FIREFLY

Executive Summary

Realizing the potential of LCC, Firefly was launched by MAS in 2007. This enables MAS to target a new segment with a suitable product model without diluting its own World Class Carrier brand. Previous attempts by MAS to fly unprofitable domestic routes with its larger planes and existing model made substantial losses.

Firefly, a subsidiary of Malaysian Airline System (MAS) Berhad is took off as a full-service community airline aimed at serving primarily secondary airports in the country and those within the Indonesia-Malaysia-Thailand Growth Triangle going into its third year of operation offering reasonable low fares while ensuring passenger comfort and convenience.

The direct competition for Firefly is AirAsia; the pioneer LCC in this region. AirAsia has the world’s lowest unit cost of $0.023 per Available Seat Kilometres (ASK) (O'Connell & Williams 2005). This enables AirAsia to offer competitive prices combined with its strong brand presence. AirAsia is a direct competition for two routes from Penang and six routes from Kuala Lumpur (KL). Although Air Asia flies to the Low Cost Carrier Terminal in Kuala Lumpur International Airport (KLIA) whilst Firefly flies to Subang, the airports can be considered to be in proximity and a competition for point-to-point passengers.For the remaining Firefly routes, no direct competition exists and Firefly stands to fully benefit.

Firefly will continue to face stiff competition from AirAsia, the Low Cost Carrier market leader in this region. AirAsia has many strengths including a powerful brand presence, high efficiency and strong online services. Also, Firefly’s hub, the Subang Airport has poor public transport services, causing inconvenience to customers.

Table below shows the marketing strategy applied by both carriers. Both have positioned themselves as LCC. AirAsia focuses on low fares with no frills and Firefly maintains a Community Airline tagline.

Item Firefly AirasiaPositioning Incredible value with low

fares / community airlinesLow cost short haul, no frills

Aircraft ATR72-500 with 68-74 seats Airbus with 160 leather seatsSeat Type Single seat (Economy Class

Only)Single seat (Economy Class Only)

Seat Option Allocated seat Free seating with Xpress Boarding option

In-Flight Dining Complimentary drinks and snacks

Wide range of light meals and snacks available for purchase onboard

Check-in baggage No-check in fees. Baggage limit of 20kg

Each check-in baggage is charge RM5, with limit of 15kg

The standardization of Firefly’s fleet to the highly fuel efficient ATR72 airplanes not only leads to improvements in yield and revenue, but also portrays a strong brand presence and an environmental friendly airline. Firefly’s option of the ATR-72 aircraft fleet was wise as it is well placed for short haul flights between ASEAN countries. Also not being a jet aircraft, the ATR72 can easily land in smaller airports which are common for tourist spots and islands like Langkawi.

SWOT AnalysisStrengthsFirefly has introduced an innovative product with new routes tapping into new markets. Domestic and short-haul routes, which previously bled MAS and were deemed unprofitable and axed, can now be revisited and served by Firefly. It has landing rights and is the sole carrier from Penang to world famous tourist destinations including Koh Samui & Langkawi.

Exclusive access to the Subang Airport enables it to fully capture travellers opting for this route. The Subang Airport is closer to main commercial and residential hotspots including KL and Petaling Jaya compared to KLIA. Firefly choosed the KL International Airport in Sepang which turning into an aviation hub as the base for its jets meant a lot more passengers will be boosted.

Weakness.Exclusive access to Subang eliminates possibilities of other airline passengers using Firefly in Subang for connectivity or during stopovers. The other limiting factor of the Subang Airport is the lack of a systematic public transport to and fro the airport, compared to the KLIA which boast the ERL (Express Rail Link), shuttle buses to town and taxies. Subang Airport relies solely on taxis.

OpportunitiesPenang itself has 13 private hospitals which Firefly can work with on promoting medical tourism which has been a success in Asia especially and has prompted global interest. With international airlines plying Penang Airport, Firefly can capture stopover passengers seeking to visit popular destinations.

ThreatsAirAsia is the main threat to Firefly. There also exists threats of substitute products namely the train services, bus services and car travel especially for routes on the Peninsular of Malaysia, for example the KL-Penang route. Aeroline, a Business Class like Bus Service charges RM55 for a KL-Penang trip, and takes approximately 5 hours compared to 1 hour by flying.

Porter’s 5 Forces Analysis

Based on the analysis and discussion done, it can be concluded into Porters 5 Forces on the level of each of the forces.

Bargaining Power of Customers

Bargaining Power of Suppliers

Threats of Potential Entrants

Threat of Substitute products

Rivalry within industry

High in routes plied by Air Asia

Low as tight competition between Airbus, ATR and others

Sizeable, full services airline might consider going lowcost

Medium with train, bus and car travel

High

In short, the LCC business is viable provided Firefly continuously improves itself and is flexible in this challenging market. Firefly needs to improve on on-time flights, and de-market this negative perception. On-time flights will not only improve Firefly’s branding and perception, it saves significant amount of money due to inefficiency and downtime, and reduces airport charges.

On-time flight information can then be displayed on Firefly’s website, indicating Firefly’s commitment to customer satisfaction. Firefly should provide a shuttle bus service to and from the Subang Airport, leading to ancillary income and boosting its Community Airline image. Awareness campaigns need to be conducted, informing the mass that Firefly offers value travel, while maintaining comfort.

Once a brand reputation of low fair airlines has become embedded into the minds of consumers, those passengers travelling on a LCC will look at any other carrier when booking their travel

.