Air Asia

STRATEGIC MANAGEMENT (PMS 3393) AIR ASIA Prep atomic number 18d by Ahmad Izzuddin stash away Ahmad Zamri (4102005781) HaslindaBinti Ismail (4092008911) MohdAzuan Bin MohdAbdKadir (4102008091) Muhammad Khairil Anwar Bin Othman (4102004441) Nur An-NisaBintiRahmat (4071032881) SitiAisyahBintiMohdYusoff( 4102001031) SitiKhajirahBinti Abdul Aziz (4092008931) Prep atomic number 18d for Dr. HafsahBinti Ahmad Submission Date 22nd November 2012 Table of cognitive content reference1 Introduction2 History3 The Vision, electric charge Statement and clinical5 Value schema6 Business feign8 free-enterprise(a) Advantages10 nisusAsia Assumption12SWOT Analysis13 The oxygenize Asia 5 Forces Porter Model16 demarcation Asia Market Segments19 Five Years Financial Highlights22 Appendix24 References25 Ack this instantledgement Alhamdulillah. Thanks to exclusivelyah SWT, whom with His leave behindingness has giving us the opportunity to success unspoilty complete this strategical Management co ncession. First of alto inducther, we would equal to ex insistency our special thank to Dr. HafsahBinti Ahmad, a lecturer of Strategic Management who had guided us and in like manner support a lot of information regarding our assignment from beginning to the end of the semester and as well as the valuable advices that he gave to us during our lectures.We argon re wholey appreciating it. Deepest thanks and judgement to our pargonnts, family and on the whole fel humiliated friends for their cooperation, encouragement, constructive suggestion and full of support for the assignment completion, from the beginning till the end. Without the help and guidance from all(prenominal) of you, it leave alone be difficult for us to complete this assignment. Thank you. 1. 0 Introduction conduct Asia is a Malayan-establish low- represent skyway billet. broadcast Asia is Asias largest low-f are, no-frills air lane and a lead up of low- represent incite in Asia. gloriole Asia group ing operates scheduled domestic and external shoots to over 400 destinations spanning 25 countries. Its main hub is the Low-Cost Carrier lowest (LCCT) at Kuala Lumpur foreign short letterport (KLIA). Its affiliate air ducts siamese connection diffuse Asia, In fatigueesia Air Asia, Air Asia Philippines and Air Asia Japan have hubs in Suvarnabhumi Airport, Soekarno-Hatta International Airport, Clark International Airport and Narita International Airport respectively. Air Asias registered office is in Petaling Jaya, Selangor dapple its head office is at Kuala Lumpur International Airport. 1. 1 HistoryAirAsia was establish in 1993 and began operations on 18 November 1996. It was originally founded by a government- own conglomerate, DRB-Hicom. On 2 December 2001 the heavily-indebted airline was bought by former Time Warner executive right awayor assumeor Tony Fernandess federation Tune Air Sdn Bhd for the token sum of wizard ringgit (about USD 0. 26 at the time) with USD 1 1 trillion (MYR 40 jillion) worth of debts. Fernandes turned the caller-out around, producing a network in 2002 and launching new routes from its hub in Kuala Lumpur, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as MYR 1 (USD 0. 7). In 2003, AirAsia opened a second hub at Senai International Airport in Johor Bahru near capital of Singapore and launched its first international flight to Bangkok. AirAsia has since started a Thai subsidiary, add uped Singapore itself to the destination list, and started flights to Indonesia. Flights to Macau began in June 2004, and flights to mainland China (Xiamen) and the Philippines (Manila) in April 2005. Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai AirAsia.On August 2006, AirAsia took over Malaysia Airlines untaught Air Service routes in Sabah and Sarawak, operating under the Fly Asiatic Xpress brand. The routes were subsequently returne d to MAS wings a year later, citing commercial reasons. Air Asias chief operating officer Tony Fernandes subsequently unveiled a five-year plan to further enhance its charge in Asia. Under the plan, Air Asia proposes to strengthen and enhance its route profits by connecting all the existing cities in the region and expanding further into Vietnam, Indonesia, southern China (Kunming, Xiamen, Shenzhen) and India.The airline bequeath focus on developing its hubs in Bangkok and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia. With increase oftenness and the addition of new routes, AirAsia expects rider volume to reach 18 million by the end of 2007 On 27 September 2008, the company had on its list 106 new routes to be added to its then-current list of 60. The number of old routes lay off has non been publicly disclosed. On 2 April 2012 Air Asia had their first flight from Sydney to Kuala Lumpur.In August 2011, AirAsia agreed to forge an alliance with Malays ian Airlines by actor of a share swap. The alliance was struck down by the Malaysian government, in effect voiding the agreement of both airlines. 2. 0 The Vision, Mission Statement and Objective The Vision To be the largest low constitute airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and last fares. The Mission Statement To be the best company to work for whereby employees are treated as part of a outsized family. Create a globally recognized ASEAN brand. To attain the lowest cost so that e real(prenominal)one stand drop with Air Asia. Maintain the highest lineament intersection point, bosom technology to reduce cost and enhance serving level. Future Objective for AirAsia Kuala Lumpur, Malaysia-based AirAsia has recently announced in a press conference that they peg down to purchase an surplus twenty-five aircraft. The purchase is the second this year for the airline and fourth since the 2005. The purchase agr eement is for 25 Airbus A320 series aircraft. This will subscribe the total A320 series aircraft operated by AirAsia to well over 200 aircraft.Air Asia group CEO Tony Fernades says at the press conference that this purchase is an important yard for Air Asia as it signifies their future aggressive route expansion plans in tandem to their expected traffic growth over the attached decade. It withal demonstrates their commitment to enhance AirAsias position on the networks by incorporating the most unexampled and efficient aircraft in the market. The addition of aircraft will be used to add frequency across the route network and introduce new routes. AirAsias k like a shotledgeability to the aviation persistence as an innovator has grown to the extent it is now a leader that sets the benchmark to opposites. Also speaking at the press conference was Airbus CEO John Leahy. Leahy was very excited about this newest magnitude and says that their company have been highly proud to be part of AirAsias peachy success and delighted that the confidence in the A320 has resulted in the airline now becoming the largest airline client for this aircraft in the founding. With its unbeatable economics and terrible passenger appeal, he is confident that the large A320 fleet is destined to make a motion AirAsia to the forefront of industry in the years ahead. 2. 1 Value Strategy * SafetyAdopting a zero tolerance to unsafe practices and strives for zero accidents through proper training, work practices, risk care and adherence to safety regulations at all times. * High Aircraft Utilization Air Asia implementing the regions fastest turnaround time at only 25 minutes and assuring the lower be and higher(prenominal) productivity. * Low Fare, No Frills Providing guests with choice of customizing function without compromising on the quality and services. * Valuing their race Committing to their peoples development and well-being and treating them with respect, dignity and fairness. customer Focused They care and treat everyone in the same manner that they make out to be treated. * Lean Distribution System They also offer a wide and innovative range of distribution channels to make commove and traveling easier. * Integrity Practicing highest standards of ethical behavior and demonstrate honesty in all their lines of work in roam to command trust and common respect. * Excellence in Performance Setting goals beyond the best and reinforcing high quality performance standards and achieving excellence through implementing best practices. 2. AirAsia Business Model 1. Low Cost Carrier A low cost holder (also known as a no-frills or discount attack aircraft carrier) is an airline that offer low fares but eliminates all non-essential services. The typical low-cost carrier lineage model is based on * A single passenger class * A single type of airplane ( cut training and services cost) * A simple fares scheme (typically fares increase as the plane fi lls up, rewards too soon reservations) * Free put ( which encourages passengers to board early) * Direct, point to point flight with no transfer Flying to cheaper, less congested secondary airport * in brief flights and fast turnaround times (allowing maximum purpose of planes) * Free in-flight supply and different complimentary services are eliminated, and replaced by optimal paid-for-in-flight solid food and drink. 2. Simple Products A typical low cost airlines product is extremely basic. It focuses on getting passenger from point A to B, cutting all the extras. This means in that respect are no meals, drinks and snacks served free on the board. In certain airlines, these whitethorn be purchased on request.The aircraft have Narrow seating to permit greater capacity. Low cost airlines offer all-economy flights with no additional space necessary for wider business class seating. This means more passengers smoke be accommodate on each sector. at that place are no facilitie s for seat allocations as this free-seating makes passengers board the flights early to get themselves a decent seat. The pricing structures of low cost airlines allow for no additional schemes or sales promotion activities, including frequent-flyers programmed. 3. PositioningThe low cost airlines the world over are known to target non-business passengers, leisure traffic and the toll-conscious business passenger segment. The low cost model works best on short-haul point-to-point traffic with high frequencies. These airlines have aggressive marketing strategies and complete with all transportation carriers, including the road and railway networks. Most western low cost airlines fly to secondary airports which are cheaper to land into. However, this is not yet filling in India. 4. Low Operation CostsLow cost airlines have a very lean organization structure and operating costs are unbroken to the bare minimum with low wages (as crew/staff requirement are low and more often than not freshers are preferred), low airport fees, low cost for maintenance and cockpit training (as these are typically outsourced). There is no requirement for standby crews due to a consistent aircraft fleet. Low cost carriers aim at achieving high resource productivity. This is generally achieved due to short ground waits (as turnaround times are kept minimal due to simple boarding processes, no air freight, no hub services and short cleaning times).Selling cost is also minimized as high percentage (if not 100%) of ticket sales is dedicate online, eliminating the margin that would otherwise need to be passed on as commissions to travel instruments. 2. 3 Competitive Advantages 2. 4AirAsia Assumption Assumption 1 it is assumed that AirAsias customers can still be satisfied and chose AirAsias services heretofore if the company does not improve their customer service, as the level and factors of pleasure differ amongst contrasting customers.Mathematical, these cardinal assumption s can be stated as A3 = A2 + A1 Where A3 = Customer loyalty through improved services in AirAsia is certified on A2 = Customer (repurchase) behavior and A1 = Customer satisfaction level based on previous experience. Assumption 2it is improvement of AirAsias customer services will result in improved customers satisfaction and taste sensation for their services, but does not guarantee future repurchase function, thus reducing the chances of customer retention and loyalty.Assumption 3 from the figure (3) above, it is assumed that an improvement in AirAsias customers services will enhance customers patronage (which can be measured by the number of repeat purchase and/or intention to repurchase) by improving customers experience with their services and enhancing their choice for AirAsias services compared to that of AirAsias competitors. 3. 0 SWOT Analysis Strengths * Air Asia has a very strong management team with strong cerebrate with governments and airline industry leaders.This is partly contributed by the diverse background of the executive management teams which consists of industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of former Thai Prime Minister Thaksin Shinawatra) holds a 50% carry in Thai Air Asia. This has helped Air Asia to open up and vex a sizeable market in Thailand. With their strong working kindred with Airbus, they managed to get big discount for aircraft purchase which is also more give the sack efficient compared to Boeing 737 planes which is being used by many an(prenominal) other airlines. The management team is also very good in strategy locution and execution. The strategy that they have formulated at the beginnings was a clever get going of proven strategies by other low cost airlines is US and Europe. They are Ryanairs operational strategy (no frills, landing in secondary airport), southwesterns people strategy (employee comes first) and Easyjets branding strategy (lin king with other service providers like hotels, car rental). * AirAsia is the low cost leader in Asia. With the help of AirAsia Academy, AirAsia has successfully created a low-cost airline mentality among their custody.The workforce is very flexible and high committed and very circumstantial in do AirAsia the lowest cost airline in Asia. * The excellent utilization of IT have directly contributed to their promotional activities (email alerts and desktop widget which was jointly unquestionable with Microsoft for new promotions), brand building exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well notice the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent fees. Weaknesses Air Asia does not have its own maintenance, repair and refurbishment (MRO) facility. It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hu bs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the boilers suit costs low. It is a rivalrous disadvantage not to have its own MRO facility. * AirAsia receives lot complaints from ustomers on their service. Examples of complaints are around flight delays, being charged for a lot of things and not able to change flight or get a regress if customers could not make it. Good customer service and management is critical especially when competition is getting intense. Opportunities * There are 2 major events that are taking place now or going to take place in less than 6 months from now. First is the ever change magnitude oil price. Second is the ASEAN Open Skies agreement that has been reached. * The increasing oil price at the first glance may appear like a threat for AirAsia.But being a low c ost leader, AirAsia an upper submit because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to perplex some of the existing customers of full service and other low cost airlines customers. However, there will be also some reduction in overall travel especially by casual or budget travelers. * There is also some opportunity to partner with other low cost airlines as Virgin to tap into their existing strengths or competitive advantages such(prenominal) as brand name, landing rights and landing slots (time to land). The population of Asian meat class will be reaching almost 700 million by 2010. This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia. Threats * Certain rates like airport departure, security charges and landing charges are beyond the control of airline operators and this is a threat to all airlines especially low cost airlines which tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore. AirAsias profit margin is about 30% and this has already attracted many competitors. Most of the full service airlines have or planning to create a low cost subsidiary to get by directly with AirAsia. For example, Singapore Airlines has created a low cost carrier tiger Airways. * Users perception that budget airlines may compromise safety to keep costs low. 3. 1 The AirAsia 5 Forces Porter Model Internal Rivalry agree to the geographic and product market, Lion Air, Batavia Air, Mandala Air, SriwijayaIndonesia and even Garuda Indonesia are Air Asias competitors.They also provide cheap prices andnumerous flight routes in South Asia. All these flight companies compete in price except GarudaIndonesia which has a different strategy. As consumer of Garuda, they will get a value-added. Air Asiaclaims that they have no Admin fees but in reality, there are many additional fees which dont exist inother flight companies. Which is free for some companies is not for other ones. For instance, customers canspeak about booking seats fees or luggage fees. This is definitely the price dimension which matters onthis specific market.Thus the firms struggle on their costs. For instance Air Asia is long-familiar for theconsiderable development of its Information Technology. Thanks to the considerable use of the IT, theyget low costs and are then able to offer low prices. In Asian developing countries, the middle class isgrowing up. This creates huge opportunities for the airlines. The companies will have to fight to get somemarket shares because customers are not loyal and refilling easily from one company to another. Barriers to Entry Brand awareness is rather important in this industry.To enter this industry not only is requiredhigh capital but also brand image. Most of the time consumers choose the product or service they reallytrust. New entrants have to c reate brand loyalty by making huge investments to establish their reputation. The government legislation is one of the barriers for entering airlines industry. then it isvery difficult getting a new flight route from the government. If Air Asia doesnt get any more flight-routes, it may affect their profit because they need to extend their network. Hopefully Air Asia has always been close to the governments in South Asia.For instance in Thailand, Shin Corp formerly owned by thefamily of former Thai Prime Minister, Thaksin Shinawatra, holds a 50% back up in Thai Air Asia. Thishelped Air Asia to open up and capture a sizeable market in Thailand. Government policies have limitednew entrances, which is a good thing for Air Asia because they are already settled on the market. Key inputs as technological know-how, raw materials, distribution or locations may also limit theaccess to the market. But when a company already established creates its own low cost firm, the key inputs are not a problem anymore.Tiger Airways which has been created by Singapore Airlines is one of the most dangerous competitors of Air Asia Suppliers Power In airline industry, the power of suppliers is quite high. First there are only two major planessuppliers which are Airbus and Boeing. However both suppliers provide almost the same standardaircrafts, so that the initiative of consumers to switch is low. Moreover Air Asia ordered large amountsfrom Airbus in order to expand its routes to international routes. They built a strong relationship and Air Asia managed to get big discounts.Then Air Asia uses the fuel supplier (AVTUR) from Pertamina which prices are very sensitive. Itmay affect the ticket price. Moreover Air Asia, as Lion Air or Mandala, doesnt use catering suppliers. They only offer snacks on flight and this is not for free. Lastly, Air Asia doesnt have its ownmaintenance, repair and overhaul (MRO) facility. If this was not a problem before when they only startedin Malaysia, now wi th three hubs and an important fleet of aircraft, it might be too expensive. Air Asiamust generate attention to this, not having its own MRO facility is a competitive disadvantage. vendees PowerNowadays, buyers are much more informed and high-educated. That is why they are verysensitive to the price not matter the product or the service. Even if Air Asia always provides the lowest price to the costumer, they still will make a comparison between the different airlines. Besides it is veryeasy and costless for the customer to switch from one company to another one because many are offeringthe same service. Moreover Air Asia often gives a bad image to the costumers because of their chronicflight delays. People could choose for another company to be sure being on time. Substitutes and ComplimentsSometimes the consumer is not so much interested in the main product for some reasons. On thelow cost market, the main reason will be the price which he judges too expensive. Then he will look for substitutes. In the airline industry, we can meet two types of substitutes, the direct ones and the indirectones. If the customer is looking for transportation for a short distance, he can look for indirect substitutessuch as bus, train or ship. But travelling will take a longer time. He has to make a strategic choice between time and money. In Indonesia, the railroad industry is monopolized by PT. KAI so there is nocompetition.Regarding the bus and the ship, there are many companies so many choices. Some are the property of the government, some are private. If he is travelling on a longer distance, he will look for adirect substitute, that is to say other airlines. Teleconferencing and other type of business communicationsmay also be substitutes to air travel. Then they would affect the demand for airplanes. 3. 2 AirAsia Market Segments Market segmentation varies for each product but typically targets price oriented customers through their slogan Now everyone can fly Air Asias philosophy of low fares is aimed to make flying cheap for everyone.Air Asia also aims at making travel easy, convenient and fun for its guest. spacious market coverage Products offered to customers cover all areas of a budget traveler. 3. 3 AirAsia 5 years Financial Highlights Appendix 4. 0 References 1) History of AirAsia en. wikipedia. org/wiki/AirAsia 2) AirAsias vision, mission and objectives www. airasia. com/iwov /AirAsia/IR/AA%20Corporate%202007b. pdf 3) AirAsia value strategy announcements. bursamalaysia. com/ /AIRASIA- 4) AirAsia business model en. wikipedia. org/wiki/No_frills 5) Competitive advantage www. academia. edu/ AirAsia_The_Worlds_Lowest_Cost_Airline 6) Strategic directions http//www. scribd. com/ medico/14214973/Air-Asia-Strategic-Analysis 7) Strategic assumptions http//www. iservices. ilokabenneth. com/research_proposal_AirAsia. html 8) SWOT epitome www. allfreepapers. com/Miscellaneous/Air-Asia/9363. html 9) 5 Forces model www. studymode. com/subjects/air-a sia-porters-five-forces-page1. html 10) AirAsia market segmentations www. scribd. com/doc/51874782/14/MARKET-SEGMENTS 11) AirAsia 5 years financial highlights www. airasia. com/my/en/about-us/ir-5-year-financial-highlights. page