1.

0 Introduction

AirAsia Group, a well-known low-cost airline around the Asia, which ownsby a parent
company name “Tune Group”. This company was actually founded by “DRB-Hicom”, which is
a company own by Malaysia’s government back in 20th December 1993 and started their
operations on 18th November 1996. Unfortunately, the company’s performance not doing very
well for few years until it was 2nd December 2001, the day that this airline taken over by Tony
Fernandes, the CEO of Air Asia Group.

Since then, Tony Fernandes performance was astonishing, he brought the airline back to
life, and they even start making profits since year 2002 and launched their airline hubs in that
particular year too. They even beat down their competitor which is used to monopoly Malaysia’s
carrier service.

Due to the extraordinary performance of the airline, they expanded their business in
Thailand by placing a subsidiary at there. Now, we may easily found subsidiary airlines of
AirAsia Group in India, Indonesia, Philippines, and even Japan.

Their headquarters is currently located at Kuala Lumpur International Airport 2,

Malaysia. At the year ended of 2014, there are more than 10,000 employees that still working
within the organizations.

Nature of business of AirAsia Group is simply focusing on providing low-cost airline

services. But their values to the customers are, “Safety conscious, Caring, Passionate, Full of
integrity, and Hardworking but keeping the Fun within.”

Vision of AirAsia Group is 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.

And below is their 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 levels.
2.0 Theories

Leadership is the ability to influence, motivate, and enable others to contribute toward the
effectiveness of the organizations of which they are members. ("Introduction to Leadership
Values Worldwide: GLOBE Findings," n.d.)

The competency perspective of leadership tries to identify the characteristics of effective

leaders. Recent writing suggests that leaders have specific personality characteristics, positive
self-concept, drive, integrity, leadership motivation, knowledge of the business, cognitive and
practical intelligence, and emotional intelligence. (McShane S. L. & Von Glinow, M. A., 2015)

Cognitive and practical intelligence refers to the leader’s above- average cognitive ability to
process information (cognitive intelligence) and ability to solve real-world problems by adapting
to, shaping, or selecting appropriate environments (practical intelligence). Knowledge of the
business refers to the leader’s tactic and explicit knowledge about the company’s environment
plays that enable a leader to make more intuitive decisions. Leadership motivation refers to the
leader need to improve in socialized power to accomplish team or organizational goals. Drive
refers to the leader’s inner motivation to pursue the organization’s goals.

Transformational theory is defined as transformational leaders create, communicate,

and model a shared vision for the team or organization, and they inspire followers to strive for
that vision. They develop and communicate the vision, communicate the vision with sincerity
and passion, model the vision by ‘walking the talk’ and acting consistently, to builds employee
trust, encourage experimentation to encourage employee discovering or trying out new
practicesand build commitment toward the vision through rewards, recognition, celebrations.
This contrasts with transactional leadership, which involves linking job performance to valued
rewards and ensuring that employees have the resources needed to get the job done. The
contingency and behavioural perspectives adopt the transactional view of leadership. (
Organizational Behavior, n.d.)
3.0 Company’s Practices

Leadership Competencies

On 24 March 2009, Tony Fernandes, the founder of Air Asia, mentioned that there is nothing
more powerful than inspirational leadership that unleashes principled behaviour for a great
cause.

In the cognitive and pratical intelligence, Tony Fernandes plays the role as an intelligent
leader. He has the ability to analyse the business environment and make the right decision. On
8eptember 2001, Tony Fernandes and three other inventors paid 1 Ringgit Malaysia to buy
AirAsia, which amounts to $40 million debts. He implements no-frills airlines, ‘zero’ fare
strategy with a famous slogan ‘Now everyone can fly’ successfully transform Air Asia to
become the Best Low Cost Airline in the world.

Tony Fernandes has the knowledge of the business and company environment to make the
right decision. Tony Fernandes targets on all income level of customers and he also creates a
slogan ‘Now Everyone Can Fly’. Tony Fernandes chooses to operate AirAsia with a low-cost
strategy that focuses on short and cheap flights in 2001. This decision turned AirAsia into a
hugely successful budget airline.

As an effective leader, Tony Fernandes also show leadership motivation in leading his
employees. Tony Fernandes work with the crew or staffs every few days each month to have
more interactions with his employees. This is warmly accepted by everyone working in AirAsia.
Other than that, Tony Fernandes says “employees come number one, customers come number
two. If you have a happy workforce, they’ll look after your customers anyway.” This proves that
Tony Fernandes is a people-oriented leader that keeps encouraging and motivating his
employees.

The television network says Tony Fernandes is “the ultimate dreamer and adventurer in
business”. It is because Tony Fernandes has followed his childhood dream to start an airline and
redefined air travel in the region. Tony Fernandes is not only an unlimited dreamer, he also
drives his employees to pursue their goals. For instance, Tony Fernandes said in one of the
interviews by Harvey, (2012) that “In AirAsia, we consider ourselves basically a dream factory.
We deliberately decided that we wanted a company where people can pursue their passion and
we wanted to make use of all the talent that we have in-house. The culture that we have stems
from the fact we want openness and we want people to be creative and passionate about what
they do. In order to do that, we’ve got to inspire them.”

Transformational Leadership Model

Tony Fernandes is a transformational leader because he changes the business model of

AirAsia to a low-cost strategy and moved down the value chain. He has also successful
transform AirAsia the Best Low Cost Airline in the world.

Tony Fermandes has develop and communicate strategic vision of AirAsia which is to
be the largest low-cost airline in Asia and to serve the 3 billion people who are currently
underserved with poor connectivity and high fares. As we know that, a good vision can help the
company to take advantage of opportunities. Therefore, he has created a good vision for doing
their business once he takeover the company. As a result, AirAsia has achieved the best low-cost
airline awards globally since year 2009. This has proved that he has become successful in
accomplishing his company vision.

Next, Tony Fermandes works hard to build employee trust in the leader as the model of
the vision. He encourages employees to pursue their passions love their jobs at AirAsia based on
their environment. Besides that, he would also spend every few days each month as the crew or
staff to work with his employees at different departments to get experience with different
departments. He also establishes a "culture department" to make people happy and to integrate
them.

He is also a good leader who will encourage his employees to question current
practices and to discover new practices. Tony Fernandes’ personal credo is "dream the
impossible, believe the unbelievable, and never take no for an answer". There was a real example
whereby a lady flight attendant at AirAsia Thailand asked Tony Fernandes about being a pilot
which Tony replied that if she is qualified so that he would hire her as a pilot. She eventually
succeeded in becoming the first lady officer and is now a full-time captain (Chris Forrest Harvey,
2012). This proves that he practices what he says by encouraging everyone trying out new
experiences.
 Lastly, Tony Fernandes builds commitment towards his vision whereby he transforms
the vision in reality. His decision of starting a low-cost airline company which eventually
achieved the vision of the company that “everyone can fly” is a reality. Therefore, AirAsia keep
promote promotion package with low prices for customers to enjoy low prices flight to different
places. AirAsia is promoting a ‘Free Seat Promotion’ and also ‘AirAsia All-in Fare from RM29
to allow everyone the opportunity to enjoy the cheapest airfare. This is to accomplish the vision
"everyone can fly" in reality. Besides that, Tony Fernandes also actively uses social media such
as twitter, blogs, Facebook or others to interact with employees and to receive customers’
positive and negative feedbacks then take immediate action to solve the problems.
4.0 PROS AND CONS

Tony Fernandes has the knowledge of the business and company environment that enable
him to make the right decision and achieve company's objectives and goals. According to Daniel
Chan (2000), since the 1970s, the competition for the Asian air travel market has always been
intense. This became more intense in the 1990s as traffic volumes were squeezed. Based on that
statement, the competition among airplane industry become more grow, traffic volume also
would be increase, and also the Asian air travel market has always been intense. Thus, having
knowledge of the business and company environment is crucial in order to thrive amidst
challenging environment where competition in the airplane industry is becoming though,
complex, and rapidly change. (Nur Rauf, N. 2009) Other than that there is possibility of new
entrance by other low-cost carrier (LCC) which creates further competition in the industry. For
example, Firefly set up by Malaysia Airline System Berhad is a part of LCC industry in Malaysia
and also adapted AirAsia's low cost concept. However, it would not be a threat to AirAsia as
Hanan & Freeman highlighted it is difficult to imitate as tacit amount of knowledge is
required on the targeted firm. (n.d, 2012)

Tony Fernandes’ commitment towards his vision “everyone can fly” made his decision of
starting a low-cost airline company achieved his vision eventually. Its successful negotiations for
its low aircraft lease rates, low long-term maintenance contracts rates, and low airport fees
enabled AirAsia to provide the lowest fares. As a result, AirAsia was able to reduce its
overheads and investments in equipments substantially in the absence of fringe services. (Zhu, A.
2015) Besides that there is potential market in the Asia for low-cost carrier due to the rapid
economic and disposable incomes growth. Infrastructure such as high speed trains and
highways has yet to meet the high standard level and therefore customers tend to choose the air
as mode of transportation. Hence, threats of substitutes are low as the geographical structure of
Asia has made air travel the viable, efficient and convenient mode of transportation. (n.d, 2012)

Tony Fernandes develops his vision as a leader. This kind of leadership orientates the
task orientation style and people orientation style of leadership in a qualitatively new level of
performance. AirAsia staff will perform task as they are willing to do when they are inspired by
the vision. The whole organization will have a sense of solidarity if they share a common cause.
Besides that, visionary leadership brings out the best in their staff and makes them perform
beyond their imagined limitations. In this kind of leadership, the mechanism of control such as
rewards and punishments become internal rather than external. People would want to do things
right because they understand it in their hearts and not because of some monetary rewards, social
commentaries or promotions. (Singhai, S. ,n.d.)

However, Tony Fernandes’ commitment in the decision of making Air Asia a low-cost
airline company in order to accomplish his vision of “everyone can fly” has its downsides. Its
low-cost policy results in Air Asia do not have its own maintenance, repair and overhaul
(MRO) facility due to low cash flow. It is a competitive disadvantage not to have its own MRO
facility. (Rend, S. ,2015) Its low-cost strategy might bring disadvantages to the company as it
faces the threat of rising fuel price and labour costs. The constantly increasing price of fuel
causes AirAsia to incur higher cost production and expense which resulting in either increased
price or reduced fly route. Meanwhile, the employees of the Air Asia demand higher salary
and the increase cost of the training and staff welfare which increased Air Asia expenses.
(n.d. ,2012) In addition, a low cost airline offers low fares in exchange for a “no-frills” service
that eliminates many of the value-added services such as free meals and in-flight
entertainment that are routinely offered by full-service airlines (Saha & Theingi, 2009).The
challenges low cost airlines face is of coping with falling travel demand, battling regulations and
taxes, and adjusting to the new environmental paradigm (Terrapinn Holdings Ltd, 2009). All the
airlines were seeking new opportunities to cut costs and boost revenues and many were
refining business models to remain competitive and profitable in the toughest economic
climate airlines had to face since 2001. There is also a market perception that low price related
to lower quality. Customer will assume that quality is below that of the higher-priced
competitors. The lower price products often perceived as inferior and as such appeal to only a
proportion of market. Low cost strategy normally focuses on middle or lower classes customer
whose needs are slightly below average. When those classes customer had increased their
income level, lower price companies might not be their choice. They will select more superior
companies that offer higher price and value in the competitive business environment. Besides, a
low price buys market share but not market loyalty customers will shift to the next lower-price
companies that come along as lower price strategy companies target market is price-conscious.
There are difficulties to get customer loyalty and retention in the lower price strategy companies
such as low cost airlines.

AirAsia as a low cost carrier has many limitations regarding services. The limitations of
services, such as, no frills service, additional baggage charges, seat selection fee, flight change
fee, and other charges, this kind of limitations may lead the customer perceive that the staff has
no empathy when customers request help that beyond airlines’ terms and conditions. A low cost
carrier has posted some limitation to the airline service in terms of technology and equipment.
Currently, the data of the Advanced Passenger Information (API) key in by the staff into system
manually used for next arrival destination by the immigration takes about 90 seconds for each
passenger. This will cause passengers to stay in the long queue. At the boarding gate, the staffs
also have the difficulty to check boarding pass. The staffs have to do bingo check manually to
check the number of passengers since there is no computer system at boarding gates. By doing
bingo manually, it may incur human errors, spend more time and staff fatigue. (Kit, N. ,2013).

Since Tony Fernandes says “employees come number one, customers come number two.
If you have a happy workforce, they’ll look after your customers anyway.” Although Tony
Fernandes treats well to his employees, but it doesn’t mean that his employees also treat their
customer in this way. Its mindset and action focus on employees important than customers result
in Air Asia receive complaints from customers. The complaints from customer will appear in the
complaints board of Air Asia. Most of the complaints are related to the poor customer service.
For examples, employees of AirAsia are rude to their customers; Air Asia's staffs are unhelpful
and impolite. The staffs are rude to the customers in the process of booking flight. Moreover,
when something happen, the only responses from the staffs are "we cannot solve this problem for
you now". It is hard to gains customer loyalty and retention in the Air Asia while Tony
Fernandes emphasis on employees come number one meanwhile customers come number two.
There are 6089 employees in the company. He cannot lead every single employees and have an
eyes at their performances as there is too many staffs and also he is not just the CEO of Air Asia,
but he also have others things to do as well. In this situation, it is means that Tony Fernandes
leadership’s motivational skill towards employee need to be improves. A good customer service
and his leadership’s motivational skill are link together.
RECOMMENDATION
A company can achieve their mission and vision, goals and objectives through leadership.
Mr Tony should set up a new goal settings for the whole organization. He should have to hold
meeting with the high level management to discuss the problems faced by them and lead them to
solve the problems. To improve the competency perspective of leadership, the management team
should be will trained with decision making skills, interpersonal skills and technical skills as it
plays an important role to help Tony Fernandes to overcome the problem. Tony Fernandes
should knows when to lead and when to follow, influence the staffs to support organizational
objectives and interests, provide direction, set challenging objectives and lead the charge to
achieve them and influence change for continual improvement. The leadership decisions will
determine the successful or failure of organizations.

Airasia may recruit their own maintenance, repair and overhaul (MRO) team, although
they are lack of cash flow, they can raise fund from other ways that can influence change for
continual improvement. Although it is hard to gain customer loyalty, but AirAsia may retain
their customer through better customer service, or provide a comfortable environment during the
flight to maintain competitive advantage. As in the airlines industry, it is hard to be deal with the
flight schedule, the main reason of flight delay is because of weather conditions and maintenance
of airplane. It incurred over-time in labor costs. Although it is unavoidable conditions, AirAsia
might give an optional choice to convert their over-time to holidays to reduce the additional pay
to the staff for over-time. Airasia would have a continual improves to stay and transform itself to
stay competitive.

As mention before, Tony Fernandes places his employees in first place but he has no
much time to interact with his employees, he can review the staff performance through
evaluation performance forms submitted by each department in the organization or the feedback
from customers.

Airasia should give priority to the elderly, pregnant women, family with infant to board
first then calling for the hot seat passengers and next turn according to the number of seat to
avoid long queue and reduce the time to check boarding pass. Passengers have to purchase
additional bag size if they exceed 7kgs of hand-carry baggage and also incurred extra charges
during proceed to payment.

As an effective leader, Tony Fernandes need to have the ability to influence his staffs.
Influence is explained as the process how a leader develop his ideas to others, gaining acceptance
from his staff and able to motivate his staff to support his ideas or actions and implement his
ideas through change. (F. Achua & N. Lussier, 2013)

(3180 words)

References

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