Air Asia - A Case Study

8/8/2019 Air Asia - A Case Study

http://slidepdf.com/reader/full/air-asia-a-case-study 1/24

Group ± 6 Sec- C



AirAsia is a Malaysian low-cost airline.

Initially it was a Malaysian Govt. controlled company.

It was re-launched in Jan 2002 as an LCC(Low Cost Carrier) after

takeover by Tony Fernandes.

It operates scheduled domestic and international flights.

AirAsia is a pioneer of low-cost flights in Asia and is the largest Asian no-

frills airline.

In a very short time, after launching as an LCC, Air Asia converted from a

debt ridden company to a profit making company.

AirAsia is a Malaysian low-cost airline.

Initially it was a Malaysian Govt. controlled company.

It was re-launched in Jan 2002 as an LCC(Low Cost Carrier) after

takeover by Tony Fernandes.

It operates scheduled domestic and international flights.

AirAsia is a pioneer of low-cost flights in Asia and is the largest Asian no-

frills airline.

In a very short time, after launching as an LCC, Air Asia converted from a

debt ridden company to a profit making company.



The airline was established in 1993 by a Malaysian government-owned conglomerateDRB-Hicom and started operations on 18 Nov 1996.

2001 Dec ± Tony Fernandez takes over the loss making AirAsia for US$ 0.26

2002 Jan ± Re-launched as first no frills LCC.

2002 Dec ± First profit of US$ 6 million

2004 - Starts regional flights to neighbouring countries. Formation of Thai Air

Asia in partnership with Thai Shin Corporation. 2004 Nov ± Listing on the Malaysian stock exchange.

2005 - Indonesia Air Asia established, hubs in Jakarta and Bali.

2006 Mar ± Main Hub moved from KLIA to neighbouring specifically built LCCterminal

2006 Aug ± Domestic Route rationalisation arrangement with MAS, took over two

third(96 out of 118) of MAS¶s loss making routes. Becomes largest airline in Malaysia. 2007 - µAir Asia X¶ launched, First long haul flight to Gold Coast, Australia.

2008 May ± 25th consecutive quarter of profitability since 2002.

2009 - Servicing 18 countries, 84 Aircrafts, 136 routes, 627 flights per day in theasia pacific route.



Change in ownership pattern FROM Government owned or Supported

TO Private.

Deregulation in airline industry leading to greater competition and

pricing freedom.

In order to increase efficiency, carriers are entering into new strategicalliances with each other.

Fierce competition, rising fuel prices leading to streamlining of

operations to enhance the value chain.

Emergence of Low Cost Carrier (LCC) market due to rising economies,

increasing business travel and growing disposable incomes especially in

Asia.



BusinessMission

SWOT Analysis

GoalFormulation

StrategyFormulation

Program Formulationand Implementation

Feedbackand Control



To be the best company to work for, whereby employees aretreated as part of a big family.

Create a globally recognized ASEAN brand.

To attain the lowest cost so that everyone can fly with AirAsia

Maintain the highest quality product, embracing technology to

reduce cost and enhance service levels

To be the best company to work for, whereby employees aretreated as part of a big family.

Create a globally recognized ASEAN brand.

To attain the lowest cost so that everyone can fly with AirAsia

Maintain the highest quality product, embracing technology to

reduce cost and enhance service levels



SWOT Analysis

Strengths

Low OperationalCosts

Highly Trained, wellpaid and motivated

staff. High Utilization of

Resources. First mover

advantage. Influential Political

Support. Strong Brand

Presence

Weaknesses

Frequent flight delays Limited variety for

flyers Lack of infrastructure

and congestion atairports hit bottom-line.

Opportunities

Very limited presencein the long haulsegment

Liberalization of

ASEAN countries. Alternate sources of

revenue through VAS. Diversifying into

sectors like air cargo.

Threats Increasing

competition Rising Fuel Prices

Substitutes like highspeed rails and other LCC¶s.

Terror attacks andhealth risks



To be the largest low cost airline in Asia and serve the people

who are currently underserved with poor connectivity and

high fares.

To be the largest low cost airline in Asia and serve the people

who are currently underserved with poor connectivity and

high fares.



To provide basic airline experience to customers by curtailing

costs. This was achieved by providing only the requisite facilitiesand keeping the prices as low as feasible. To provide requisite

safety and focus on simplicity.



Operating Expenses Cost/ASK for Air Asia

2009 2007

Reason

Staff Cost .35 .33 1.) Superior Productivity ±Similar trainingand incentives .2.) To and fro flight on the same day

Fuel and Oil 1.21 1.59 Multi layered Hedging StrategyNewer, fuel efficient Aircraft.Efficient flying skills of pilots

Maintenance and Overhaul .16 0.28 1.)New aircraft requires less maintenance.

2.)Single Type of aircraft reduces need for diverse spares, skills etc.

Sales and Marketing .14 .11 1.)In-house marketing team reduces costsand turnaround time.2.)Stress on e-ticketing and telephonebooking .

3.) Free publicity through media

User Station and Aviation .26 .22 1.) Reliance on secondary airports.2.) No amenities like passenger lounges.

Cost of Aircraft,depreciation, amortization

.42 .48 1.) Reduced leasing costs.2.) High aircraft utilization

Total cost per ASK 2.95 3.16 Approx 6.7 % less than 2007 figures.



` Lowest prices without compromising on customer service.

` VAS to flyers-

x Ticketless check-in ± saved time and hassle free

x

Single class seating- no bias amongst flyersx Standard operating procedures ensured uniform

level of competence amongst the staff.

x Multi-lingual website

x Customer µdelight¶ services like lucky draw

x Shunned µhub and spoke¶ for µpoint to point¶ system.

x Reliance on ITES



Tony Fernandes invited Connor McCarthy to join AirAsia'sexecutive team.

They restructured the complete business model and adopted low-fare, no-frills concept.

They planned to offer only one standard class cabin.

It did not provide in-flight entertainment or free meals.

Seats were sold through telephonic booking centre, sales office,travel agents and at local banks and post offices.

Multiple hubs within Malaysia to serve better.

Innovative marketing.

Tony Fernandes invited Connor McCarthy to join AirAsia'sexecutive team.

They restructured the complete business model and adopted low-fare, no-frills concept.

They planned to offer only one standard class cabin.

It did not provide in-flight entertainment or free meals.

Seats were sold through telephonic booking centre, sales office,travel agents and at local banks and post offices.

Multiple hubs within Malaysia to serve better.

Innovative marketing.



March2001

June2002

June2003

June2004

June2005

June2006

June2007

291 611 1.481

2.839

6.289

9.312

12.992

Passengers Flown by Air Asia Group(in thousands)



Bargaining

power of customers

Bargaining

power of supplier

Threats of

potentialentrants

Threats of

substituteproducts

CompetitiveRivalry

Medium Customers

highlysensitive to

prices.

Competitiongives buyersmore choices

LowVolatileinternationalcrude oil prices. ±

tacked throughhedging policy

Limited aircraftmanufacturerslimits suddenexpansion plans

SizeableAttractivemarket for fullcost carriers to

start low costsubsidiaries.

Develop-ment of newlow-costcarriers.

Medium Train, bus

and car travelare

developing

Other LCC¶slike JetStar Asia, Tiger Airways,ValuAir Nok Air etc.

High Hard

competition

Price cuttingandcartelizationby bigger players.



Ancillary income increase Offer more on board services/ products to the passengers-

Taxi booking service

Internet WIFI access on board

Newspapers, Movie renting,«

Merchandising. (perfum, make-up, toys«),

Ticket price differentiation.

Place advertisings in the plane¶s cabin.



Increasing AIR Asia's assets - Enlarging this existingfleet.

Cargo¶s installations to load/unload the aircraft

Invest in joint ventures

Diversification - AIRASIA should acquire new know-howin a view to offer More Service to the consumer.

i.e. To take over an online travel agency

OK



Thank You!!

Questions??

Thank You!!

Questions??

Air Asia - A Case Study

Documents

Transcript of Air Asia - A Case Study