OPERATIONS MANAGEMENT

GAB 4013

OPERATIONS MANAGEMENT PRACTICES
IN

AIRASIA BHD.

DANIEL YEO REN WEI HOSSAM MAHMOUD ELANZEERY KUMANAN A/L RAMAN MOHAMED ABDELAZIZ ELBAGOURI VINOD A/L CHANDRA SAYAKARAN

7851 8007 7935 8001 7961

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TABLE OF CONTENTS
CHAPTER 1 INTRODUCTION.........................................................................................................1 CHAPTER 2 LOCATION STRATEGY.............................................................................................2 2.1 2.2 2.3 2.4 Factors Propelling Aviation in Southeast Asia..............................2 Population of Selected Countries in Asia......................................3 Point-to-Point.................................................................................3 Hub-and-Spoke..............................................................................3 2.4.1 2.4.2 2.4.3 2.5 Multiplier Effect.................................................................................4 Advantages.........................................................................................5 Disadvantages....................................................................................5

Locations and Destinations............................................................6

CHAPTER 3 PROCESS STRATEGY................................................................................................7 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 Large Quantity and Small Variety of Services..............................7 Special Purpose Equipment...........................................................7 Less Broadly Skilled Operators.....................................................8 Standardized Work Orders and Job Instructions...........................8 Low Inventories.............................................................................8 Low Work-in-Process Inventory....................................................8 Swift Movement of Units...............................................................8 Goods Made to a Forecast..............................................................9 Simple Scheduling.........................................................................9 High Fixed Costs..........................................................................9 Utilization of Capacity.................................................................9

CHAPTER 4 DESIGN OF GOODS AND SERVICES....................................................................11 4.1 4.2 4.3 4.4 4.5 Phase 1: Hotel B-E & Hotel Distribution Management Systems 11 Phase 2: Pre-Defined Packaging Solution...................................12 Phase 3: Dynamic Packaging Solutions (DPS)............................12 Achievements...............................................................................13 Recommendations........................................................................13

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..........................................22 REFERENCES.............15 Reliance on Technology........................................3 6.............15 Operating Strategy............................................................................................................ B..................................................... C & D Inspection System.................................15 Daily Utilization Rate...........................................................20 Risk Factors & Recommendation.............................................................................2 6.15 5.....3.......1 5.......................3 5........21 CHAPTER 7 CONCLUSION........................1 6..............................4 6......................................3 Important Factors..........................................................5 Revenue and Block Hours..........18 A.........................23 iii .....................2 5............4 Economic conditions......................................CHAPTER 5 SCHEDULING.............................3...............................................................................................................16 CHAPTER 6 MAINTENANCE SYSTEM...............14 5.................18 6.......................................................................................................................19 Maintenance-By-The-Hour & Time...............................19 Maintenance Operation Strategy....................14 Risk Factors...................Material Program...14 Schedule Planning...............................................2 5....3..............1 5.

scheduling and maintenance. The Department of Civil Aviation (DCA) of Malaysia mandates AirAsia for certain inspections and parts replacements after specified hours of flying. A deeper look into the AirAsia’s process strategy shows that it also follows a product-focused strategy. process strategy. providing high-frequency services on short-haul. AirAsia has carried over 2.CHAPTER 1 INTRODUCTION AirAsia is the leading low-cost carrier in Southeast Asia. 1 . design of goods and services. and scheduling is one of the most crucial functions in the business. making it a servicetype company. AirAsia’s main business is air transport. point-to-point domestic and international routes. Passenger and crew safety are prioritized in airlines. The purpose of this report is to highlight the operations management practices in AirAsia in the areas of location strategy. Schedules represent one of the primary products of an airline.6 million passengers to date and is dubbed the most efficient and lowest unit cost airline in the world.

From 1985 to 2000 passenger activity within the region increased at the average yearly rate of 7. one of the highest in the world. Several factors. including rising per capita incomes and broadly available low airfares. including: • • • • • Geography Increasing number of business travelers Increasing urbanization Large demographic area with good per capita income growth Liberalization of the aviation industry 2 . and intra-regional passenger volume is expected to grow at 8. but is growing very rapidly.CHAPTER 2 LOCATION STRATEGY The aviation industry in Southeast Asia has grown rapidly in recent years. propelled in mainly by economic development in the region and the liberalization of the regional aviation industry.1 Factors Propelling Aviation in Southeast Asia Various factors are expected to drive continued aviation activity growth in Southeast Asian region.5%. Growth is forecasted to continue.6% on an yearly basis from 20032008. provide opportunities for rapid growth and market share gain for the region’s low cost carriers. Low-cost carrier activity in Southeast Asia is only beginning to develop. 2.

3 .1% 0.3 Point-to-Point In the past. The nonstop system could be expected to remain relatively stable over long periods.424.5% 0.1% 1.499.2 Population of Selected Countries in Asia Population in cities > 1 million Urbanization 2002 26% n/a 18% 38% 28% 43% 20 % 59% 29% 60% 100% 20% 25% 2002 (actual) 13% n/a n/a 14% 10% 10% n/a 6% 9% 16% 100% 12% 13% 2015 (forecast) 18% n/a n/a 17% 12% 13% n/a 6% 11% 17% 100% 15% 14% Population Country Bangladesh Brunei Cambodia China India Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam 2002 (actual) 135. economy viability frequently depended on adding traffic flows from backup markets on either end of a nonstop route.000 351.684.613.00 0 1.000 79.786.000 5.000 61.530.048.4 Hub-and-Spoke Carriers rapidly replaced the old structure with a hub-and-spoke system due to several reasons.716.164.000 80.00 0 211.5% N/A 1.2% 1.000 2002 to 2015 annual growth 1.5% 1% 1.1% 2. 2.1% 2.000 13.000 4.641.6% 1.6% 1. however. there was constant pressure for more direct. Many city-pair markets.000 24.400.305.000 1.172.6% 1. point-to-point nonstop flights.000 48. could not support nonstop service in terms of their own origin/destination traffic.2.280.

2.1 Multiplier Effect The main advantage of the hub-and-spoke operation is the multiplier effect. This multiplication of traffic greatly increases the chances of obtaining strong load factors. linked in paired with direct nonstop service. the 16 pairs obtained by the connection linkage of each of the four eastern cities with the four western cities to the hub itself. Full airplanes result in lower costs.4. which permit lower fares. The number of city-pairs an airline can serve with a given amount of flight mileage. The number of citypairs receiving air service in this pattern is four. each of the cities is linked to a centrally located hub. and these saving have also allowed the airlines to increase the frequency of flights. 4 . The figure below shows eight hypothetical cities. The figure below now shows what happens when approximately the same amount of mileage flown. there would now be a total of 24 citypairs served. With the permutation of routing possible via the hub.

such as noise and pollution.2 Advantages Once the carrier establishes itself with a solid network of spokes at a particular hub. Passengers flying in low traffic markets might not enjoy low affaires or fly in large jets if the airlines were to fly them nonstop between the end cities.3 Disadvantages The extent of excessive concentration at the hub can result in some negative economic impacts. congestion delay. congestion delay increase rapidly. 2. which may outweigh some of hubbing is benefit to both airlines and passengers. Hub also offers advantages to travelers. unless the other carrier has the resources to undertake a similar feed network. finally excessive aircraft concentration at the hub can have negative environmental impact. a separate gate is required. Passengers from small cities can fly to many small or large cities in the word with relatively low airfares via the multiple-hub systems. 5 . for each city feeding into the hub.4. moreover.2. passengers can also enjoy the convenience of frequent flights to and from that hub. These negative economic effects of aircraft concentration must be into account when conducting cost benefit analyses into building or expending major hubs. By linking at a hub. it becomes arduous for any other carrier to challenge it competitively. namely.4. Small planes cost more per seat-mile to operate and may require multiple stops for refueling. The use of the large jets also increases travelers’ chance of finding a seat on their desired flight. As aircraft volume approaches the capacity of the hub airport. and adding more cities requires more gates. This usually results in lower schedule delay. Congestion delay also creates additional work for air traffic controllers and increases their stress levels.

5 Locations and Destinations AirAsia presently operates out of six hubs in Thailand. 6 .2. Malaysia and Indonesia serving 78 destinations in Southeast Asia as shown in figure below.

which can be represented by the routes it serves through its flights. trainings. The group’s strategy is to target markets within three-and-a half hours flights from hubs. which limit the routes to Southeast Asia and greater China. in the coming lines it will be explained how AirAsia’s processes fall under the product focus area. AirAsia operates from six different hubs. It fulfills the following 11 characteristics that describe a product focus strategy. Moreover AirAsia uses only two types of aircraft which results in cheaper costs in term of spare parts inventory. 7 .CHAPTER 3 PROCESS STRATEGY AirAsia’s main industrial function is air transport.1 Large Quantity and Small Variety of Services AirAsia provides a limited variety of services. which will be discussed in this chapter. AirAsia was recognized by Boeing as a leader in utilization rates among airlines. which makes it considered as a service type of company and makes it quite hard to differentiate between the design of services and the process strategy.2 Special Purpose Equipment As with any airlines the equipment used by AirAsia is very purpose oriented consisting mostly of aircrafts. It provides so frequent flights. 3. Taking a deeper look into the process strategy of AirAsia it can be clearly demonstrated that it follows a product focus strategy. They are capable of having several round trips per aircraft per day because they maintain low turnaround times. which can be considered as large quantity service. 3. reduced requirements and makes scheduling more efficient.

7 Swift Movement of Units Swift movement of units through facility is typical. 3. the number of orders needed is negligible comparing to other industries that are higher in variety.6 Low Work-in-Process Inventory Work-in-process inventory is small compared to output. The inventory AirAsia possesses consists of a spare parts inventory for the aircrafts they own. As the aircrafts are already delivered from other companies like Boeing and Airbus they just need normal routine maintenance and repair if necessary which is considered as very low work-in-process compared to the frequent flight service they provide. its average turnaround time is 25 minutes compared to 45 to 120 of typical turnaround in other airlines. It operated 13 block hours a day in 2004. 3. That explains how swift the movement of airplanes is through hubs. AirAsia operates point-to point services and maintains low turnaround times. 3. The pilots will only be more skillful in operating on a single type of aircraft which either is the Boeing 737 or the Airbus A320. which minimizes the cost for training.3. This type of inventory is considered negligible relative to the amount of flights each aircraft performs.5 Low Inventories Inventories are low relative to the value of the product.4 Standardized Work Orders and Job Instructions Work orders and job instructions are few because they are standardized. 3. As schedules and routes are predetermined. 8 .3 Less Broadly Skilled Operators As mentioned in the previous section AirAsia is using two types of aircraft.

a market that covers a population of 500 million people where a small percentage of the market regularly travels by air. As discussed in the previous subsection and the scheduling chapter we can easily notice that the scheduling is almost standardized and varies according to specific reasons but does not change drastically since the services are well defined and made to make the best sales. AirAsia is always concerned about the high utilization of their aircrafts and they are proud of having the shortest turnaround time and highest utilization. and lower airport fees. 3.9 Simple Scheduling Scheduling is relatively simple and concerned with establishing a rate of output sufficient to meet sales forecast. the flights are more often and forecasted to suit the huge number of travelers. 3. It is so clear that the prices of aircrafts are relatively high. aircraft maintenance contracts with third parties were obtained through competitive bidding process. Also during peak times and holidays.8 Goods Made to a Forecast Finished goods are usually made to a forecast. which resulted in lower rates. AirAsia targets the region of Southeast Asia.3. Moreover.10 High Fixed Costs Fixed costs tend to be high and variable costs tend to be low. The higher the utilization the more profit and variable costs increase. lower rates for long-term maintenance contracts. AirAsia is always trying to reduce the fixed costs by negotiating charges for the group’s aircrafts. AirAsia especially designed its services to be through specific hubs going to specific countries at specific times according to the number of people expected to be traveling to certain destinations at certain times of the year. AirAsia’s fixed costs are relatively higher than their variable costs.11 Utilization of Capacity Costs are highly dependent on the utilization of capacity. 9 . However. AirAsia's average monthly contractual lease charge per aircraft decreased by more than 60% from 2001 to 2004. AirAsia actively seeks to enter into the jet fuel derivative contracts to lessen the impact of rising fuel prices. 3.

Another feature of AirAsia’s process strategy is their high dependence and leverage of technology especially in booking as described in the design of goods and services in another chapter. 10 .

com. AirAsia procurement team will then set specific markup and related policies for each of its client group accordingly thus streamlining AirAsia’s operation handling. air inclusive packages via its website to realize its’ vision of becoming a one-stop flight. the airline has singularly grown the Malaysian air travel market through its revolutionary low fares. reliable flights and offering innovative internet-based booking at www. nofrills. To date. the airline has carried over 2. 4. AirAsia has seen a great opening and invaluable assets a hotel component would offer and would like to sell hotel rooms. Moreover.I. hotel and holiday portal that offers good value for money travel products.airasia. ticketless airline in January 2002. Hotel Distribution Management Systems (HDMS) allows AirAsia’s procurement team to maintain room data as well as providing its hotel partners & affiliates restricted login access to maintain their own inventory & cost price. 11 . explore other expansion possibility to complement its total air offering.T travelers) to reserve hotel rooms online. frequent.6 million passengers and is dubbed the most efficient and lowest unit cost airline in the world. AirAsia is going regionally and internationally as well. Since the conversion of AirAsia into a low fare.1 Phase 1: Hotel B-E & Hotel Distribution Management Systems Hotel Booking Engine (Hotel-BE) enables AirAsia’s B2C customers (F. Having gained strong air-footing locally.CHAPTER 4 DESIGN OF GOODS AND SERVICES Air Asia Berhad (Air Asia) is considered the first low fare no frills airline to introduce the idea of “ticketless” traveling in Asia.

after customer enters his desired destination and travel date.2 Phase 2: Pre-Defined Packaging Solution Pre-Defined Packaging Solution was set up for AirAsia to pre-assign hotel and flight component for a package. 12 . Package price will then vary dynamically according to the new selection made. DPS will automatically present the lowest priced package option (with flight & hotel in a single package). However.4. customer is allowed to modify the travel product selection based on their budget & preferences. he can choose a travel package with combination of flight and hotel from a predefined list. 4. Any combination of flight and hotel will always remain at one fixed price predetermined by AirAsia. For example.3 Phase 3: Dynamic Packaging Solutions (DPS) Based on customer’s selection of travel destination.

4. Corporate Customers. 13 . not only that but it is spreading its network outside the continent by opening new route to London which is considered a great step for putting Air Asia as a leading low cat airline in the whole world. Air Asia has started opening new roots to middle east such as Abo Dhabi. Sales Offices and Ticketing Offices regionally the solutions are ready for such implementation. No longer are they simply flight-centric. This has given AirAsia the ability to transform themselves into a travel merchant and profit center. However. better positioned to compete with both online and offline channels. when AirAsia is ready to roll out its strategy to target on the B2B group of customers.4 Achievements One of the major benefits that AirAsia has reaped by implementing AFOOFA Solutions’ technology is the substantial increased revenue from hotel bookings. but now focusing on both flights and hotels to become a convenient one-stop holiday portal catering to a larger target audience.5 Recommendations Air Asia is only serving its B2C customers at the moment. 4. In addition to that. Reservation Centers. such as travel Agents.

Flight Operations: Airport Runway Length.CHAPTER 5 SCHEDULING One of the most important functions in a business is scheduling. Complex mathematical algorithms have been utilized to develop computer programs capable to complete the complex scheduling task required for airline companies. and THAI) may do and developing a plan of action to meet such competition. Slots and Regulations. 5. Fuel Capacity. Determining the size of the South East Asia market and projecting its future growth. Crews: Certain crew routings must be followed to maintain efficient monthly utilization. the following factors are influential in the scheduling of an airline company: • • • • • • Airport Authorities: Curfews. 5. Equipment maintenance: Scheduled and Unscheduled Facilities: Airport capacity establishes an upper limit on operations.1 Important Factors Amongst others. Marketing Factors: Traffic flow and Load factors. 14 . amongst which are: • • Attempting to forecast what the competition (MAS. Singapore Airlines. The airline management needs to continuously find a balance between economic strength and adequate service quality.2 Schedule Planning Schedule planning poses several challenges. Air Traffic Control and Routings.

which would affect the profit margins.3. 5. However.3 Reliance on Technology Air Asia relies heavily on the Internet and automated systems to operate its business.• • Estimating the costs and revenues of the alternative plans of action to determine which will be profitable. Usual causes of delay are adverse weather conditions. which enables more revenue generation from the aircraft.1 Economic conditions The airline operations are subject to the supply and cost of jet fuel.2 Daily Utilization Rate Air Asia depends on a strategy to maintain a high daily aircraft utilization rate. Estimating the effect of planned product changes on the size of the total market and on the carrier's share of the market. Therefore. Any failures in either system would have an adverse effect on the company itself. air traffic control related requirements and unscheduled maintenance. in the event that an aircraft falls behind schedule during the day. 15 .3 Risk Factors There are several risk factors involved in scheduling: 5. 5.3. 5. Air Asia ensures that it has high capacity redundant systems that are backed-up on a daily or weekly basis in order to avoid the loss of data and disruption of operations. it could remain behind schedule during the remainder of that day. which can disrupt timely operations and lead to guest dissatisfaction. the downside to high daily aircraft utilization is that. security and safety.3. the fluctuation of economy in the countries in which business is done and labor costing in the related countries. This is achieved by reducing turnaround time at airports and the delays involved.

The application optimizes crew and saves money by reducing operating costs. predict. An important operating software used by Air Asia is the Geneva Optimum Airline Performance (OAP) software for flight scheduling and crew rosters by Navitaire. Database: Central database housing crew and daily operations data to support daily operations and crew data and related reporting. 16 . actual Seamlessly integrate business units and processes and reduce errors Test multiple scenarios and solutions before committing to a schedule The Geneva software used by AirAsia is utilized for these various tasks: • • • • • Crew Management System: Delivers fast. The benefits of using this software are to: • • • • • • • • Accurately measure and report key performance indicators to management Address business problems Incorporate rules into route development Increase the efficiency and integrity of operations Optimize the utilization of staff and aircraft resources Plan for action on events before they become critical and measure planned performance vs. measure and report on activity to optimize daily aircraft and crew utilization. The Geneva system enables Air Asia to organize. Flight Log Manager: Gathers and verifies actual flight information and makes it available for comprehensive management reporting. workable solutions to react to disruptions quickly. enables scalable operations and improves efficiency by investing heavily in information technology. plan.5. Day of Operations Manager: Provides fast decision support essential for managing daily disruptions. Pairing Manager: Establishes the most effective commercial operating framework for crew pairings from a commercial flight schedule.4 Operating Strategy Air Asia directly lowers costs.

view their work schedules and receive crew administration messages via the Internet. targeted and informative reporting. Resource Planning Manager: Provides the tools to plan and monitor all crew administration needs. System Controller: Provides complete access to AirAsia's procedures. rules and regulations and core data. Roster Manager: Allows schedulers to generate efficient crew rosters and manage changes that achieve business goals while meeting crew needs and allows crew to participate in schedule bidding. 17 . • Routing Profitability Manager: Develops and maintains profitable routes using advanced planning and analysis tools to maximize aircraft utilization of a proposed flight schedule. • • Scheduling Manager: Allows AirAsia to automatically plan and maximize the flight schedules to produce the best commercial return.• • • Report Manager: Allows accurate. timely.

"Block" refers to the placement and removal of a block under the wheel at the gate. AirAsia has developed an ergonomic way to maintain its aircraft without impacting operations. a highly skilled technical team and the most advanced technology. 6. AirAsia practices a concept where it measures its REVENUE HOURS from takeoff (wheels up) to landing (wheels down). with years of experience in the aviation industry. which includes flight crew. 18 . preventive maintenance can be integrated smoothly into the operations. maintenance cost. fuel consumed. constant updating and training of technicians and flight crew. According to the Civil Aviation Act 1969 and Civil Aviation Regulation 1996.While BLOCK HOURS is measured gate to gate and so count the time spent taxiing at both ends of the flight.1 Revenue and Block Hours Common aircraft maintenance is based on hours of operation rather than miles flown. Therefore. Together with Boeing and Airbus. thus increasing BLOCK HOURS and reducing costs. is done in terms of costs per block hour. Using a modern sophisticated system. AirAsia’s technicians and engineers make up one of the most experienced teams in Malaysia. and with the authorization of the regulatory agencies. and more importantly with enhanced safety.CHAPTER 6 MAINTENANCE SYSTEM AirAsia considers safety to be the single most important aspect of our operations and it is a characteristic that will never be compromised. For AirAsia. AirAsia can therefore keep its aircrafts fully operational for the entire year. depreciation values and/or rent and insurance. AirAsia is stringent about complying with the highest international standards and procedures set by the Malaysian civil aviation regulations. if the maintenance process on a plane is not done accordingly. the plane’s services are liable for suspension or better known as grounded. AirAsia conducts periodic check-ups of its aircraft via a scheduled maintenance system. analysis of the direct costs of operating an airplane. Safety procedures include strict aircraft maintenance. With this scheduled maintenance system.

These aircrafts are been monitored more critically compared to the other newer aircrafts. Both the ‘A’ and ‘B’ checks are done overnight at the airport or at an established maintenance base and are carried out every few days or weeks. in no way does AirAsia tolerate on caring for the fleet. is performed about every fifteen months. However. DCA Malaysia strictly checks and requests for an update for the maintenance of the fleets. ‘C’ check is more extensive. While. 19 .2 A. A related measurement is "cycles" with a cycle consisting of one takeoff and landing. ‘C’ & ‘D’ Checks systems in order to maintain its aircrafts . some airlines do them on a strict calendar basis. For example. Which positively results in a fleet of AirAsia safeguarded airplanes of premier quality. ‘B’. ‘B". ‘C’ & ‘D’ are the various level of maintenance type to be done on the aircrafts.Aircraft maintenance is considered to be one of the most crucial business strategies of the company. The terms "Zero Time" or "Half Life". and takes the airplane out of service for several days. the plane must be sent for servicing even though the aircraft only completed two flights within the period. refer to the number of hours the airplane or engine has operated since its last D check. AirAsia cannot navigate a fly if they break the standards set by the DCA. The ‘D’ check is the most comprehensive of all and is done about every six to eight years and it takes a month or more to complete. 6. every 3 month. Malaysia’s department of civil aviation (DCA) requires special inspections to be made on many old aircraft that have been operated for a specified number of cycles . However. All ‘A’. The time limit to complete the ‘C’ and D work is largely determined by the number of hours of operation or the number of cycles.3 Maintenance Operation Strategy AirAsia may be Asia's leading low fare budget air carrier. This is because large amount of the revenues of the company is spent on aircraft maintenance and it is also crucial in providing a safe and confident service to the passengers.Similar calculations are also used to compare the relative economic performance of one type of airplane to another or also known as the Key Performance Index. B. It is usually a simply and routine check. 6. C & D Inspection System AirAsia adopts the ‘A’.

Engine maintenance of AirAsia's various aircraft currently fill within one of two engine maintenance programs. AirAsia's maintenance and overhaul cost was RM26. The "Time and Material" program requires AirAsia to pay to the contractor a rate to be negotiated at the time of execution of maintenance performed by the contractor.000 in the period from July-Dec 2007 which represents 2. night-stops. The group’s fleet is maintained in accordance with a program prescribed by Boeing and Airbus. budgeting is more predictable and simplified.4 Maintenance-By-The-Hour & Time. and "A" checks once a month.096. Since it began operation in 1996. By basing the cost of engine maintenance on the number of flight hours rather than the level of maintenance required at any given time. considering the rank is usually extended in two years. one of the world's best. Heavy checks are "C" and "D" checks conducted once yearly for between 10 to 21 days. BHD. pursuant to a "Time and Material" contract.874. It is a high expectation and not at all bad for Asia's leading low fare budget carrier. Two of AirAsia's engines are maintained by GE Engines Services Malaysia SDN. Not bad. 6. 20 .000 in the same period from 2006 because they use newer aircraft now.4% of AirAsia's revenue compared to RM35. It did not take too long for the DCA Malaysia to spot the high maintenance standards of AirAsia. The "Maintenance-By-The-Hour” program obliges AirAsia to pay a fixed hourly rate to the contractor based on the number of flight hours of each aircraft. The engineering teams attained jar ops1 or better known as m1 status within just 9 months. The line check crew is AirAsia's very own fully-trained maintenance crew and the hangar check crew is ST Aero. none of the group’s aircraft have been involved in any major accident involving personal injury to its guests and employees or other disasters. a "Maintenance-By-The-Hour" program and "Time and Material" program. AirAsia's high maintenance standard has become more an expectation than a requirement.Material Program AirAsia aims to ensure that safety standards of its aircrafts are adhered to while achieving the lowest cost possible.AirAsia conducts line checks at transits. the manufacturer of the group’s aircraft. During these processes. the entire aircraft is stripped and examined with surgical precision. AirAsia follows the maintenance program prescribed by Boeing and Airbus. 32 of AirAsia engines are maintained by ST Aero pursuant to a "Maintenance-By-The-Hour" contract.

United Kingdom.1 million. located at KLIA. In November 2002. a wholly own subsidiary of ST Aero. 6. This is a preventive maintenance program being implemented by the Air Force Army of United States Of America. Any significant increase in maintenance and overhaul expenses could have a material adverse effect on AirAsia. AirAsia currently employs 78 type-rated licensed engineers to perform the light maintenance on its aircraft. the DCA granted approval to AirAsia to perform its own light maintenance. AirAsia is less dependent on third party maintenance provider. 21 . will not be withdrawn. Analyst can examine the parameters of each flight to determine if there are any traces of irregularity. AirAsia's aircraft maintenance hanger. was completed in December 2003 at a cost of RM2. If AirAsia does not proceed with the proposed acquisition of 150 Airbus A320 aircraft. the group’s fleet will require more maintenance as its ages and its maintenance and overhaul expenses will increase on an absolute basis.5 Risk Factors & Recommendation AirAsia's maintenance cost will increase as its fleet ages. As a result. which reduces costs as well as aircraft downtime. In November 2002.All heavy maintenance is performed by ST Aero and MAS pursuant to "Time and Material" contract. AirAsia currently incurs low maintenance and overhaul expenses because it procures maintenance services from third-parties through a competitive bidding process and performs its own light maintenance pursuant to approval granted by the DCA. complications can be detected even before it happens. on an available seat kilometer basis and as a percentage of its operating expenses. AirAsia entered into seven year component management and support services agreement with Air Rotables Limited. The average age of AirAsia’s aircraft was approximately 16 years at June 30. Therefore. which in turn helps ensure that DCA's approval under which it performs its own line maintenance. 2004. for the repair of most of its aircraft components. AirAsia's dedicated quality assurance team ensures that DCA's regulations are strictly adhered to. AirAsia is recommended to use the Active Flight Data Analysis Program whereby all the parameters of the flights are recorded.

an increase in maintenance cost could affect the company financially. In addition. which makes it especially vulnerable to delays that can disrupt timely operations and lead to guest dissatisfaction. AirAsia invested in high capacity redundant systems that are backed-up on a daily or weekly basis to avoid the loss of data and disruption of operations. AirAsia relied heavily on high daily aircraft utilization rate to optimize its revenue. any failure of the Internet or automated systems used could result in adverse implications. maintenance strategy. process strategy. As AirAsia’s fleet ages. design of goods and services. Furthermore. there were certain drawbacks and risks ascertained that could pose problems for this company. 22 . there will be need for overhaul and even the usual maintenance cost would increase. scheduling strategy.CHAPTER 7 CONCLUSION A case study of the operations management practices in AirAsia Bhd. Another solution was to proceed with the acquisition of 150 Airbus A320 aircraft. Some possible ways to prevent or overcome such drawbacks were also identified. was successfully done. researching the following five operations management strategy decisions: location strategy. Upon analyzing the strategies used.

(2003). DBS Bank Ltd. (2007). Boston.REFERENCES [1] A. AirAsia – Wikipedia. AirAsia International Institutional Offering. "Geneva: Airline Operations Management System". The World's Best Low-Cost Airline. 1999. October 2008. Last accessed October 9. a management perspective. 23 . http://www.airasia. [2] AirAsia Bhd.org/wiki/AirAsia. 2009. [3] Credit Suisse. 2009. the free encyclopedia. Wells. CLSA Asia-Pacific Markets. Last accessed October 16. Air transportation.navitaire.com. 2004. Available: http://www. [4] Navitaire.com/. Available: http://en. Citigroup. California: Wadsworth Publishing Company. Welcome to AirAsia.wikipedia. T.com/ [5] Wikipedia.

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