Case Study Air Asia
Transcript of Case Study Air Asia
Gilles
Manon
Matthias
Maxime
Elisabeth
Low Cost Airlines
• What is a Low-Cost Airline?
Low-Cost Airline = No-Frills Airline.
Minimum services for passengers.
• History:
USA: Pacific Southwest Airlines (1949-1988)
Southwest Airlines (1971)
Europe: Ryanair (1985)
Easyjet (1992)
Asia: Air Asia (2001)
Synthesis
Analysis
Conclusion
Air Asia Airlines over the years
• 1996: full-service airlines => Failure
• 2001:Tony Fernandes World Trade Center terrorist attacks Low-Cost Domestic airlines
• 2004: 1st international service => Phuket (Thai)
• 2007: The lowest cost in the World, 51 000 passengers per day, 54 planes. Cross border joint ventures Expansion to Cargo transportation.
• 2008: Launch of Air Asia X
Synthesis
Analysis
Conclusion
• Headquarters : Sepang, Selangor Malaysia
• 78 planes (including Joint ventures)• 3.000 employees• 16.000.000 customers a year• $60.000.000 turnover.
Synthesis
Analysis
Conclusion
Air Asia today
Illustrations
Synthesis
Analysis
Conclusion
Air Asia Routes Map
Synthesis
Analysis
Conclusion
Positioning Low-cost short haul, no frills
Aircraft Airbus A320 with 180 seats
Seat Type Single Seat ( Economy class only)
Seat Option Free seating with Xpress boarding option
In-Flight Services
Wide range of light meals and snacks available for purchase on board
Marketing strategy
Conclusion
Analysis
Synthesis
Key Factors to the Success of AirAsia
• Global Context: - Air Asia was re-launched in the aftermath of the September
11 events - Aircraft costs were declining at that time
• An attractive market: - Geographical conditions = Pacific Asia is made up
numerous islands and poor road network
• Demography: - more than 558 million inhabitants (ASEAN countries) and
over 3 billions with China and India - urbanization (many cities have more than 1 million
inhabitants) and growth of the middle class population
• Its Strategy: - Differentiation strategy by simplification - Attractive and competitive ticket price, even compared to
bus and road fare
Conclusion
Analysis
Synthesis
STRENGTHS WEAKNESSES
- Important revenue up
- Low distribution cost
- Low operational costs
- Attractive ticket price
- Strong Brand presence in Asia
- Malaysian government support
- Diversification strategy + Joint ventures
- Aircraft financing costs surging
OPPORTUNITIES THREATS
- Liberalization of ASEAN capital routes
- Asia’s middle class growth
- Recycling routes abandoned by struggling rivals
- Increasing competition
- Oil price
- Flu spread
- Substitute products
SWOT Analysis
Conclusion
Analysis
Synthesis
Bargaining power of customers
Bargaining power of supplier
Threats of potential entrants
Threats of substitute products
Rivalry within industry
Medium
Many customers but high sensibility to prices.
Develop-ment of substitute product
Low
Hard competition between Airbus, Boeing, ATR and others
Sizeable
Full services Air Line might consider going low cost. Develop-ment of new low-cost companies
Medium
Train, bus and car travel are developing
High
Hard competition
Porter Analysis
Conclusion
Analysis
Synthesis
Differentiation strategy
Downward differentiation or simplification (combined with a niche strategy):
The offer consists in a cheaper product or service , with deliberately limited features (usually associated services are reduced)
Conclusion
Analysis
Synthesis
Cost
Price
Reference offer
Price & cost
Cost decreases more than price
Niche strategy
What is a niche market?
- small but profitable segment of a market
- market niches do not exist by themselves, but are created by identifying needs that are not satisfied by the competitors
- adapt offer to customer demand
Conclusion
Analysis
Synthesis
Cost reduction
Leanest cost structure: - High aircraft utilization (turnaround time)
- No frills (no free food & beverages, ticketless travel)
- Streamline Operations (simple process)
- Basic Amenities (secondary airports)
- Point to point network (short-haul, 3 hour flight or less)
- Lean Distribution System (internet, sales office)
Conclusion
Analysis
Synthesis
Liberalization of air transportation:
ASEAN liberalizes air transport:• The Roadmap for Integration of Air Travel Sector (2004)
provides for the liberalization of air traffic for all the international airports of member countries
• This agreement was ratified in 2007 in Singapore by the 10 member countries of ASEAN
• The final objective is an ASEAN Single Aviation Market by 2015: full liberalization of both passenger and cargo air services
• Advantages of this liberalization: – it stimulates economic and commercial growth by
facilitating goods exchanges– it should increase competition and thus lower tariffs– it enables passengers to have greater choice if there
are more competitors– it will reduce trade transaction costs for ASEAN
member countries
Conclusion
Analysis
Synthesis
Liberalization of Indian aviation sector
• Travel liberalization in India opens up a great market for low cost airlines
• The growing middle class represents over 200 million potential travellers Conclusion
Analysis
Synthesis
Recommendations
1.To maintain the high level of profitability
30% profit margin on EBITDAR (Earning Before Interest, Taxes, Depreciation, Amortization and Rent)
Synthesis
Analysis
Conclusion
How to maintain this level of profit while fuel price is
increasing?
- Act on the prices
- Act on the costs
Synthesis
Analysis
Conclusion
Recommendations
Act on the prices
Yield management: different price’s categories are defined. Cheap tickets available during the middle of the week
Expensive tickets to be distributed when the demand is high (week-end)
Prices increasing according to the demand
Synthesis
Analysis
Conclusion
Recommendations
Act on the costs
Extensive use of the aircrafts in launching long haul night flights
Offer more on board services/ products to the passengers:• Taxi booking service • Internet WIFI access on board• Newspapers, Movie renting,…• Offer more products on catalogue. (Parfum, make-up,
toys…), Products could be sold without TVA so AIRASIA could increase its margin instead and still be cheaper than regular retailers.
Place advertisings on the plane’s cabini.e. to advert about an online hotel booking website.
Synthesis
Analysis
Conclusion
Recommendations
2. Fund-raising
They would come from:
- Private equities- Public
This fresh money could be used to finance strategic
projects…which ones?
Synthesis
Analysis
Conclusion
Recommendations
3. Implement strategic projects
A) Increasing AIR Asia's assets
Enlarging this existing fleet• More narrow body aircrafts• Some wide body aircrafts
This new fleet will enable to open new routes in ASIA and around the globe!
Cargo’s installations to load/unload the aircraft
Air Asia’s flights could thus mix passengers and freight
Synthesis
Analysis
Conclusion
Recommendations
B) Invest in joint ventures
AIRASIA should maintain its international development across Asia in association with local budget airlinesIt would increase the airline’s offer.
C) Diversification
AIRASIA should acquire new know-how in a view to offer More Service to the consumer.i.e. To take over an online travel agency
D) Take over competitors
AIRASIA should enter in equities of threatening competitors to eliminate them
Synthesis
Analysis
Conclusion
Recommendations
Gilles
Manon
Matthias
Maxime
Elisabeth
Questions?