IEU

International
Management
Assignment 1 & 2

Adiba
1/7/2014
Assignment 1-A

Business Strategy AF & KL

Air France–KLM is a French-Dutch airline holding company incorporated under French

law with its headquarters at Paris–Charles de Gaulle Airport in Tremblay-en-France,
near Paris. The group has offices in Montreuil, Seine-Saint-Denis, Paris, and in
Amstelveen, Netherlands.

Air France–KLM is the result of the merger in 2004 between Air France and KLM.

In 2008, it was the largest airline company in the world in terms of total operating
revenues, and also the largest in the world in terms of international passenger-
kilometers. The company's CEO since 17 October 2011 is Jean-Cyril Spinetta. Both Air
France and KLM are members of the Sky Team airline alliance. They offer a frequent
flyer programmer called Flying Blue. The company's namesake airlines rely on two
major hubs: Paris–Charles de Gaulle Airport and Amsterdam Airport Schiphol.

Air France–KLM Airlines transported 71.374 million passengers in 2010. Air France–
KLM was created by the mutually agreed merger between Air France and Netherlands-
based KLM on 5 May 2004. As a result of the deal, the French government's share of Air
France was reduced from 54.4% (of the former Air France) to 44% (of the combined
airline). Its share was subsequently reduced to 25%, and later to 18.6%. At the time of
the merger in May 2004, Air France and KLM combined offered flights to 225
destinations in the world. In the year ending 21 March 2003, the two companies
combined transported 66.3 million passengers.

In October 2005, Air France Cargo and KLM Cargo, the two freight subsidiaries of the
group, announced a merger of their commercial activities. The Joint Cargo Management
Team now operates the organization worldwide from the Netherlands.

In a 2007 opening for a majority takeover of the loss-generating Alitalia, Air France–
KLM was one of three bidders, and was favored by the board of Alitalia. However, on 2
April 2008, it was reported that negotiations have been abandoned. After the
acquisition of Alitalia and Air One by Compagnia Aerea Italiana on 12 December 2008,
Air France–KLM has announced it is interested once again in purchasing a participation
in the new merged company. On 12 January 2009, Air France–KLM announced that it
will buy a 25% share in this company for €323 million.

February 2011: Air France–KLM with Delta Air Lines are working together to examine a
bid for Virgin Atlantic. At the present Richard Branson has 51 percent stake of Virgin
Atlantic and the rest is held by Delta Air Lines. Air France–KLM was categorized as one
of World's 10 safest airlines announced by ATRA in August 2011. In June 2012 it was
released, that Air France–KLM is considering to sell its subsidiary CityJet. The company
announced they will cancel its flights to Iran as of April 2013.

News in 2013

03 OCT 2013

Air France (AF, Paris CDG) and partner KLM Royal Dutch Airlines (KL, Amsterdam) have
said they are open to the possibility of merging with Alitalia (AZ, Rome Fiumicino)
though any tentative tie up would depend on strict conditions being met before hand.
"Our conditions for helping Alitalia are very strict. If the conditions are met, I am ready
to go ahead," Air France-KLM chief executive Alexandre de Juniac told French daily Les
Echos on Tuesday without expanding on what those conditions were. Sources said last
week that Air France had voted against a proposed capital increase at Alitalia of at least
EUR100 million (USD135 million) to help shore up the ailing carrier's coffers on the
basis that "the conditions have no chance of being met." However, there are also
disagreements over financial commitments and a possible business strategy for the
Italian group should a merger go ahead, Reuters quotes sources familiar with the
matter. Among them are worries that any Air France-KLM investment would clash with
Italy's ambition to make Rome Fiumicino an international hub, and instead turn Alitalia
into a regional player and trigger job cuts. Mr de Juniac retorted: "Air France-KLM-
Alitalia, if one day we are united, could become a very great European brand. In such a
scenario, we could supply (Alitalia's) long-haul flights with passengers from Air France
and KLM and they could do the same for us," he said. The Alitalia board was informed
last week of possible interest from China, Russia and the United Arab Emirates but
nothing as yet concrete has been confirmed.
18 OKT 2013

Air France-KLM Group Chief Executive Officer Alexandre de Juniac said Alitalia SpA
must commit to a deeper overhaul before the French carrier considers deeper ties that
would help create a pan-European airline. “Air France, KLM and Alitalia would make a
great European carrier,” de Juniac said in an interview last night on French television
broadcaster LCI. “But at this point, it’s not guaranteed, because to do what we’ve asked,
there has to be an industrial restructuring of Alitalia that goes a lot further than what
we’ve seen so far.”

Air France, which already owns 25 percent of Alitalia and is a partner in the Sky team
alliance, isn’t in a position to keep funding Alitalia without a restructuring plan at the
Italian carrier, the CEO said. The French airline has been reluctant to invest as it
undertakes its own restructuring and has seen the value of its holding in Alitalia plunge.

Air France is considering whether to contribute to a capital increase at Alitalia, which

was agreed by the Italian airline’s board last week. Time is running out for Alitalia, as its
sales slump deepened over the last month as concerns over the airline’s future deterred
travelers from booking. Alitalia’s last major overhaul occurred in 2009 after the
company declared bankruptcy and got a fresh start by eliminating its debt and merging
its assets with those of another Italian carrier, Air One SpA.

“In our view, Air France-KLM (AF) should only take over Alitalia if the airline is allowed
to enter bankruptcy,” Donal O’Neill, an analyst at Good body Stockbrokers in Dublin,
wrote in a note to investors today. “The airline could be stripped to the bone with the
brand, the long-haul network and a few short-haul trunk routes kept intact and
integrated.”

31 OCT 2013

Reuters - Fog clouding the future of Alitalia deepened on Thursday when Air France-
KLM (AIRF.PA) wrote off the value of its stake and told Italy it would ignore an
emergency cash call for the battered airline unless "very strict conditions" were met.
Alexandre de Juniac, chief executive of the Franco-Dutch group, said he had been
"offended and discouraged" by the conduct of talks to keep Alitalia afloat. "We are not
here to put money into a company that cannot last for the long term. We need a real,
robust plan that will stay the course," the former French finance ministry official told
reporters after announcing higher third-quarter profits.

The Italian airline declined to comment on the write down, saying only that its flights
continued without disruption. It later said its nine-month loss had widened to 162
million euros ($220.24 million)from 119 million euros a year ago. Hurt by competition
from low-cost carriers and high-speed trains, Alitalia has asked shareholders to take
part in a 300-million-euro capital increase. But it said on Thursday that only three of its
21 Italian investors had subscribed so far. Air France-KLM, forced by a weak economy to
put back its own debt reduction plans by as much as a year, says it backs Alitalia's
financing move in principle. But it has kept the airline guessing over whether it will
participate, despite mounting pressure from Italian shareholders.

If it refuses to participate in the increase, Air France-KLM's 25 percent stake will fall
automatically to 11 percent. Alitalia Chairman Roberto Colaninno, who led the group of
Italian investors which last rescued Alitalia in 2008, said he would no longer be a
manager in the company after the capital increase. Air France-KLM, which took part in a
shareholder loan early this year, has given few details on its conditions for investing
more in Alitalia which has seen a decade of losses. But de Juniac set out a broad agenda
for any agreement that appeared to include jobs. The conditions cover the medium-haul
and long-haul networks, "social mechanisms" and "financially, a very strong
restructuring," he told a news conference.

"We don't have the money to do something temporary. This is not a punishment for the
Italians or bad treatment. I think it is good for the Italians that we do this," he said,
adding Air France-KLM had sometimes been kept "out of the loop". Air France-KLM took
an impairment charge of 119 million euros, fully depreciating the value of its 25 percent
stake in Alitalia, which it came close to buying in 2008. "This is an important sign
because it comes back to the battle over price. Air France is saying the company is
already worth practically zero," said Andrea Giuricin, transport analyst at the University
of Milan Bicocca and author of a book called "The endless privatization of Alitalia".
Italy's emblematic flag carrier has lurched from crisis to crisis since 2000, when talks
with what was then a standalone Dutch airline, KLM, broke down in acrimony. KLM
merged with Air France in 2004, kicking off a round of European consolidation. The
Italian government has urged Alitalia to seek another foreign partner if talks collapse
with Air France-KLM, but interested candidates are seen as few and far between. "Air
France-KLM seems to be calculating that there are no other candidates for Alitalia," a
Paris-based banker said. "If it doesn't get the guarantees it wants on restructuring, then
it would have every reason to let its shareholding be diluted, even if it has to come back
later. It might end up more expensive, but it would be safer," he added.

Some analysts are wary about further involvement, despite Italy's appeal as Europe's
no.4 travel market. Shares in Air France-KLM rose 0.4 percent after the latest rebuff.
"We believe AF-KLM should not invest further in Alitalia," said Citi airlines analyst
Andrew Light in a note. Air France-KLM said it faced "major difficulties" in boosting its
medium-haul and cargo businesses. Earnings before interest, tax, depreciation and
amortization would be about 2.5 billion euros in 2014, at the low end of its target range,
and a 2 billion net debt reduction would only be achieved in 2015.

Air France-KLM had previously set its sights on reaching the debt goal by the end of
2014. It is in the midst of a major restructuring plan which it said was otherwise on
track. German rival Lufthansa (LHAG.DE) said the first signs of market recovery in
cargo, a bellwether for the economy, were visible for the fourth quarter, but
disappointed with slower growth in its passenger business. Lufthansa shares fell 1.8
percent.

Air France-KLM, which has announced 2,880 new job cuts, said unit costs fell 1.5
percent on a constant fuel and currency basis in the third quarter and confirmed it
aimed to improve its second-half operating result at the same pace as the first half.
Operating earnings for the third quarter rose 29 percent to 634 million euros from a
Performa level of 491 million, despite revenue which grew just 0.4 percent to 7.212
billion. ($1 = 0.7356 euros)

14 NOV 2013
PARIS — Air France-KLM, the French-Dutch airline, said Thursday that it would not take
part in a plan to inject 300 million euros into Alitalia, arguing that the faltering Italian
flag carrier was not prepared to take sufficient steps to reduce its mounting debt. The
decision, which is expected to lead to a significant reduction in Air France-KLM’s 25
percent stake in Alitalia, signaled a wavering faith in the Italian carrier’s long-term
prospects from its biggest strategic partner.

It came just hours after Alitalia’s board presented a revised business plan that it said
included “sharp reductions” in operating costs as well as unspecified cuts to its medium-
haul operations, which face fierce competition from low-cost competitors like Ryanair
and EasyJet on European routes, as well as from high-speed rail in the domestic market.
“Air France-KLM have had their rendezvous with reality,” said Chris Tarry, an
independent airline analyst in London. “This is broadly a vote of no confidence.”

In a brief statement, Air France-KLM acknowledged that additional measures proposed

by Alitalia late Wednesday were “moving in the right direction” and said it intended to
maintain an eight-year commercial agreement, signed in 2009, that allows both carriers
to share costs and revenues on flights in and out of Alitalia’s main operations in Rome
and Milan. But the French-Dutch airline had made clear that its participation in the
bailout would be also contingent on the restructuring of Alitalia’s debt load of nearly 1
billion euros, or $1.34 billion — an issue that the proposal presented on Wednesday did
not address.

Air France-KLM has said it would like to remain a serious partner of Alitalia, but its own
finances are severely constrained. The French-Dutch group is in the midst of its own
painful restructuring, involving more than 5,000 job cuts, that it hopes will restore it to
profitability by 2015. In recent weeks, Air France-KLM management has signaled its
skepticism that the measures Alitalia has so far proposed, in close coordination with
Italy’s fragile coalition government, would go far enough to ensure Alitalia’s long-term
profitability and growth. Some executives within the French-Dutch group also privately
expressed frustration that Air France, which has four seats on the Alitalia board, had
been kept at arm’s length from the drafting of the new business plan and was given only
limited access to Alitalia’s financial records.
Late last month, Air France-KLM went so far as to write off the entire residual value of
its Alitalia stake, which it acquired in 2008 for 323 million euros. “If you look at it from
their point of view, they have lost virtually all of their previous investment,” Mr. Tarry
said of Air France-KLM. While the overhaul that Alitalia has proposed may help bring it
back into the black eventually, he said, “it doesn’t answer the question of how are you
going to grow it?”

Analysts said Air France-KLM’s decision was likely to reduce its stake in Alitalia to
between 5 and 10 percent. The outcome will depend on how many of the 300 million
euros in new shares Alitalia manages to sell to existing shareholders. Alitalia, which is
not publicly traded, said late Wednesday that it had extended a Thursday deadline by
two weeks, to Nov. 27, for shareholders to commit to participating in the
recapitalization plan. Before announcing its revised business plan, Alitalia said
shareholders had agreed to subscribe to around 240 million euros in new shares.

Under the terms of the rescue package, which was brokered by Italy’s coalition
government in October, Italy’s state-owned post office, Poste Italiane, agreed to buy up
to 75 million euros in shares that were not claimed by existing shareholders, equivalent
to a 12 percent stake. In addition, two Italian banks, Intesa Sanpaolo and UniCredit,
agreed to underwrite up to 100 million euros’ worth of any additional unsubscribed
shares. Intesa Sanpaolo already owns 8.9 percent of the airline. The capital increase
forms part of a broader package that also includes 200 million euros in loans and lines
of credit from a consortium of banks to keep Alitalia operating for at least the next
several months.

Jean-Charles Tréhan, a spokesman for Air France-KLM, dismissed recent speculation in

the French media that the group was still interested in helping Alitalia, but was simply
waiting for it to face new liquidity problems that would strengthen Air France’s
bargaining position. “We have no interest in the bankruptcy of Alitalia,” Mr. Tréhan said.
“We want to continue our partnership with an Alitalia that is strong.” But he declined to
say whether Air France-KLM would consider an eventual increase it its Alitalia stake.
“That is not a question for today,” Mr. Tréhan said. With the door to further investment
by Air France-KLM apparently closed for now, analysts said Alitalia was likely to step up
its efforts to secure a new strategic partnership with another airline. Italian media
reports in recent weeks have suggested that the carrier had held preliminary talks with
Aeroflot of Russia, while Italy’s transport minister suggested this week that Alitalia
might approach some of the fast-growing carriers in Southeast Asia.

But some worried that the uncertainty might begin to drive wary passengers to other
airlines at a critical time. “You are in the winter, a time when airline cash flows are the
most dire,” Mr. Tarry said. “Alitalia has to continue to convey the view that they are
there for all time, or people are not going to continue to book with them.”

Assignment 1-B

SWOT Analysis

AIR FRANCE-KLM GROUP SA

STRATEGIC EVALUATION
SWOT analysis
Strengths
• Air France-KLM group is a market leader in air transportation in Europe with a
balanced business model which incorporates market traffic and customers and
includes two airlines – each with its own hub base and operating in several
major business segments. These are passenger transport, cargo transport,
maintenance
And other activities within the airline sector including foodservice and charter
services. Passenger transport is the company’s major business segment,
accounting for more than 80% of its turnover and 92% of its operating income.
Air France-KLM carried 74.8 million passengers in 2008 and has a fleet of 600
aircrafts.
• The company operates one of the most modern fleets in the world from its key
transportation hubs Paris- Charles de Gaulle and Amsterdam-Schiphol. These
home base centers are among the largest in Europe.
Moreover, increased capacity at Paris-Charles de Gaulle boosts capabilities
offered to clients.
• Air France-KLM has integrated environmental issues and sustainable
development as part of its policy. In 2007, the company issued a Climate plan in
which it commits to limit the negative consequences of developing air transport
on the environment and to promote sustainable development. This plan has been
 reinforced in 2008.
• The Group has a strong competitive advantage through its wide and balanced
customer base, of which 52% are leisure passengers and 48% are business
travellers. The company also balances point-to-point traffic and connecting
flights, with 56% transfer passengers in comparison with 44% direct flights
customers.
• Air France-KLM’s extensive route network provides customers with 114 long-
haul destination opportunities, which accounts for 63% of the total 181 offered
by the company.
• The company had a strong financial year in 2008 with operating income of
EUR1.4 billion, due to its wide geographical spread and lack of over-dependence
on particular markets, which have minimized economic and geopolitical threats.
• Strong logistics network with recently opened centers in three main regions
(Southeast Asia, China and the US), contributes towards the localized logistics
services provided by Air France-KLM as well as repair
Capabilities.
• Through the acquisition of VLM Airlines at the end of 2007, the Group was able
to tap into the business travel market and the MICE sector and attract business
men attending conferences and events from around
the world.
• Air France-KLM has introduced an e-ticketing service, self-service check-in
kiosks, baggage drop-off points, check-in via the internet, thus providing greater
flexibility for its customers.
Weaknesses
• The unfavorable economic conditions, which started in 2008, as well as the
rising fuel prices have hit the whole airline industry, including Air France-KLM,
and led to falling demand for air transportation and increased demand for rail
and bus transportation, which can be a major threat to the company.
• Reduced capacity and changes to flight routes are some of the measures
adopted by airlines to counter the effects of the economic crisis. However,
passengers are expected to opt for the cheaper alternatives offered by the low-
cost carriers. This can negatively affect Air France-KLM’s profitability. Indeed,
the company’s
 market share has been decreasing in 2008, due to direct competition from easy
Jet, especially on the Paris-Nice and Paris-Toulouse routes.
• Increased competition from emerging markets such as India, China and Brazil
on the Europe-Asia and Europe-Latin America axis, poses a major threat to the
Group’s business and profitability.
• Increasing maintenance costs in Europe due to the strong fall of the US dollar
against the Euro can hit Air France-KLM. The company’s major contracts are
negotiated in US dollars, but European maintenance activities are predominantly
priced in euros, which negatively impacts the airline’s operational costs.
• Due to the higher fuel costs, Air France-KLM has introduced specific taxes on
customer fares. For example, for long-haul trips, this has sometimes added
EUR240 on a return ticket.
• Despite increased overseas traffic following the alliances and the partnerships
with North American airlines, Air France-KLM is highly price-sensitive and
strongly influenced by the financial downturn. Rising air fares and declining
household budgets have led to a decrease in domestic travel in North and South
America. As a result, leisure and business people reconsider or cancel their travel
plans.
• The number of passengers on the London-Paris route fell from 2.9 million in
2002 to 2.1 million in 2007 and the decline has accelerated in 2008 because of
faster and more frequent Eurostar services. Air France-KLM has therefore
released slots to its partner carrier Northwest Airlines, to allow it to start
operating from Heathrow, and the company is using one of its slots to operate a
service to Los Angeles. However, this service was withdrawn during the 2008-
2009 winter, due to lack of demand, and from April 2009, Air France-KLM will
use the slot to complement Delta’s Heathrow-New York service.
Opportunities
• The Group can strengthen its leadership position by increasing its network and
alliances. Opportunities for new partnerships are seen in emerging markets with
strong growth potential, such as Brazil, India and China, which can boost the
company’s profitability and its geographical reach. As the host nation of FIFA
2014 Football World Cup, there are expectations that the Brazil government will
enhance the country’s air transportation network in terms of flight
 frequencies/routes, to cater efficiently to the strong demand, which can create
further opportunities for airlines such as Air France-KLM.
• In April 2008 aiming to establish a strong network out of Heathrow, Air France-
KLM gave Delta Airlines (Delta Airlines acquired Northwest Airlines in October
2008) slots to operate nine daily flights to seven cities in the US thus benefiting
from the US-EU Open Skies agreement. This step will lead to the increase of flight
frequencies, improved scheduling and competitive price offers for customers.
• A source of passenger growth for the carrier could come from markets such as
France, the Benelux countries, Germany and Switzerland. In September 2008, Air
France-KLM has proposed a rival train service to Eurostar, to operate from 2010
(when Eurostar’s monopoly ends). The carrier plans to launch a high speed train
service on routes London to Paris and Paris to Amsterdam.

Threats
• Increasing oil prices can cause services previously offered to customers for free
to be charged by airline operators which in turn can generate a reliance on
ancillary revenues to offset rising costs. Although oil prices declined in the latter
half of 2008, airlines are expected to see decreasing numbers of leisure and
business travellers.
• Strong competition from companies such as British Airways (BA), Lufthansa as
well as the Gulf airlines with regards to passenger flows is amongst the major
threats for the Group. For example, the second largest European airline British
Airways plans through its proposed merger with Iberia, an airline in which it
already has a 13% stake, to reinforce its presence in South America.
• The worsening economic crisis can further affect demand and decrease
passengers’ capacity in key markets, which can hit Air France-KLM’s profitability.
With a deteriorating operating environment, decreasing
freight traffic can be expected as well.
• The introduction of “environmental” and flight taxes, as in the Netherlands, can
influence the market and further increase airfares for the consumers and hit Air
France-KLM’s revenues. Passengers are expected to use alternative transport
modes in order to avoid paying the taxes.
• The emergence of new competitors from emerging markets such as China,
India and Brazil can pose a serious threat to Air France-KLM. For example, the
over-capacity of airports in China is leading to the construction of new airport
terminals. In Brazil, airlines in 2008 continued investing heavily in marketing
and operations to capitalize on the untapped potential presented by the Brazilian
market. The entrance of Azul Linhas Aéreas in December 2008 is a good example
of this trend.
• Domestic air traffic has decreased due to more intense rail competition. With
the development of TGV East in particular, Air France has had to reduce the
frequency of flights from Paris to Strasbourg. Flows from province to province
are, however, increasing, especially between Lyon- Toulouse and Marseille-
Bastia.
 Assignment 2 – A

Strategy AirAsia Airlines in Asia

Our ir-vision To continue to be the lowest cost short-haul airline in every market we
serve, delivering strong organic growth through offering the lowest airfares at a profit.

Leanest Cost Structure

• Efficient and simple point to point operations
• Attracting and retaining hardworking and smart people
  • Passion for continuous cost reduction

Maximize Shareholders' Value

• Resilient profit growth through our lower cost base
• Expansion of the AirAsia network in a prudent and disciplined manner
   • Invest and enhance the AirAsia brand to increase investors' returns

Safety
• Comply with the highest International Aviation Safety Standards and practices
• Keep operations simple and transparent
   • Ensure the security of our People and Guests

Passion for Guests' Satisfaction

• Maintain simplicity in every application
• Practice the unique and friendly AirAsia experience at every opportunity
   • Recognize the linkage between guests' satisfaction and long-term success

Transparency
• Transparency in decision-making and information sharing
• Optimum disclosure - higher than industry norms
   • Timeliness in disclosing information

Human Capital Development

• Invest in both hard and soft skills
• Recognize all our People as contributors to our success
• Reward excellence and individual contributions
   • Maintaining one brand across the Group
12 success strategies of AirAsia boss Tony Fernandes

BULL MARKET, BULL SHEET By Wilson Lee Flores (The Philippine Star) | Updated December
16, 2013 - 12:00am

MALAYSIA — Congratulations to AirAsia Group boss Tony Fernandes of Malaysia and his
business partner, the Philippines’ undisputed “Juice King” Alfredo “Fred” M. Yao. On Dec. 7, I
was one of the guests on the inaugural flight Z2 511 of budget airline AirAsia Zest from Manila’s
Ninoy Aquino International Airport Terminal 4 to Miri City in the Sarawak state of Malaysia,
which took only two hours and 20 minutes.

Manila is the second international direct flight destination for Miri City, the first being direct
flights to Singapore. AirAsia Zest chief operating officer Joy Caneba said this new flight route is
not only significant for tourism and trade, the four flights every week will help make traveling
so much easier for numerous overseas Filipino workers in east Malaysia and Brunei. 

United Daily News publisher Sim Yong Liang said Miri City is an ideal, affordable, fun, relaxing
and safe tourist destination due to its lush primary forests ideal for jungle trekking, like Niah
national park, with its prehistoric human remains, and the UNESCO World Heritage site Mulu
Caves, Lambir Hills waterfalls and wildlife, scuba diving, delicious food, colorful and diverse
cultures and different ethnic groups.

 How Asia’s biggest budget airline was built

AirAsia has been named the “World’s Best Low Cost Airline” in the annual World Airline Survey
by Skytrax for five consecutive years from 2009 to 2013. What are his success strategies? Here
is our list based on interviews and some research, not in any

A good grasp of finance — Similar to Megaworld’s Andrew Tan, Fernandes is an

accountant by training and good at numbers. Educated at the London School of
Economics, from 1987 to 1989 he worked as the financial controller of British tycoon
Richard Branson’s Virgin Records in London. He is from Malaysia’s ethnic Indian
minority, with ancestral roots in India’s former Portuguese colony of Goa, which
explains his Portuguese-sounding surname.  Fernandes was formerly Southeast Asian
regional vice president for Warner Music Group from 1992-2001. No need to become
accountants, but we all need a good understanding of accounting and finance.
Determination — During a speech at the Sabah International Business Luncheon Talk
2012, Fernandes was quoted by the Borneo Post as saying nothing is impossible to
achieve as long as there is determination. He turned around an unprofitable and small
airline company with only two airplanes to one that now has a 160-strong fleet of
aircraft in only 12 years!

Do not fear failure — “I don’t care about failing because I do not want to sit down in my
older years and say, ‘How come I didn’t try?’ So we did and Malaysia is the country
which allowed four Malaysians to go out and make their dreams come true,” Fernandes
said.

Take care of key assets, your people — One of Fernandes’ strengths is his caring for and
nurturing good employees. He sees people as the “key asset” of any business and hopes
to help develop their full potential, passions and dreams. His business offices have no
walls and he seeks ideas from his staff. On Dec. 12, Fernandes gave 263 Chopard
watches totaling five million ringgit as gifts to 263 staff members who’ve been with the
company 10 years. Chopard is a 153-year-old Swiss luxury watch brand. Also, after
typhoon Yolanda destroyed Tacloban City, Fernandes reportedly sought out one of his
employees whose home was wiped out and I heard the tycoon will help rebuild the
house. 

Branding — JG Summit Holdings founder John Gokongwei Jr. years ago told me that
earning profits is not enough in business, that it is important to create a brand or
brands. One believer in the power of brands is Tony Fernandes. He said it took him
seven years to consciously and consistently build up the AirAsia brand name and logo as
distinct and internationally known.

Marketing — Tony Fernandes invests in and excels in marketing. He said: “If you have a
great product but no one knows about it, it’s history.” Fernandes reminds me of his
former boss, Virgin Group’s colorful Richard Branson and America’s high-profile realty
developer Donald Trump. Like Trump, Fernandes this year hosted the Asian version of
the TV series The Apprentice Asia, with the winner being Filipino UP Diliman economics
graduate Jonathan Allen S. Yabut, who is now also chief marketing officer of AirAsia
Zest.
Support from the government — As in most societies, entrepreneurs cannot go against
the government but need their support. Fernandes got his break in 2001 when then
Malaysian Prime Minister Dr. Mahathir Mohamad heard of his dream to start an airline
and advised him to just buy the heavily in-debt, government-linked AirAsia. Fernandes
mortgaged his house and got personal savings to buy this firm with two old jets and
US$11 million worth of debt. He bought the company for one ringgit (about 26 US
cents). After he turned around AirAsia, in 2003 Fernandes lobbied Dr. Mahathir to raise
the “Open Skies” idea with leaders of Thailand, Indonesia, and Singapore, leading to
these nations giving AirAsia and other budget airlines landing rights.

Use digital technology — Fernandes believes in using digital technology for his
businesses. Much of his business comes from AirAsia.com. In fact, one unique thing
about AirAsia flights is its inflight magazine Travel 3Sixty, which has this reminder:
“Touch me, feel me and flip me over, but you can’t take me home. Read me online.” I
think Fernandes isn’t scrimping on publishing costs, it is part of his clever marketing
strategy to make passengers discover and enjoy his website.

Generosity — Fernandes is legendary for his personal and corporate generosity. He

gives people big gifts, not only to generate loyalty to the business, but he is also
generous in philanthropy, for example, his relief assistance to typhoon Yolanda victims
here in the Philippines. His AirAsia Foundation also recently supported the social
enterprise Rags2Riches led by Reese Fernandez-Ruiz of the Philippines. Rags2Riches is
a genuine NGO helping underprivileged Filipino artisans transform their lives and turn
scrap into high-fashion bags and other items.

Passion — Passion seems to be a common denominator among achievers in business,

the arts, sports and other fields. Tony Fernandes hires people with passion. He is
exceptionally passionate, not only about his firms, charities and employees, but also
about sports. He owns a football team in England, an F1 car racing team and is a major
supporter of Asia’s biggest mixed martial arts sport, the OneFC.

Bold vision — Tony Fernandes has a bold, global and long-range vision for his various
companies. As a child, he dreamt of three things: running an airline, owning an English
football club and owning a Formula One racing team. 
Dynamic corporate culture — Fernandes said: “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 that 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.”
Business Strategies Of Lion Air Management Essay

This essay has been written by a regular student and is *not* an example of our own
work. If you would like your own custom essay written just for you by one of our
professionals then

This report will discuss the content of business strategies used by Lion Air and how it
gains both the national and international position in the airline market. The report
includes and discusses their strategic choice in order to gain competitive advantages
over competitors. In this sense, current international strategies will be discussed into
three strategic categories, international strategy, global strategy and differentiation
strategy. Moreover, Lion Air’s value chain will be analyzed to identify the patterns of the
organization’s activities.

This paper also gives the insight into how Lion Air’s strategies have been developed, by
indentifying the Lion Air’s corporate value, notably corporate missions, visions and
objectives in the form of strategy leadership as value. Furthermore, this report will
discuss the strategic development process by separating into two categories, intended
strategy development and emergent strategy development, though they are not mutual
exclusive.

This paper will evaluate the Lion Air’s strategy forces on suitability of strategy. Base on
the earlier analysis of PESTEL framework, Porter’s 5 forces model and core competency
to evaluate the suitability of the Lion Air’s strategy.

1.0 Current International Strategies of Lion Air

The choice of international strategy depends mainly on the external environment and
organizational capabilities. Moreover, improvements in international regulation and
good governance resulted in a conducive political environment and emerging economy.
For this reason, there is also an incremental demand in emerging global markets.
Furthermore, most competitors of Lion Air are operated worldwide and compete each
other to gain market shares. Therefore, all these factors lead Lion Air to develop its
international strategy to Global strategy. The followings are the strategies used by Lion
Air.

1.1 Lion Air Global Strategy

The global strategy is the strategic guide towards globalization. Moreover, it is

represent the international strategy with the broaden scope of business activates
that distributed geographically worldwide. The competitive advantage of
location, labor cost and government regulation play an important role, therefore
product offers and branch offices are located in different countries. Lion air
started its growth and expansion using global strategy. It expanded their
branches to Singapore, Malaysia and Vietnam.

1.2 Lion Air Brand Strategy

Brand image plays an important role on the success in a service business like air
line business. For this reason, there must be a good perception and reputation on
Lion Air for customer in outsides Indonesia when implementing global strategy.
Even though customers in Indonesia had accepted Lion Air as a trusted and low
cost carrier, it is essential for Lion Air to strengthen this perception to its global
brand in order to compete with other brands like Air Asia, JetStar, Tiger Airways
globally.

Therefore, Lion Air added 60 brand new Boeing 737-900ERs to meet customer
expectation of safety. Furthermore, Lion Air also cooperates with Boeing as their
auditor in order to improve their safety standards to meet international
standards. Lion Air is the first air line in the world that using the new Boeing
737-900ER. From this point, Lion Air image as a premium low cost carrier will
incline.

1.3 Differentiation Strategy

Lion Air use differentiation strategy that provides a low price ticket and
premium services to the customer. Lion Air provides two classes for the seat,
business class and economy class. The objective is to achieve competitive
 advantages by offering superior products and services with low price. Within the
differentiation strategy, Lion air had done research on identifying and
understanding of their target customer so they offer service that meet customer
needs. Furthermore, they also do analysis and identifying on their key
competitors so that they can innovate their services for changing trends.

Lion Air offered various domestic and international destination with low price,
therefore Lion Air can become the market leader for air line industry in
Indonesia beat its rival Garuda Indonesia with 30, 71% market share (Tempo,
2010). Considering the majority people in Indonesia are middle – low class
people, therefore Lion Air offer a low price service that can be afforded by many
people. Lion Air doesn't offer a premium service as Garuda Indonesia; however
they just offer a safety and comfortable flight with low price.

2.0 Lion Air value chain analysis

The value chain framework has been used as an effective analysis method for the
strategic planning of organization. Furthermore, most organizations have activities that
link together to construct the strategy of the business and form the value chain. The
value is divided into two categories. These are primary and support.

2.1 Primary Activities

2.1.1 Inbound logistics

Lion Air maintained the need of fuel, food and drinks to be delivered just
in time in order to meet customer satisfaction. They only use a reliable
supplier to supply foods and drinks, therefore customer will get the only
fresh food. Lion Air expect a timely delivery for their supplier, to ensure
reductions in stock turnover, therefore they can reducing wastage and
keep the inventory cost low.

2.1.2. Operations

The emotional bonding is the key to building loyalty and one of the major
factors that encourage the customers to repurchase the airline products.
 For this reason, Lion Air manages this issue with serving their customer
with online ticketing and provides 24 hours ticketing service for book the
flight and emergency assistance (Ionides, 2006).

2.1.3. Outbound logistics

Lion Air collaborates with Boeing to audit their safety standards and
supply them with the newest model of 737-900ER that more efficiency in
terms of fuel conception, therefore they can keep their cost low.

2.1.4. Marketing and Sales

Promotion and sales of Lion Air are mainly through a network of travel
agencies and mass media. Moreover, Lion Air promotes their airline with
their 60 brand new Boeing 737-900 Ers that launched and used firstly by
Lion Air in the world.

2.1.5. Service

Lion Air provides 24 hours ticketing service and call centre, therefore
their customer can book the flight whenever they want.

2.2. Support Activities

2.2.1. Procurement

Lion Air cooperation with any companies that can provide them with the
best quality and low price.

2.2.2. Technology Development

Lion Air enhanced their business system with the latest computer
reservation systems, flight scheduling systems; therefore they can meet
their customers’ satisfaction with effective and efficiency way.
 2.2.3. Human Resources Management

Employee development is an essential part in the Lion Air. The employees

of the company are 4,500 people worldwide. Lion Air provide an
education and training program for their employee, such as developing
them for advance positions or programs, training employees to perform
effectively in their current job, orienting employees in the workplace.
Moreover, Lion Air multicultural management team are organized to
promote and support business goals of the company.

2.2.4. Infrastructure

Lion Air currently become a global corporation with branches at

Singapore, Malaysia and Vietnam, headquarter in Indonesia. Lion Air
cooperation with the local agencies to manage and audit their regulatory
compliance, legal issues and public relations.

The value chain framework has been used as an effective analysis method
for the strategic planning of organization. Furthermore, most
organizations have activities that link together to construct the strategy of
the business and form the value chain. The value is divided into two
categories. These are primary and support.

2.3 Value of Lion Air

Core values are the main principals that guide the organization’s strategy.
Moreover, the long run success of corporations is mainly attributed to the strong
core values of their companies (Johnson, Scholes & Whittington, 2010).

The core values of Lion Air are the skills of its top management at planning
marketing strategies and the interpersonal skills of its flight attendants. Making
flights as comfortable as possible with low price is what they do the best.
3.0 Strategy Development Process of Lion Air

In this section, the processes through which the Lion Air’s strategy identified has been
developed will be described by two broad explanations, intended strategy and emergent
strategy, since they are not mutually exclusive.

Strategy development helps organizations to setting company determination for

strategic decisions. The company objectives, goals, missions and vision are established
through strategy development. From this point, the company can set a detail plan to
achieve their goals and objectives. Strategy development can be developed in some
ways. For instance, these two methods commonly occur in organizations which are
intended strategy and emergent strategy. Intended strategy is a formulation of a desired
strategy as planned systematically by management team. In the other hand, emergent
strategy is the decision that emerges from the sophisticated processes in which
managers implemented the intended strategy and adapt to the changing external
environment (Grant, 2006).

According to Lion Air, strategy making is a combination of intended and emergent as

their multiple strategy development process. An intended strategy characterized as
primary process which is formulated through Lion Air formal board meeting and
strategy planning. While emergent strategy in Lion Air, dominantly performed by the
middle management as a result of multiple strategic decisions that represent
cooperation team work. For this reason, corporate headquarters sets general guidelines
of vision, mission statement, performance targets and business principles. However,
there is a considerable freedom for division manager to adjust, adapt to the vast
changing and competitive environment.

3.1 Intended strategy development of Lion Air

Strategy is the direction, the most feasible shortcut for reaching the desire goals.
Organisation is not viable without strategy, thus it requires careful attention and
scrutiny for developing strategy. However, organisation must determine its
corporate value for developing and communicating the way the organisation
operate. The essence of corporate value is the organisation’s core value, the
underlying principles that guide an organisation’s strategy.
Lion Air has firm determination and commitment to diffuse its intended strategy
to motivate its stakeholders; it has formulated and planned its desired strategy
through strategy leadership as vision.

3.1.1 Strategy development through strategic leadership

Mission and vision are co-related with the purpose and strategic direction
of an organization. They play an important part of the strategy-making
process.

Vision:

Lion Air has strong commitment to utilise its ingenuity and innovation to
offer passengers better air travel experience with not only low airfares,
but through a comprehensive ranges of its value-added services.

Mission:

Consistent service delivery, safety and security are the foundation blocks
of everything at Lion Air.

Our commitment to these attributes has resulted in our airline’s success.

To recognized and operate globally, Lion Air serving the needs of their
customers, staff, and partners with a business model that is based upon
operational efficiency, innovation, and customer satisfaction.

Objective:

Offer opportunities for travellers and attract budget-conscious customers

to use Lion Air more often with economic cost regard to its consistent low
fares.

Mainstream cost leadership within operations, thereby able to keep its

fares consistently low for travellers.
Maximise daily service sectors served by Lion Air’s aircraft with efficient
air route scheduling.

3.1.2 Strategic planning

Strategy development is equated with formalised strategic

planning, it is typically the defining process of strategy regarding
to decision making on resource allocating for pursuing the desired
strategy, basically connect to its people and capital. Strategic
planning may take the form of systematised, step-by-step,
chronological procedures to develop or coordinate an
organisation’s strategy (Johnson et al. 2008).

3.1.2.1 Initial guideline

The circle’s starting point for Lion Air is a set of business

analysis technique of external environment of Indonesia as
indicated in Part 1, the PESTEL analysis comprise of
political, economic, social, technology, environment and
legal. Due to a specific set of vision, mission and objective,
Lion Air has concluded the preliminary assumption of real
macro-operational environment in Indonesia (Section 5) as
prospective for air industry. Lion Air anticipates the soaring
demand for air travelling in its archipelago state in the
relation to conductive political environment, emerging
economic, and effective communication network.

3.1.2.2 Business- level planning

Success is only a target. The processes of success are very

much alike climbing the staircase, one need to be settled
down before the other. Airline must keep on expanding its
scope, wider accessibility and extend its network. Lion Air
has a business unit division which responsible for explore
for the future step. This team find out what should be the
next destination the airline should place their investment
to; by analyzing many factors of the targeted destination
include demography, economic transaction, the demand for
travelling and many other sectors. For some targets, for
instance Surabaya, Manado, Ambon, Makassar, the analysis
may not be prospective, but it can be offset by the favorable
geographic condition which allows it to be the connection
hub with its proximity. Once the result is positive, the team
then draws up strategic plans to present to the corporate
centre for discussing and evaluating. The strategic plans
must undergo many steps of revising and discussing before
it can be finalized by the corporate board.

3.1.2.3 Corporate- level planning

Open up corporate plan is a complicated task, it requires

complicated procedures. Corporate must outlay huge
investment in facility as well as for dealing with indigenous
authority and overcome some government regulations.
Therefore reinforcement is quite a risky task if not
prudently evaluate.

The corporate plan results from the approval of the

business plans. Lion Air’s boards are the eventual reviewers
of the strategic plan. The board have jurisdiction to decide
whether the plan should be ratified or need further revised.
The board then prioritize the sequence of corporate plans
and take action. As the result of effort, started from only one
daily flight, within merely 9 years time, Lion Air currently
connects to over 36 destinations and operates up to 226
flights daily. In the immediate future, passenger will be able
to fly extensively throughout the Asia Pacific region with
Lion Air.
 3.1.3 Externally imposed strategy

Externally imposed strategy is the way of dealing with the

influences caused by powerful external stakeholder. This is
basically a barrier which threatens the process and development
of corporate plan. These barriers include government regulation,
measure, public awareness etc. Strategies being impose in such
ways may have been determined using the tools of analysis and
evaluation associated with a rational/ analytic approach, or
perhaps through systematic strategic planning. Lion Air has been
flexible in identifying externally imposed strategy, thanks to
conducive Indonesian political environment which imposed fewer
barriers in airline industry. Due to minor obstacles, Lion Air has
extended their scope effectively within the region (as mentioned in
the Part I section 6.1 Potential Entrants). International expansion
is biggest challenge for airline industry, but it inevitably entails a
lot of obstacles. To overcome these obstacles, externally imposed
strategy must be prudently designed, all the influent factors must
be taken to account to find out best solution then reinforce. For
instance, from the result of externally imposed strategy, Lion Air
formed a new joint venture partnership and the ownership was to
be split 51% to Brisbane-based SkyAirWorld. This new
partnership entitled the Lion Air Australia to operate as any other
Australian-owned airline on the same air traffic rights. (As
mentioned in Part I section 3.1 The Ownership of Lion Air).

3.2 Emergent strategy development

Over time, strategies need to be reviewed and must be flexible according to the
real situation. Typically, it changes by building on and amending what has gone
before. We can say that experiences and mistakes lead to better perspective for
future orientation. Another word, strategies evolve and inform strategic
decisions, which in turn consolidate strategic direction.
Emergent strategy comes about through everyday routines, activities and
processes in organizations leading to decision that become the long-term
direction of the organization. (Johnson et al. 2008). Not only the strategy, but the
vision, mission and objective should also be reviewed and rectified, so that make
it easier for organization to shift accordingly. In the insight of emergent strategy,
corporation will be able to find out some loopholes from past operation, and then
generate better solutions and new direction. The emergent strategy
development consists of four processes, logical incrementalism, resource
allocation processes, cultural processes and organizational politics.

3.2.1 Logical incrementalism

For Lion Air, the global ambition came after the achievement of earliest
goal, a desire to offer the best air service quality within Indonesia. In the
early stage, airline industry was solely run by government, this state-
owned airline offered high fare travelling within less route and poor
service. The progression of airline was slow since there was no
competitor. There was no private company interested to invest in this
sector then. Rusdi Kirana saw this unsatisfactory as the opportunity, the
first air route of Lion Air was Pontianak where is the home town of
Kirana’s family. Many people said that, Rusdi decided to set up his own
airline while he was delayed and waiting for several hours in the airport.
This sounds ridiculous, but it might be true. The earliest objective of Lion
Air was to be a budget airline which offer low fair travel and improve the
service quality, such as safety, better facility, and convenience (no
delaying).

From here, we can see the logical incremental of Lion Air, it further
develops its strategy by experimentation and logically learning from
partial commitment rather than through the formulation of total strategy.

3.2.2 Resource allocation processes

Lion Air did not do away with the uncertainty. In its earliest stage, Lion
Air outlaid less capital to invest on only one route with a single aircraft.
This initial investment worked as the experiment for future speculation, it
determined the potential and marketable of this industry. If it was not
favourable, corporation would have changed their strategies and
expectations, they probably came out as a luxury brand designate for high
end market, or divested if the business is considered not viable. In this
sense, Lion Air has had specific resource allocation strategy to avoid the
tremendous loss. As they identified the feasible opportunity, huge pool of
resource has been invested to purchase and reinforce its fleet and open
up new routes locally then internationally. The way resources are
allocated determines its emergent strategy as part of strategy
development.

3.2.3 Organizational politics

Organizational politics might be a factor of constrains within an

organization, if not properly manage, it could cause internal tension and
blemish innovation and creativity. Currently, Lion Air joint venture with
SkyAirWorld, but due to the corporate planning strategy, all final decision
must be approved by the board director, which means that the most
powerful force reside on the board of Lion Air (as discussed in Part I,
section 3.1). But still, if politics emerge within some departments, it
definitely affects the evaluation processes. In this sense, the board should
work closely with the subordinate department in the evaluation process.
The board should preside over as a moderator to ensure unify and
compromise, all the champions and powerful stakeholder should discuss
all the issues and problems in light and overboard.

3.2.4 Cultural Processes

Cultural process describes the outcome of the taken-for-granted

assumptions and behaviour in the organization. For a company to run
effectively it must ignore the paradigm and keep on seeking for new ideas
as the ways for operating instead of depending on only one source of
revenue. So Lion Air should not stick with its routines, rituals and
 symbols. Lion Air should think out of the box and broader its scope. The
culture here might be a mistaken core assumption that the only revenue
source for airline industry is selling the air ticket. But in fact, there are lots
of opportunities that linked directly with the airline industry such as
courier service, duty-free shopping and restaurant etc. These will
ultimately generate more the revenue, spur the sale, build up loyalty and
eventually become the competitive advantages or even core competency.
Therefore the strategy development may need to be directed to these.

4.0 Strategy evaluation

Although a company consider more comprehensive and detailed when they set the
strategy, the company cannot perfect forecast and control the changes of market.
Therefore, in the process of implementing the strategy, the company should
continuously to evaluate the strategy and give the objective appraisal, to correct the
problems timely, to fit the capricious market, and then the company can achieve
sustainable development. There are three key success criteria which can be used to
assess the viability of strategic options involves suitability, acceptability and feasibility
(Johnson, Scholes, & Whittington, 2010). In this part will evaluate the suitability of the
Lion Air’s strategy.

Suitability is concerned with whether a strategy addresses the key issues relating to the
strategic position of the organization (Johnson, Scholes, & Whittington, 2010). In other
words, suitability means whether the strategy make economic sense and suitable for
environment and company capabilities. In part 1 of this assignment has discussed the
PESTEL framework and Porter’s 5 forces model to analyze the macro and industry
environments of Lion Air, as well as the core competency of Lion Air. For the evaluation
of the suitability of the Lion Air’s strategy, it will base on the earlier analysis of PESTEL
framework, Porter’s 5 forces model and core competency.

4.1 PESTEL framework

According to previous PESTEL framework analysis of Indonesia, there is a

conducive political environment for Lion Air can operates and expand its
business safely. Additionally, the emerging economical environment in Indonesia
causes the improvement of living standards, people willing to travel more.
Furthermore, Indonesia is an archipelago country, the Indonesian have a high
demand of air service; they fly just like the Chinese by train in China. Indonesia
air travel is important not only because it is the fastest way to travel, but in many
cases because there are no other forms of transportation available. The various
islands and cities are connected through airways system. Therefore, a convenient
and cheap air service is what the customers expect. As a low cost carrier, Lion Air
offers the low fare for customers to satisfy the aspirations of travel. How Lion Air
can offer the lower fare than others? Firstly, Lion Air improves the seat kilometre
utilization and the flight time. Generally, the average of an aircraft flight time is
about 9 hours per day. Lion Air through increased efficiency extended the flight
to 10-11 hours per day. The average seat kilometre utilization for the common
flight is 70%-80%, Lion Air through reasonable allocate to increase the seat
kilometre utilization over 90% as possible. Secondly, Lion Air is a no-frills airline.
It means that no assigned seating, in-flight entertainment, or even free food and
drink. Thirdly, Lion Air encourages customers through the network to buy the
ticket directly. It does reduce the ticketing costs. For these reasons, Lion Air has
cut the cost successfully; therefore Lion Air can provide the low fare to
customers.

4.2 Porter’s 5 forces model

Based on the Porter’s 5 forces model analysis, the airline industry is very
challenging in Indonesia. Firstly there are many competitors competing with
Lion Air, such as Air Asia, Batavia Air, Mandala Air, Sriwijaya Indonesia and
Garuda Indonesia. These stated names (except Garuda) are the budget airlines
which offer numerous flight routes in Asia, so they essentially compete on price.
Customers always choose the one who has the lower price fare and high quality
service. According to the common features of the low cost carrier, every airline
companies have their own strategy to reduce the cost; however the result is
almost same, the low fare. How can customers choose the airline companies
which are offer same price tickets? Therefore, differentiation strategy becomes
important for airline companies. A differentiation strategy seeks to provide
products or services that offer benefits that are different from those of
competitors and that are widely valued by buyers (Johnson, Scholes, &
Whittington, 2010). In previous part has mention about Lion Air use
differentiation strategy to be different from other airlines. Lion Air provides two
classes for the seat, business class and economy class. The aim of this is through
offering superior products and services to satisfy different requirement from
customers. Brand image also is an important element for customers to make
decision. Lion Air has a good reputation in Indonesia. The Indonesians had
accepted Lion Air as a trusted low-cost carrier. Lion Air has continually improved
its brand image. Lion Air has order the new Boeing 737-900ERs and cooperates
with Boeing for improve the safety standards to meet the international safety
standards.

4.3 Core competency

In the part 1 of this assignment has discussed the core competencies of Lion Air
are cost efficiency and service. Cost efficiency has manifested in many ways.
Customers can benefit from cost efficiencies in terms of lower prices or more
product features for the same price. The management of the cost base of an
organization could also be a basis for achieving competitive advantage (Johnson,
Scholes, & Whittington, 2010). Lion Air’s motto “we make people fly” guide Lion
Air offers the low fare to customers in order to meet the aspirations of travel.
Lion Air through every kinds of strategy to reduce the cost. Cause of Lion Air
continually reduces the cost, therefore Lion Air could gain the profits while offer
the low fare. Lion Air also invests on the old terminal of International Airport in
eastern Indonesia. The strategy aims to expand the airline's market in eastern
Indonesia, and boost maintenance efficiency. Lion Air is very concern about the
safety of customers. Lion Air provides Customer Lion Air Travel Insurance - an
affordable and convenient way for Customer to protect their trip
(www2.lionair.co.id). Lion Air is improving its flight safety standards through
gradually rolling out the Required Navigation Performance (RNP) methods and
the standards will built-in in all the aircraft eventually. For these strategies,
customers could experience the low fare and high quality service.
5.0 Conclusion

Lion Air overall strategies include global strategy, brand strategy and differentiation
strategy. Moreover, Lion Air has make effort on improving the quality of service,
customers’ safety and reduces the cost. According to the evaluation of the suitability of
the Lion Air’s strategy based on PESTEL framework, Porter’s 5 forces model and core
competency, the strategies of Lion Air used are fit with the macro environment in
Indonesia and Lion Air’s core competences. Lion Air’s position as the low carrier air line
fit Indonesian market considers the economical and geographical condition of
Indonesia.