effectively. With the introduction of CSR, customers no longer need to
queue up or go through agency to purchase their flight tickets. With that itself, online
reservation on AirAsia website for flight as well as hotel rooms can be done in a click of button
that saves time as well as enhance customer satisfaction.
Customer Relationship Management (CRM) is a set of applications that enables
companies to capture market insights in order to serve customers better. This systematic
application helps AirAsia to analyze customer databases in order to maintain and update
electronic customer profile. Moreover, CRM also helps to update online answers at AirAsia's
web page - frequently asked questions (FAQs) about their services, such as booking, online
payment and etc. CRM assists AirAsia in organizing customer communications if AirAsia
faces difficulties, such as struggles to maintain multiple mailing lists for different groups of
customers. Using CRM also helps AirAsia to develop their customer's relationships. CRM
systems provide reliable sources to deal with AirAsia's customers in sales, marketing, and
service to optimize revenue, customer satisfaction, and customer retention (Laudon and
Laudon, 2010). The benefit of using CRM is because this system provides a better service to
customers. For example, on the first page of AirAsia Website states member log in button
which proves that AirAsia always set customers as their first priority in every aspect. The
benefits of becoming AirAsia members are information provided to customers will always
one's step ahead from others (ie. promotional booking offers, news updates, and so on). All
customers' particular data are fully secured and will be guaranteed for personalization from
AirAsia.

Enterprise Resource Planning (ERP) System is the information systems to integrate the
data from different functional areas of a business, such areas as planning, manufacturing, order
entry, inventory management and many more (Oz, 2008). This system also helps in planning
and allow companies to operate more efficiency because it avoid duplication of information
and avoid rework (Oz, 2008). AirAsia uses ERP system to capture daily operation's
transactions, manages supply chain, and reduces daily operational costs as well as to increase
operational performance (Microsoft Press Pass, 2005).The major benefits of ERP are
improvement on the coordination of AirAsia's process into one streamlined process where all
information can be accessed across departments through a single enterprise wide information
network (Anthony, 2005). Additional benefit from implementing ERP systems are reduced
operating cost, such as lower the cost of production, marketing, inventory control, and help
desk support. Facilitating day-to-day management activities is also one of the benefits from
ERP systems. It encourages the establishment of backbone data warehouses (Anthony,
2005).The implementations of ERP systems allows employees to access real time information
and this helps with research, decision making, and managerial control (benefitsoferp, 2010).
Advanced Planning and Scheduling (APS) system is a manufacturing management
process system. APS system enables visibility across the whole supply chain since it uses
information from ERP for planning and scheduling operations and can be used to tracks costs
based on the activities in the production of manufactured goods. To improve AirAsia's strategic
and operational performance, classifies and clusters orders from customer, and checks
resources availability, AirAsia uses APS system to analyze the flexibility and intelligence
required. The supply chain management system helps AirAsia to have better connectivity
across the supply chain by ensuring each party like suppliers and customersto works together
in integration in terms of cross-functional scheduling and planning.
4.2 Do they need to adjust/alter their product or services to fit with the host country
market needs?
AirAsia do not need to adjust their services to fit with the host country market needs as
customers can get the same information through every channel of AirAsia. All the channels
worldwide share the same knowledge base. This may reduce the risk of wrong information and
decrease the operating cost.
AirAsia is one of the companies that provides consistent and fast customer service
across mobile channels, web and Facebook 24 hoursa day. AirAsia invested in new areas such
as mobile app and Facebook for customer service, over two million enquiries per month are
being managed. For example, customers enquire through AirAsia mobile app which gives users
an enhanced experience. AirAsia mobile app also generated 2 million downloads and achieved
as No1 downloaded apps in Apple Store at Malaysia, Indonesia and Thailand.
In addition, AirAsia needs to adjust their product to fit with the host country needs and
culture. For example, AirAsia adjusted the menu according to different flight routes. AirAsia
AK flight Malaysia offers traditional food like murukku, nasi dagang with chicken curry and
rice with beef in black sauce. Besides, Thai AirAsia FD flight offers traditional foods and
western foods which is hyderabadi biryant, spaghetti and baked French toast.

4.3 How does the company face competition?


AirAsia is considered to be a leading brand of low cost airplane company. There are
many competitors going against AirAsia Company that offers similar services such as Firefly
Airline, Berjaya Airline and Malindo Airline. This may affect AirAsias profitability because
competition among this industries is very tough. Thus, AirAsia need to roll out strategies to
compete with competitors in the same industry at the same time improve performance and
profitability of organization.
According to Daniel Chan (2000), the airline industry is fascinating and a unique
industry. It can captures the interest of audiences because of the impact and reach on the
growing and large number of travelers or consumers worldwide. Airline industry has become
the highest opportunity for AirAsia based on this statement. The growing number of travelers
worldwide can be a delightful opportunity for AirAsia to run their operation in order to compete
and survive from competition. Thus, AirAsia needs to develop strategies and create competitive
advantages to differentiate themselves from other airlines.
4.3.1 Pricing

The different pricesoffered between airlinesoperating in low cost carries industry


influence decision making of customers. AirAsia pricing strategy is to offer the lowest possible
fare compared to their competitor in order to maintain current market and tap into new market,
at the same time able to grab greater opportunities in the tough competition.

4.3.2 Cost Management


AirAsia faces stiff competition by trying to minimize their operation costs. Tony
Fernandes, announced the business plan of company for fiscal 2014 will be concentrating on
cost-cutting efforts in order to improve profitability. The changes includesreplacement of
airlines fleet with more fuel-efficient aircraft, automatic check-in procedures and reduce
overhead expenses. Everything which causes inefficiencies are eliminated and reduced. Tony
Fernandes stated that AirAsia can compete with another airplane industries if they are able to
reduce cost efficiently.Most of the profit crisis was due to extra fuel costs and price wars among
budget carries. The weakening of Indonesian rupiah and currencies in other countries where
AirAsia to made fuel procurement become more expensive. A senior executive from Maybank,
major Malaysian financial conglomerate, AirAsia has been cutting flights to Borneo and other
loss making routes. This decision might can increase AirAsias earnings. In the meantime,
AirAsia has broadened its existence by winning over customers from state-run airlines and
building up the aviation networks across Asia.

4.3.3 Information Technology


AirAsia applies E-commerce in their business and maximized IT technology in order
to face competition. E-commerce is a business tool that becomes a vital strategic management
which allows company to sell products and services, purchase supplies, advertises, track
inventories, bypass intermediaries, share information and eliminate paperwork. E-commerce
can minimalize the expenses and make higher profitability. AirAsia uses E-commerce IT usage
to run the company efficiently and effectively at a possible low cost. AirAsia applied current
IT such as computer reservation system (CRS), yield management system (YMS) and
enterprise resource planning (ERP) system.
Yield management system is a revenue management system that anticipates,
understands and reacts to the customer behavior in order to maximize revenue of the
organization. AirAsia use this system to allocate capacity to expected revenue and take account
into the operating costs. The optimization process done by the seat and route. Every seat
consider as a chance to maximize revenues. Seats are available at numerous prices in different
points of time. A reservation for the same seat done a little late will be more expensive compare
with the earlier. AirAsia also choose the route by adjusting price for destinations and routes
that have greater demand compare with others. By using this system, AirAsia can efficiently
price the seat and route for the flights. AirAsia can also make effectively to know the customers
with lowest cost by using IT technology.
5.0 How does a host country political and international legal environment or trade barrier
affect the Malaysian companies in their international marketing activities?
International marketing activities are interconnected with corporate goals, objectives
and strategy firm. The overall goal, objectives and strategy firm that has a significant effect on
the decision of international marketing. It will affect the decision of whether to enter a new
market and how maximum the firm predict risk to ready the level of control required on
international operations.
5.1 Political Environment
The activities in Air Asia Company that concerned about government policy and
administration is that Aviation Tycoon Tan Sri Tony Fernandes appears to be moving his
loyalty from one former Prime Minister to another since coming under attack from the
influential of Malay right-wingers over AirAsias controversial share swap deal with Malaysia
Airlines System (MAS). Furthermore, there are some of the political activities that might be
change or influence a business is events that affect the operation of AirAsia such as the political
uncertainty in Thailand on 25 November 2008. These events definitely bring the big impact to
the anti-government protesters recently blocked flights for a week in Bangkoks main airport.
The others example was at Bali Indonesia on 12 October 2002 in the tourist district of
Indonesia. The attack was the worst terrorist that attacked Indonesia approximately 202 died.
These both of issues can definitely show that political and administration of a country can
influence and bring a big impact to the AirAsia operation.
Moreover, the host country political environment will affect the international
marketing activities of Malaysia companies. Based on the political aspect, AirAsia face the
changes in regulation set by the host country government. For example, the globalization of
the world's governments appear privatization and deregulation trend increase, causing the
airline industry continues to consolidate. However, the political issues also included by taking
a budget flight from Malaysia have become a challenge problem because government has been
instrumental into success of the government airlines. In most of the government Airline in Asia
have been subsidized by government to help build up government accountability and
turnaround their plan widely. And most airlines in Asia have full or substantial state ownership
as well as management and control, often subsidized and protected by the governments from
competition. One of the example is Malaysia Airline System (MAS). Such companies are often
have subsidized by government and doesnt face much competition in airline industry. Instead
to being profit-oriented, but they are more to focus on national objectives. By government
subsidize to Malaysia Airline System (MAS) so AirAsia must having a strong financial
management to enhance their competitiveness and unsure their operating activities going
smooth.
Furthermore, AirAsia also faced some problem due to the heavily regulated air travel
in AirAsia. AirAsia has proved difficulty to fly outside because the bilateral agreements are a
major obstacles in the flight path of low-cost airlines. The AirAsia factor that influences is
landing costs has led to decline the aviation market is still under strict control of flight rights
agreements. The AirAsia CEO Tony Fernandes engaged the support of the former Prime
Minister of Malaysia, Tun Dr. Mahathir Mohamad to network with neighbouring countries in
an effort to develop an open-skies agreement to create a liberalization market to the Airline
industry. Since then, Indonesia, India, Thailand, and Singapore landing rights have been
granted in AirAsias airway. Through the open-skies agreement Air-Asia , it not only help them
to offer lower fares to further boots of country but it also help AirAsia increase the net income
after tax.
In addition, In light of globalization, the airline industry has also been hit by the threat
of violence - terrorism, accidents, attacks and disasters like Ebola also as a host country
political factor. It will affect the Malaysia customer confidence in a particular airline and it will
also affect the profitability of the Malaysian Airline companies. Hence, the low-cost airlines
will be subjected to factors such as the flight restrictions, preferences of consumers and Asia
geographical infrastructure. Due to such uncertainties, the budget airline will be careful in
choosing the route that promoting in their day to day operations to prevent any possible
negative effects. This political factor will affect the AirAsia international marketing activities
due to uncertainties choosing the route that promoting to inform to customer, it will also reduce
the confidence of customers.
Furthermore, the other political factor that in AirAsia is disagreement about the
uniforms worn by the hosts with a member of UMNO prefer to more 'Islamic' due to Malaysia
is a multi-racial and religion culture, therefore, AirAsia have to survey the culture of country
and more adapt to the customer religion needs and wants. It can more attract customer to visit
their Airline. In addition, the human resource policies are also affected by political influences
to selection and recruitment of staff is not based on merit or their reputation but rather, racial
composition. Through political limitation, it will totally restrict AirAsia performance to
competition with other international airline service. Therefore, the political issues also factor
to affect AirAsia marketing share, revenue and reputation in the international marketing.
5.2 Legal environment
The international legal environment also effect the AirAsia Malaysia companies.
AirAsia always follow The Competition Act 2010. The Competition Act 2010 was approved
by Parliament and come into force in 2012. This Act applies to any commercial activity of any
company (including government- linked companies) which in and outside Malaysia has an
effect on competition in any market of Malaysia. In the airline industry, the international legal
environment of competition issues include global alliances, tariff adjustments, code-sharing,
price-fixing, capacity and airport slot allocation, predatory pricing, frequency program,
corporate discount schemes, and travel agent commissions competition authorities. Besides
that, airline must obtain permission and approval from competition authorities before they are
allowed to form alliances. The competition will think over the terms of the agreement, the
potential impact on the airline market and also whether the alliance will lead to excessive
market domination.
Therefore, AirAsia to collect more taxation which charge and requested from customer
will be increase by most of countries also a factor of legal environment that effect AirAsia
international marketing service in Malaysia. For example, there are Passenger Service Charge(
Known as Airport Tax) which is collected by airlines from guests on behalf of MAHB
(Malaysia Airport Holding Berhad) will be charged 6% for all domestic or international flights.
PSC and Malaysian GST at 6% is applicable to all carrier codes of flights which departing from
airport in Malaysia. The collection taxation as a legal in Malaysia, which will also affect the
revenue of AirAsia. Facing more taxation for ticket, AirAsia customer will feel uncomfortable
and ask for reduce the price of tickets.
In additional, AirAsia with uncertainties change according to the current economic
situation in the global, especially for the Asian countries who always export goods with the
lower cost to enhance their competitiveness with domestic industry. Therefore, for the
environmental protection regulation will also request AirAsia to use clear fuel or gas which
can more increase cost and reduce company revenue. For example the Environment protect art
administered licences and approval under Environment Protection Act 1970 including work
approval fees, licence fees, permit fees for waste transport and environmental audit fees. The
legal regulation that request of environment protection will increase AirAsia image and
reputation but it also will increase the cost of marketing activities.
(EPA) Laws of export and import will also affect AirAsia, all these depend on policies
of Asian countries and economy of the world. Besides that, the legal regulation in airline
industry face legal barrier to entry example, Licensing, patents, landing right and air routes.
While in 2011, the Malaysian government lifted route restriction on AirAsia air route, as
allowed AirAsia airline to fly everywhere except Sydney.
5.3 Trade Barrier
Therefore, trade barrier also effect the marketing activities of AirAsia. One of the
barriers of AirAsia is entry market interdependent firms. Firms in oligopoly is interdependent
because there are limited firms in the market, therefore, if a firm changes in product prices or
the nature of their products, it will strongly affect sales of other firms in the market. All the
firms in an oligopoly have to respond to the actions of other firms in the market.
Therefore, in order for AirAsia to break the entry barrier, they provide variety of
promotions such as AirAsia X in which people can fly to Asia and Oceania with the cheapest
price available and run some special promotions. People traveling with AirAsia has been given
the privilege to fly for free and only need pay airport tax and fuel surcharge. Through this kind
of promotion, AirAsia can increase their marketing share in the international market.
However, AirAsia not only through their promotion provide to set a high barriers to
entry but also with their functions and the services they provide. Some of the function are
people can buy tickets online, can register online, without having to queue at the airport check-
in counter, which will save them a lot of time, passengers can have the privilege to choose their
seats if they make a reservation first. With promotions and features, AirAsia has set trade
barriers to entry, will prevent new companies want to enter the market, it can maintain AirAsia
market share in the international market.
Another barrier faced by AirAsia is where AirAsia start-up of the high cost required to
run an Airline. Although a new firm does not have enough capital to start up a new airline
industry, it will not be as advanced, stable or popular as AirAsia. Therefore, AirAsia has a big
advantage over new companies. Through this trade barrier, AirAsia can also has advantage
with it, by have a stable companies.
Furthermore, another barrier to entry is AirAsia benefit from economies of scale, this
means that the firm can set their price for their flight at a lower cost because of their prestige
in the market. More people will buy from AirAsia, can reduce the cost per flight. AirAsia have
to always confirm the economies of scale stable and try to reduce the cost per flight. While
AirAsia is known as the best low-cost airline, they still face a number of problems caused by
trade barriers. AirAsia always facing problems when they want to expand their air routes
because local airline such as MAS will complain. Airasia want to operate flights from Kuala
Lumpur to Sydney but it has been blocked by the government, although officials Sydney
Airport have been given permission to do so.
Thus, Airasia is a fast growing company in Malaysia that will be grow bigger in the
near future. Although it has quite a number of trade barriers in the way, AirAsia also has some
benefits where other firms do not get the benefit from, such as economies of scale. It can easily
become barriers to entry for new firms that want to enter the market. The host country political
and international legal environment or trade barrier not only effect the Malaysian companies
in their international marketing activities but also show that how AirAsia solve this kind of
problem to form a company stable and profitability. As their professional management
companies and increase international activities AirAsia will be stable and may one day become
a market leader in the industry.
6.0 SWOT analysis of the company in term of their 4 Ps
(Product, price, promotion and place)

6.1 STRENGTH
Low cost leader in Asia

AirAsia Berhad is the first airline company that offers a low cost flight in the Asian market.
Regarding to the low cost principle, AirAsia Berhad plans to maximize sales and minimize
operating cost. Based on their slogan Now Everyone Can Fly, AirAsia provides low cost
flight for those budget passengers especially students, those family with lower income and low
income earners who wish to travel at a low cost pricing. Therefore, it increases the demand of
travelling. Besides that, AirAsia have a strong working relationship with Air bus which helps
them to purchase aircraft at a discounted rate and this air craft is fuel efficient compared to
Boeing 737 planes that many airlines company are currently using.

Management team has strong connections with the government and the airline industry
leaders.

This is because executive management member team of AirAsia are from different kinds of
industry professionals and ex-top government officials. For an example, Shin Corp in the past
which owned by the family of former Thai Prime minister-ThaksinShinawatra holds around
fifty percent of shares in the Thai AirAsia. Due to this reason, it has help to create and explore
a sizeable market in Thailand.

Expert in in strategy formulation and execution

AirAsia management team has good strategy formulation and execution skills. The strategies
formulated at AirAsia are a clever blend of proven strategies used by other organizations.
Examples of strategies implemented are: Ryanairs operational strategy which is no frills and
landing in secondary airport. Southwests people strategy which is employee comes first.
Easyjets brand strategy which is linking with service providers like car rental and hotels etc.

AirAsia's brand name is well established in Asia Pacific

They forged cooperation with other service providers such as hotels and hostels, car rental
firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) which has created a very
unique image among travellers. Alliance with Galileo GDS (Global Distribution System) that
enables travel agents from around the world to check flight details and make bookings. It
contributed to their brand name. AirAsias in Indonesia (Indonesia AirAsia) and Thailand (Thai
AirAsia) have successfully become a regional brand beyond just Malaysia. AirAsiais endorsed
byManchaster United football team and AT&T Williams Formula One team to advertise and
improve the image to a greater extend.

Marketing Tools

AirAsiaruns promotions and advertisements very often to attract customers. AirAsia utilizes
marketers to promote through social media, newspaper, magazines which can influence choice
of purchase. Moreover, AirAsia is a well-established LCC operating out of South East Asia
and it has operations in over 25 countries and over 400 international and national destinations,
and the most famous destination is Bali- Indonesia, Thailand - Bangkok, Korea-Seoul, Japan-
Tokyo and Nagasaki, Taiwan and the other. Meanwhile, it has subsidiaries in Indonesia, Thai,
Philippines, Japan and it has a fleet size of nearly 300 aircrafts

6.2 WEAKNESS
Limited service resources

Due to their low cost business model, AirAsiaBerhad cannot provide various servicesrequired
by customers. It is limited wherebyAirAsiaBerhad does not include frill services such as
complimentary drinks, snacks, pillow and entertainment. Passengers may be charged an
additional fee for inflight services if they need extra services.

Customer service
AirAsia receives a lot of complaints from customers on flight delay problem which causes
customers to be unsatisfied and in the long run they will lose confidence towards
AirAsiaBerhad.

Lack of maintenance, repair and overhaul (MRO) facility


AirAsiaBerhad has owned 123 aircrafts until today and about another 100 aircrafts to be
received these few years. Due to increment of aircraft and routes, they also experience high
risk of malfunction of their aircraft. Their malfunction aircrafts cannot utilize since they have
shortage of MRO facility to repair it. It will directly reduce their revenue because the flight
routes will decrease.

6.3 OPPORTUNITY
Promote Malaysian tourism

AirAsiaBerhadhave increased their routes and destinations throughout the country. In


such,AirAsia will have the opportunity to promote Malaysian tourism, which in return will
increase the company's revenue. AirAsiaBerhad has created a skybridges of culture with many
countries, since year 2012 they have flying to 81 destinations in 18 countries. Furthermore,
AirAsia have contract with Malaysia in the 'Cuti-Cuti Malaysia' and the entire customer that
relate to the 'Cuti-Cuti Malaysia' will promote the AirAsia fly. The place of interest and culture
in Malaysia would be spread out to all passengers who travel with AirAsiaBerhad.

Lots of potential customers that consist of foreign workers

Recently, there are lots of foreign workers from neighbouring countries such as Indonesia,
Myanmar, Philippines, and Vietnam working in Malaysia. They are the potential customers for
AirAsiaBerhad because they opt for cheap and budget airlines.

Political connections

AirAsiaBerhadjoint venture with Shin Corp, where Shin Corp is owned by the family of Prime
Minister in Thailand. Shin Corp has the financial strength to support AirAsiaBerhad to grow
their organization at a global scale. This is the reason why AirAsiaBerhadexpanded quickly in
the airline market backed up with strong political connection.

6.4 THREATS
Rising fuel cost and labor costs

Hike in fuel price may cause AirAsiaBerhadto encounter problem about the fuel costing which
will have a major effect on earnings. Besides, it increases cost of production,
consequentlyAirAsia will either increase priceof the flight or reduce the fly route. Meanwhile,
AirAsias employees demand an increment in salary and the increase cost of the training and
staff welfare causesAirAsia expenses to increase.
Competitors

Currently,AirAsiaBerhad is the leader in the worlds low cost carrier in airline industry but it
is still growing. Many of the full service airlines are planning to create a low cost operation to
compete withAirAsiaBerhad by offering similar offers and attributes. For example, Singapore
Airlines has created a low cost carrier Tiger Airways.
7.0 BRAND POSITIONING
Positioning is the process of putting the image of a company or a brand into the mind of the
target customer. In order to position the brand strongly in consumers mind, organizations
needs to redefine and differentiate themselves from their competitors. Most of the airline
industry offers comfort seats for passengers, quality service but in AirAsia's case, on top of all
that it offers cheap flight fares. The success of the brand positioning depends on the
effectiveness of advertising in nailing the perceptions into the minds of prospects. CEO Tony
Fernandes turned the company around and quickly positioned AirAsia as the first low-cost
carrier in Asia by introducing cheap flight fares and economy class for the whole flights with
the tagline Now Everyone Can Fly. AirAsia initiated advertisements through social media
such as flights as low as RM1 and consequently introduced their popular AirAsia Zero Fare
Promotion. Since Malaysian Airlines was already the first in the airline category, AirAsia
cheekily associated themselves with its rival with this catchy advertisement in 2006.

At AirAsia, no one gets treated like a second-class citizen. For a few Ringgit, you'll get a
comfy leather seat and a fun and friendly crew who treats you the way you like to be treated.
It's so easy to book and you can even choose to sit anywhere you like! It's no wonder more than
20 million guests have embraced the AirAsia experience.

This advertisement alone simultaneously portrays AirAsias fun and friendly brand image and
positioned itself as a no frills, low-cost airline and with 20 million guests, it is the wanted airline
of choice. It also poked fun at Malaysia Airlines' first class seating and relatively pricier fares.

AirAsias core brand positioning proved to be successful as it understands the needs of


consumers and formulated a low-cost strategy that appeals to the masses. AirAsia produced
profits in 2002 and has since launched subsidiary companies such as Thai AirAsia, Indonesia
AirAsia, AirAsia India, AirAsia Japan, AirAsia Philippines and AirAsia X, which operates
AirAsia's international flights.
7.1 BRAND EXPLORATORY

Brand salience talks about brand awareness. Customers associates AirAsia as the preferred
choice of travelling airline with affordability. With AirAsias slogan- Now Everyone Can Fly,
travelling is no longer a hindrance for people and it can be a reality by flying with AirAsia to
preferred choice of destination.
Brand performance is about the tangible and intangible brand associations of customers
towards a brand. AirAsia designs the service products which works on customers touch points.
All intangibles are diligently put to service. The airline synchronize the tangibles and
intangibles at different level to meet the customers requirements. Customers relate AirAsia as
a budget airline offering quality and reliable service at an affordable price. Brand imagery is
the intangible aspect as how the brand portrays itself. Through consistent advertisements and
promotional efforts, AirAsia markets itself as a low cost carrier offering the lowest fare and no
frills in comparison with other airlines.
Brand judgement is defined as evaluation about the brand. Customers judge AirAsia through
service and quality aspect whereby AirAsia is able to deliver satisfied quality service to
customers. Brand feelings of customers towards AirAsia is strong and favourable as AirAsia
portrays a fun, friendly, trustworthy airline and live up to their mission.
Brand resonance is relationship between customers and the brand. With the AirAsia BIG
programme, members can earn BIG POINT from every transaction and redeem it for free
flights with AirAsia. This strategy will forge an intense relationship between the company and
customers and develop long term loyalty towards the brand.

8.0 Conclusion
9.0 References

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