Air Asia: Case study on Growth, Diversification and Low cost Strtegy
Partha Pratim Mahanta Pranjal Pratim Neog Dibakar Sinha Samiron Moran Dipankar Nath Abhijit Ramchiary 25-5, Block H, Jalan PJU 1/37 Dataran Prima, 47301 Petaling Jaya Selangor Darul Ehsan, MalaysiaPartha Pratim MahantaDibakar Sinha CASE STUDY Pranjal Ramchiary Abhijit Pratim NeogDipankar Nath Samiron Moran MBA 3rd SEMESTER SECTION- B
OBJECTIVES To show the profile of our company i.e. Air Asia. To know the business strategies and operations of AirAsia by using different strategy models. To show you the future of Air Asia by SWOT analysis. To show you some of the future planning with reference tofuture growth.
CORPORATE PROFILE Our Vision : AirAsia To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares.Asias leading airline.Our Mission : in 1993 with the dream of making flying possible It was establishedfor To be the best company to work. everyoneHeadquarters : Sepang, Selangor and Malaysia Create a globally recognized ASEAN brand.No. of planes (including Joint ventures) : 78 planesNo. of employees : 3,000 employees that everyone can fly with To attain the lowest cost so AirAsia.No. of customers : 16,000,000 per yearTurnover per annum : $60,000,000 product, embracing Maintain the highest quality technology to reduce cost and enhance service levels.
CORPORATE PROFILE Our Corporate objectives : Leanest cost structure Maximize shareholders value Safety Our Valuesfor Guests’ satisfaction Passion : Transparency Safety First, Low Fare and No Frills Human Capital Development High Aircraft Utilisation Streamline Operations Lean Distribution System and Point to Point Network
Air Asia Airlines over the years Dates and years Milestones18 April 2002 AirAsia became Asia’s first airline to go ticketless.10 May 2002 It introduced its first online booking.19 August 2003 It introduced world’s first SMS booking.8 December 2003 It’s first international flight took off to Phuket.8 December 2004 It announced a joint venture with PT AWAIR of Indonesia.21 February & 29 March 2005 Launched Go-Hostel & Go-Car.Year 2007 The lowest cost in the World, 51 000 passengers per day, 54 planes.Year 2008 Launch of Air Asia X.
Business Strategy and OperationsFREQUENT FLIGHTS SAFETY FIRST LOW FARE NO FRILLS Faster turnaround time Ticketless service Improving aircraft utilization Crew efficiency Internet booking Using one type of Reservations and sales office aircraft for saving training cost Easy payment channels and authorized travel agents Nationwide call centers The airlines complies with the It’s fares are The airline ensures fastconditions of the International significantly lower than turnaround of about half-an-hour Safety and is regulated Aviation those of other which is the fastest in the region Malaysian Dept. of Civil by the operators AviationCOST OPTIMIZATION OPERATION GUEST’s CONVENIENCE
SWOT ANALYSIS OF AIRASIA Growth in revenue OPPORTUNITY Low distribution cost Increasing competition Low operational costs Increasing oil price External Environmental Attractive ticket price Substitute products Strong Brand presence in Asia Increasing of maintenance cost Malaysian government support Diversification strategy + Joint ventures FactorWEAKNESS Internal Comp- -etence Factor STRENGTH Liberalization of ASEAN capital routes Does not have its own maintenance, Asia’s middle class growthrepair and overhaul (MRO) facility. The “ASEAN Open Skies” allows Receives a lot of complaints from unlimited flights among ASEAN’scustomers on their service. regional air carriers beginning December 2008. THREATS
PORTER ANALYSIS OF AIRASIA Potential Entrants Many customers but high Medium Threat of Newsensibility to prices. Entrants Train, bus and car travelMediumareDevelopment of substitute developing. Industryproducts. Competitors Bargaining Power of Suppliers Buyers Buyers Bargaining Power of Suppliers Rivalry Among Medium Existing Firms Hard competition between Airbus, Boeing, ATR Full services Air Line might and others. Low Threat of Substituteconsider going low cost. Development of new low-cost Products or Servicescompanies. Substitutes
BCG Matrix analysis of AirAsia according to the country that their fleets are operating Malaysia IndonesiaBrunei Macau and Thailand Singapore
STRENGTH WEAKNESSBrand Name Relatively high price Long-term future High operation cost Strong management team Investment cost in high technology Strategy formulation and execution Strong competition Low cost leader in Asia Excellent utilization of IT OPPORTUNITY THREATS Entrance of other LCCsDemographic advantages High fuel price decreases yield Growing of Middle Class Accident, terrorist attack and disaster Partner with other low cost airlines and affect customer confidence High fuel prices will squeeze out Aviation regulation and governmentunprofitable competitors policy Air Asia will get inherent advantage Increase in operation cost in producingin long distance travel value-added services Developed innovation technology System disruption due to heavily reliance on online sales
FUTURE STRATEGY Layered Adaptive Security Travelling planning “Equivalent Visual” Operation Reservations and ticketing “Super Density” Airport Frequently flyer program Operations Campaign management Airborne Information Net Customer care Yield Management System (YMS) Business intelligence Computer Reservation System (CRS) Enterprise Resource Planning System (ERP)
FUTURE PLANNING To maintain the high level of profitability. 1. Act on the prices : Expensive tickets to be distributed when the demand is high (week-end). Prices increasing according to the demand. Cheap tickets available during the middle of the week. 2. Act on the cost : Offer more on board services/ products to the passengers. Taxi booking service Internet WIFI access on board Newspapers Place advertisings on the plane’s cabin
FUTURE PLANNING Fund-raising Fresh money could be used to finance strategic projects. Invest in joint ventures. Maintain international development across Asia in association with local budget airlines. It would increase the airline’s offer. Diversification Acquire new know-how in a view to offer more service to the consumer. E.g. To take over an online travel agency.
Conclusion The strategies of Air Asia focus more on the management and access of information rather the creation of irrelevant airline services. For this reason, Air Asia has developed a unique set of guiding principles - simplicity, cost-efficiency and effectiveness. Total commitment to these principles makes the airline services of Air Asia very user-friendly to its customers. SWOT analysis of AirAsia with reference to sustainability and future growth shows more opportunities than threats. AirAsia is fully determined to exploit these opportunities and convert more threats into opportunities for success.