head of commercial operations Darren has 5 questions:

First, how best to leverage the extensive network of the
regional sister company AirAsia in selecting new and profitable destinations for AirAsia X, the long haul1
venture of the group? Second, how to increase revenues without raising ticket prices? Third, how best
to
globally position the airline’s brand in non-Asian markets? Fourth, how to shift his marketing team’s
mentality away from a start-up mindset? And finally, how to prepare for a global initial public offering
within the next 12 months
 
AirAsia's beginning:
- in 2001, founder Fernandes wants to do Southwest and Ryanair model in Malaysia, but has long haul
flights >5 hours
- initial plan was to be intercontinental, but advisers warned Fernandes
- market: growing middle class
- he followed advisers, asian flights first.
- worlds best low cost airline in the world award in 2009
- many subsidiaries, thai airasia, indo airasia...
 
Airasia X, separate business entity, to lessen complication (2007)
 low cost, long haul intercontinental
 "partnered" with malaysian airlines. malaysian airlines were already planning to do it on a local
airline that both malaysian airlines and Fernandes owned.
 a330 bigger aircraft
 they use airbus aircrafts only because financial benefits
 X started as a franchise of airasia to leverage resources
 In 2010, officially independent from airasia. this is also preparation for IPO in 2012
 
how did long haul , low cost model survive:
The reason was surprisingly simple. From the beginning, X operated as an ultra-lean company, with the
bare minimum number of staff hired to achieve safety and effectively complete only the basic
transportation tasks. Additionally, labor costs in Malaysia, and the absence of unionization, helped keep
human resource costs low. Until it reached the necessary scale, X shared resources with AirAsia, focused
on avoiding duplicate processes. X did not invest in terminal or other non-airplane related infrastructure
that would increase fixed asset overheads.
These factors included the company’s emerging market heritage, the struggles to
overcome the depressed economic environment during AirAsia’s launch, the negative effects of 9/11 on
the airline industry and diligent benchmarking against the successful models Ryanair and Southwest
Airlines operated. Osman-Rani made it his mission to create an airline that would withstand any kind of
major external environmental shocks, including pandemic disease, terrorist attacks, natural disasters,
economic crises, or oil price spikes.
 
model:
 
low cost leader, other significant aspects of X’s business model included aircraft
selection, higher utilization of space by maximizing seating capacity, aircraft utilization, customer
focused paid a la carte inflight experience, including premium seats, operational simplicity and other
unique intangibles.
 
 
 
aircraft selection and seat configuration
 had a good relationship eith airbus
 airbus provided fast maintenances service
 3-3-3 seat plan for more seating space
 but some airline company said this was not preferred because passengers have the hassle of
getting out.
 also installed some head rest for more comfort
 
 
luxury, flat bed
 first in the world for budget ailrlinez
 no free amenities, frills also have to be paid
 
utilization: they had no fixed schedules, maximize time. with 16 hour average flights.
 
People still bought frills. and these also included duty free unlike other budget airlines
 
simple:
 one point trips
 no complicated fees
 postpone reward program
 No refund
 can book4 hours before
 
culture
 everyone sat with one another
 work hard play hard
 minimized physical barriers
 
why early success, when others failed: they had leverage and help from airasia
 
had their own terminal (lcct) from big political support. this lowered costs. but it can only handle
10million people. projections were atb18millin
 
 
ticket outlets:
primarily website.
-reached out to kiosks in airport, ticketing counters and even travel agencies
 
marketing: they acquired KoolRed, an asian Facebook for airline discussions. eventually these social
media platforms distributed to local countries. some countries had their own KoolRed
 
they also did translation of language for their own website
 
30% of budget was still allocated to paper advertising
 
there were getting free familiarization trips to get favorable reviews as well
 
 
Since X flew long distances competing head to head with full service airlines, the adoption of the pure
low cost model was considered insufficient. Sensing this alignment issue, Wright, as the manager for
revenue management, convinced Osman-Rani to recruit a seasoned executive with extensive airline
industry revenue management experience in order to close this expertise gap. The newly established
revenue management team began operating in December 2010. Wright requested a thorough analysis
of

X’s revenue model, passenger profile and passenger needs as the team’s first deliverable.
 
budget airline focused on load factor and not yield factor
 
passenger base: 60% were malaysian nationals
 
websites:
When AirAsia or X had a massive fare sale, it was always designed
to surprise consumers and influence them to purchase the low priced fares immediately. However,
AirAsia.com did not have the bandwidth andhi server infrastructure to handle the sudden spike in web
traffic on promotional sales days. websitree crashed!
 
they also had their own call center to adress these problems
 
 
also had problems in people coming in when they had no visa. also, these absences in plane seats made
the levelling of the craft uneven
 
constraints of expansion:
 airplane fleet and landing rights
 malaysian government favored malaysian airlines, so it restricted X into expanding to other
territories
 
Viability of destinations:
 Difficulty with malaysian government
 Head of routes Balan made it possible from Kuala Lumpur to Christchurch (it was a succes)
 
Growing revenue, Maintaining low ticket price:
 Onboard sales also helped revenue sales
 Sales per passenger was bigger than SIA
 has baggage fees
 has meals, travel pillow, eyemask, retail space
 Only keep the stuff that sells well
 
X considers themselves to be the game changers. Doing things first in the budget airline industry
 
Flight Transfer:
 In Dec 10, they began to sell flight transfers
 Added more fee, but people valued convenience
 "Fly-Thru" - This was a success
 
Brand:
 Sponsoring sport stuff
 Focused on one identity
 AirAsia, hard to distinguish between X and AirAsia
 "we always have a sale"
 
Distinctive Advertising:
 They try to be humorous
 
Long Haul vs Short Haul and the challenge of a single brand:
 They did not have the frills in long haul
 Reclining seats were added later mainly for health and comfort reasons
 We are the brand that is turning dreams into reality ( for the less income)
 
Global Focus Work:
 99% malaysian employees
 They can alter their business model as they expand, but they should remain critical to low cost
 
Global IPO:
 Difficulty in merging one consolidated report from different parts of the world
 Revenue Mgmt: Plan vs React
o They did not match advertising with revenues
o Fare advertised is done, but already sold out
 Making nice: Balancing Domestic Political Relationships
o The national airline (malaysian airlines) love-hate relationship
 Malaysian income but competitor of Malaysian airlines
o Ministry of Transport had restricted AirAsia because of this at times
o Ministry of Transport to plan to share the routes with Malaysian Airlines
 
Conclusions:
 Maintain entrepreneurial and flexible model
 Bold culture: Xcited, Xcellence, X-rated
 Enjoyed less attrition rate
 Growing and expanding firm and challenging foreign firms as well
 What happens in the long term?
o Competitors will arise
o Brand recognition outside asia?
o Is long haul really viable?