1. We proudly present to
you…..
Please fasten your seat belts
1/9/2014
Presented By:
Apoorva Kulshreshtha (1003)
Vipul Aurange (1005)
Bhaswati Chakraborty (1007)
Vishal Dhangar (1010)
Paul Anto (1027)
1
2. Objectives
• To study what is actually bringing AirAsia to
Indian markets and why it can sustain.
• To formulate strategies; which will help AirAsia
(i) to get an edge over other Indian low cost
airlines like Indigo, SpiceJet and (ii) serve uncatered market segment.
• To assess possible challenges AirAsia can face
in India.
2
3. Research Methodology
• Descriptive
– Qualitative
• Secondary Research
– Articles reviews, news, case studies
– Report of DGCA, International
Association
Airport
Transport
3
4. Indian Aviation Industry
overview
• India is currently the 9th largest aviation
market
• Handling 121 million domestic and 41 million
international passengers
• More than 85 international airlines operate to
India and 5 Indian carriers connect over 40
countries.
4
5. • Total domestic passengers carried by the scheduled domestic airlines between
January and May 2013 were 25.998 million, as against 25.808 million during the
corresponding period of previous year thereby registering a growth of 0.74 per
cent(DGCA)
• No-frill carrier IndiGo lead in terms of market share with 29.7 per cent of the pie,
followed by Jet Airways-Jet Lite combine at 25.3 per cent, Air India Domestic at
19.2 per cent, Spice Jet at 17.5 per cent, and Go Air at 8.3 per cent for the month
of July 2013.
• The air transport (including air freight) in India has attracted foreign direct
investment (FDI) worth US$ 456.84 million from April 2000 to July 2013, as per the
data released by Department of Industrial Policy and Promotion (DIPP).
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7. About AirAsia India
• Indian-Malaysian low cost carrier
• Announced on 19 February 2013,
• The airline would be operated as a joint
venture between AirAsia holding 49% , Tata
Sons holding 30% and Amit Bhatia taking up
the remaining 21% in the airline.
7
8. Vision Statement
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.
Mission Statement
• To be the best company to work for whereby employees are treated as
part of a big family.
• Create a globally recognized ASEAN brand.
• To attain the lowest cost so that everyone can fly with Air Asia.
• Maintain the highest quality product, embracing technology to reduce
cost and enhance service levels.
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9. Key Strategies
• Safety First
•High Aircraft Utilization
•Low Fare, No Frills
•Streamline Operations
•Lean Distribution System
•Point to Point Network
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10. Political
• Open sky policy/ deregulation (+)
• FDI limits(+)
• Unstable government policies (-)
Economical
• Growing middle class income (+)
• Expected GDP growth (+)
• Hike in average income (+)
• Growth in tourism 9% (+)
• Rising ATF price (-)
• High airport fees (-)
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11. Socio – cultural
• Growing middle class (+)
• Domestic leisure travel (+)
• Foreign tourist (+)
• Status symbol (+)
• Security issue and terrorism (-)
Technological
• Modernized airports (+)
• Greenfield airports (+)
• Online ticket booking (+)
• Video conferencing (-)
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12. Threat of entry – low
• Requirement of local permit
• No objection certificate from the aviation ministry and approval from foreign investment
promotion board
• Enhancement of the minimum paid-up equity capital requirement
Power of suppliers – moderately high
• Duopoly in market (Boeing and airbus) in aircraft market leaving low bargaining power with
airlines
• Switch cost to other supplier is high
• Limited supply of suppliers for ATF in India (4 players)
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13. Power of buyers – very high
• Switching cost is minimal because multiple alternatives available. It is not difficult to move
from one airline to another or to switch to a substitute.
• Penetration of internet helped customers to compare different prices of different airline
carriers and go for the best buy.
Threat of substitute – medium
• Indirect substitutes are railways but not powerful as airline score highly in travel time
• Technological upgradation like Video Conferencing
Rivalry among existing competitors – very high
• Very little product differentiation in services
• Intense competition due to many low cost carriers like indigo, spice jet, GoAir, jet airways etc.
• High exit barriers
• Intense price competition due to high fixed cost and low marginal cost.
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14. Strength
• Effective top management
• Strong strategy and execution –plan on fuel hedging, buying low cost airbuses
• Strong brand name and joint venture with TATA, reputed name in INDIA
• Low cost model
• Single type fleet
• First to market with ICT collaboration
• Multi skilled staff – seamless transition with workforce
Weakness
• Limited human resource
• Heavy reliance on IT
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15. Opportunities
• Vast population
• Enormous size and growing middle class
• Can target one million people traveling by train
Threats
• Rising fuel cost
• Rising labour cost
• Regulatory uncertainty of Indian govt
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17. Promotion
Challenges:
• Spreading awareness in untapped market.
• Reaching to first time fliers and educating them.
Strategy:
• Initially costly advertising
• Following competitors.
• Strategies to educate and attract first fliers.
Execution:
• Movies & Music, football, tourism
• Billboards near railway and bus stations
• Tie ups with banks & hotels, social networking , mails & SMS
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18. Marketing
Challenges:
• Low cost already boasted by airlines like Indigo, SpiceJet.
• Hence creating a POD is necessary as well as difficult.
• Failing to keep promise will harm the brand image.
• Targeting untapped market would require educating the customer and hence cost
escalating.
Segmentation:
Geographic, Demographic & Behavioral
Targeting:
• Income groups of 1,50,000 to 6,00,000
• Small & medium businessmen, migratory workforce, tourists
• South India
• Needful of traveling and not so cautious about extra services
• Price oriented and safety conscious
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19. Positioning:
• Positioning only on low cost will not be sufficient.
• On-time and service: hygiene factors
• Connectivity: differentiator or motivational factors
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20. Sales
Challenges:
•
•
•
•
Higher sales means higher occupancy rate.
To gain more first time fliers per year.
To gain more market share to be the market leader.
To choose cost effective yet profitable channels to sell.
Strategies:
•
•
•
•
Contracts with travel agents
Tie ups with tourism agencies
Contracts with organizations
Price reduction by 25% to 30% than competitors
Execution:
• Deliberate distribution of sales targets
• Sales focus on tier II cities
• Separate targets to various channels according to channel and geographical
potential
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23. Objectives
Financial measure
Targets
Initiatives
Revenue growth
Ticket revenue
Increase sales
Penetrating
in
other
domestic routes
Cost reduction
Lesser cost expense
Decrease in cost
Maximize sister company
partnership
Asset utilisation
Lesser cost expense
Increase in service
capacity
1/9/2014
Purchase of
new modern aircraft
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25. Objectives
Performance measure
targets
Initiatives
Payment convenience
Payment methods
Increase in sales %
Payment kiosk
Flight meal
Customization of food menu
Increase % of food choices
Food choices varieties
Cost reduction
Operation cost
Decrease in oil consumption Monitoring of international
cost
1/9/2014
oil price change
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26. Objectives
Employee
Performance measure
retention
and Employee satisfaction
productivity
Targets
Initiatives
Increase in work efficiency Increase
and
satisfaction
in
in
salary
and
both retirement plan
employees and customers
Improvement in relationship
with labor union
1/9/2014
Decrease in attrition rate
Dropping the criminal charges
against labor union members
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27. Fuel hedging:
Foreign currency hedge up to 66% with a weighted average (based on loans
pertaining to aircraft being deployed to India )
Working capital=current assets- current liabilities
=610224-4828745
=-4218521( negative working capital means that the service industry takes time to
repay the debt)
Cost Initiatives
Sharklets on Aircraft
Fuel Savings of approximately 3%
Pushing for LCC Terminal
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29. Revenue per mile = Number of seats occupied * Number of miles * Price per seat
Available seat per mile = Number of seats available * Number of miles * Price per seat
Load factor = Revenue per mile / Available seat per mile
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30. 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.
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33. • All fleets with LCC service.
• Bring capacity utilization upto 70-80%, NO delay & cancellation of flight.
• Earlier, AIR ASIA was planning routes having low Passenger Load Factor (53%)
.INCREASE PLF TO 65% i.e. industry avg. & then increase to 70-80%.
• Turn Around Targets :Not more than 30MINUTES for A320s
1/9/2014
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34. • Fleet selection
• Reduction in cancellation, no frill service for LCC
• MRO (Maintenance, Repair and Operating expenses)
• Luggage
• Airbus-320, ATR-72 will be installed with single-engine
taxiing:
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35. • Shutting down of engines during delays: such as taxi queuing and
standing at the jet way.
• Flying at high altitude has lower air resistance so needs less fuel.
• Redesign hubs/schedules for less congestion—in the air and on the
ground.
• Interline operations agreement
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40. Experienced in dealing with the public
Physically fit with a good attendance record in previous position
Hard working, flexible & willing to operate on a shift roster
Over 18 years of age
Between 5'2 (1.57m) and 6'2 (1.85) in height with weight in proportion
Of normal vision (contact lenses acceptable)
Able to swim well
You must be in possession of a valid passport and have the right to work anywhere in the
world
Fluent in English (both written and spoken)
Prepared to live within one hour's travelling time of any Air Asia base
Ready to meet the challenge of dealing with people and demanding situations
Friendly and outgoing with a lively personality
1/9/2014
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45. • “Efficiency" and "functional flexibility" as
key components
• Ground crew can become flight
attendants and vice versa
• Unit crewing
• Operational efficiency
1/9/2014
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50. • A theoretical Framework for determiming the relationship between
competitive strategies and Human Resources practices; Journal of
Naval Science and Engineering 2010, Vol. 6, No. 3, pp. 76 – 87
• “Linking Corporate Strategy and HR Strategy: Implications for HR
Professionals,” In R. Padaki, N.M. Agrawal, C. Balaji and G.
Mahapatra (eds.) Emerging Asia: An HR Agenda, New Delhi: Tata
McGraw-Hill, 2005, pp. 215-223
• http://www.caspianlearning.co.uk/Whtp_caspian_airlines.pdf
• The lowest of low-cost carriers: the case of AirAsia; The
International Journal of Human Resource Management, Vol. 21,
No. 2, February 2010, 197–213
• Reports of DGCA
• Annual Report of Air Asia
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