Air asia’ core competencies distinctive its success ( Nasser AL-Dhahli)
Air Asia’ s Core Competencies and its success Factors MGT7144- Management Research Skills, Action & Strategy Assignment 2 ( Group Discussion and Presentation) By : Nasser ALDhahli SEGi University DBA 2012 SCM -020314
IntroductionIncreasing liberalization of the regulatory environment inwhich regional and global airlines compete has createdchallenges for major carriers as well as opportunities forcarriers that are able to deliver high-quality services at thelowest possible price.As a result, low-cost airlines are an increasingly commonsight in airports around the world where no-frill air carriersare providing reliable service at a fraction of the pricecharged by full-price competitors. such as AirAsia
• Air Asia , Profile Established in 1993 and commenced operation on 18 November 1996.• 2001, it was purchased by former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd from the ownership of HICOM Holdings Bhd for the token sum of only RM1, and with only 2 Boeing 737-300 aircraft together with RM40 million in debt.• AirAsia Berhad is a Malaysia-based low-cost airline.• The largest low-fare, no-frills airline and a pioneer of low cost travel in Asia.• Operates scheduled domestic and international flights to over 400 destinations spanning to 25 countries.• Had flown over 100 million guests upon the core believe that ‘Now Everyone Can Fly’.• Main terminal hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA).• AirAsia’s associates companies- AirAsia X, Thai AirAsia (TAA), Indonesia (IAA) and Malaysia AirAsia (MAA), and VietJet AirAsia.
Key Strategies Safety First •High Aircraft Utilization•Low Fare, No Frills •Streamline Operations•Lean Distribution System •Point to Point Network Air Asia.com 2012
Root of Competitive advantage of Air Asia Adapted from Study slide For Dr. Abang, 2013
Capabilities Foster a dependency on Internet technology, eg. online booking, online checking (flight status, promotions). Investment in the AirAsia Academy. Dynamic environment between employees. No communication barriers between employers and employees, friendly. Aggressive marketing tactics, massive advertising, promotional packages etc Employees motivation- rewards free flights for their staff. Offer customers the ticketless concept. Low operating cost- wages, airport fees, short ground waits due to simple boarding processes. Keeping cost low- uses one type of aircraft, Airbus.
CORE COMPETITVE OF AIR ASIA1- Usage of one type of aircraft Economies of scale Cost can be cut by 50% Small inventories ( cube-square rule, power of purchasing) Reduce time on employees training and learning curveASK: Available seat kilometers, which is the total number of seatsavailable on scheduled flightsmultiplied by the number of kilometers these seats were flown.Cost per ASK: Total operating expenses (excluding finance costs andtaxation) divided by ASK. In theairline industry, this is comparable to ‘unit cost’.
CORE COMPETITVE OF AIR ASIA Cont,,,,2- Synergy between the AA management and the employees Management support and motivate employees to work and creativity Competitors find it hard to follow3- Productive and Skillful employees Employees create tips to help in procedures and save time, costs. example: the one type concept4- Limited passenger service Food and beverages are not included , transportation from the airplane to theairport not includes etc …. Airport tax
COMPETITVE ADVANTAGES LOW COST Product and skillful employees Courteous, and simple but limited aggressive and passenger focused service ( eg. management structure No Meals) Short Haul , point-to- point High aircraft routes, often utilization to secondary airports Standardizatio Frequent, n fleet of Reliable aircraft Schedules Developed for this presentation
Strengths WeaknessesStrong management team consists of industry Service resource is limited due to low costsexperts and ex-top government officials( all the board of directors have outstanding Government interference and regulation onportfolio airport deals Low cost operations (ticketless, online Non-central location of secondary airportsbooking, online check-in, quick turnaround of25 minutes, low fares and no frills) Heavy reliance on outsourcing Using single aircraft fleet (reduce the Complaint from customers regarding themaintenance and training costs) current overcrowded LCCT (handled about 17 million passengers instead of its capability to Enter and focus on potential market (lower handle 15 million passengers)and middle income group) Multi-skilled and well-trained staffs toenhance the efficiencyStrong brand recognition, marketing approachand awareness
Opportunities Threats Expansion to new routes based on low cost Accident and disaster affect customerphilosophy (exploit growing markets like confidence (Example: an aircraft skidded offChina, India) the runway while landing at KCH International Airport on Jan 2011) Higher fuel costs means less profitablecompetitors may be forced out of business Aviation regulation and government policy (barriers in new routes expansion) Partnerships with Virgin airline to useexisting strengths (brand recognition, landing Full service airlines start cut costs torights) compete (MAS offered discounted fares with meals and comfortable seats) Differentiate from old LCC model (include Entrance of other low cost couriers (Firefly,customer service and operation as full service Tiger Airways)airline)Long haul flight to approach undevelopedmarket (Air Asia X to Europe)
Success factors• Combination of good timing, entrepreneurial vision and some blind luck that may have run out• Testament to Fernandes’s capabilities as a effective leader in a wide range of settings.• “The one thing the company managed to keep consistent was its no-frills model and always offering value in low fares” (Lawton and Doh, P435)
ConclusionAirAsia’s air fleet has grown with routes servicing 400destinations in 25 countries with hubs in Malaysia, Thailandand Indonesia today. In addition, Tony Fernandes isresponsible for this impressive rate of growth, with manyanalysts citing his no-frills, low-cost business model assome of the best industry practices.
References:Corporate profile. (2012). AirAsia. Retrieved fromhttp://www.airasia.com/ot/en/about-us/corporate-profile.page.Clerment. Ong & Ivy Wong . Power Point Presentation on Air AisaDr. Abang N Dahlan . (2013). Seminar 3 Topic 5 Strategy ResearchLawton, T. & Doh, J. The ascendance of AirAsia: building a successfulbudget airline in Asia. Ivey Case Study No. 2.