Contribution of leader

Tony Fernandes, the CEO of AirAsia also founded Tune Air Sdn. Bhd. He is practically the
man behind introducing the model of budget or no-frills airlines.
Analysis of Leadership from Competency Perspective
1. Motivation for Leadership
Tony Fernandes has always displayed exemplary commitment to business and has been
extremely accessible to the media. He aims at influencing employees to accomplish
organization goals. As an example, Tony wore AirAsia's official red cap and T-shirt to almost
every official meeting or occasions. He even at times has served customers aboard AirAsia
flight along with the cabin staff. (Tony Fernandes, 2012) According to Tony, he wanted to set
an example and motivate staff to strive towards higher goals. Besides, Tony Fernandes is a
sociable, outgoing and talkative by nature. He hands out his personal phone number to
media representatives, and himself became the biggest brand ambassador for the company.
Although Tony is the CEO, yet he retains his humble beginnings. Owing to his personal
attitude and characteristics, he has been able to achieve the company's goals and
objectives. He has become an inspiration for his employees, and so the employees are
motivated to follow him in spirit in their respective work.
2. Intelligence
Tony Fernandes is undoubtedly an intelligence leader. He possesses the rare ability to
analyse a wide variety of issues, alternatives and opportunities. He also has a remarkable
vision of future, as has been proved by how well he has exploited the market opportunities.
AirAsia's vision is 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. (AirAsia Corparate
Profile, 2012) Although this market did not seem profitable to others, Tony went ahead and
took the risk, ultimately transforming AirAsia from a heavily debt-ridden subsidiary into a
market leader. Besides, he also owns a chain of hotels called Tune Hotels based on similar
no-frills concept, thereby demonstrating his intelligence and foresight to diversify in the
marketplace.
3. Business Knowledge
Tony possessed incredible knowledge about airlines business and his company's external
environment. He was the pioneer of low costs, no frills air travel. His knowledge does not
stop with the airline industry. In fact, he has continually introduced a plethora of innovative

ideas and concepts, e.g., hostel booking services, online booking and web check-in, holiday
products, travel insurance, and car rental. By introducing the disruptive innovation of lowcost, no-frills strategy and moving down the value chain, he has demonstrated tremendous
intelligence and knowledge of his operating environment.
4. Drive
Tony Fernandes drives and motivates AirAsia employees (Allstars) to chase their goals while
encouraging them to move forward with him. As per him, he believes in inculcating a
management philosophy that pushes employees to pursue their passion and dreams. Tony
himself believes in the power of dreams and since childhood aspired to run an airline, own
an F1 team and a football club. (Tony Fernandes, 2012)
Transformational leadership
1. Create a strategic vision
Tony Fernandes is a transformational leader as he transformed the entire business model of
airlines with his "Now everyone can fly" slogan. Low-cost, no-frills strategy was the first at a
time when all airlines wanted to move up the value chain. Today AirAsia has swiftly gone on
to break the norms of travel globally and continues to rise to become the most favoured low
coat airline of the world. Tony Fernandes mortgaged his home and sank his savings to invest
AirAsia Company (Alesia Sion, 2012).
Tony has a strategic vision for AirAsia to be the largest airline in the low cost segment in Asia
and serve over 3 billion people currently underserved. From 2004 onwards, AirAsia has won
several awards in low-cost airline segment around the world. This goes on to prove that
Tonys leadership has been successful at accomplishing his companys vision.
2. Communicating Vision
Tony Fernandes has strived to foster a work environment that encourages employees to
grow while learning. He encourages his employees to love their jobs and pursue their
passions. Besides, every month Tony spends a day as a baggage-handler; every two
months as a cabin crew for a day, and every three months, as a check-in clerk for a day
(Shashank Nigam, 2009) so as to experience first-hand the working environment of his
employees in different department. He has even instituted a "cultural department" to "hold
parties and pass the message". AirAsia workplace is in stark contrast to the traditional
management in Asia based on strict levels of hierarchy and control. Any employee can meet
him any time he/she wants.

3. Modelling the vision

Tony also modelled the vision of AirAsia. He proved that he not just talked but also enacted it
to offer everyone to fly by offering cheap fares. Further, his personal mission statement is
"dream the impossible, believe the unbelievable, and never take no for an answer". A real
example of him extending this to others happened when at the launch of AirAsia Thailand,
he was told by a woman that she wanted to become a pilot. Tony replied to her that if she
clears the pilot-training exams, he will hire her without questions. Eventually, the woman did
complete her training and joined AirAsia as a first officer. Subsequently she became a fulltime captain (Chris Forrest Harvey, 2012). This small incident shows that he inspires
everyone and willing to give others an opportunity to work alongside him towards fulfilling
their personal dreams and aspirations.
4. Commitment toward the vision
Lastly, Tony worked hard to build and inculcate employee commitment towards his vision. He
aspired to start a low-cost airline and he turned that vision into reality. AirAsia continues to
keep its promise of low fares enabling its customers to fly to different destinations. AirAsias
airfares are significantly cheaper than its competitors. Its vision "everyone can fly" is now a
reality. Besides, he also did away with conventional hierarchy so as to encourage employees
to voice their opinions. He shares office space with employees in an open floor plan. He also
allows them to reach out to him personally via call, SMS or email. Thereby cutting down the
need for them to go through multiple departments. Even the lowest ranking officers also can
have his phone number to contact him directly which means he treats everyone as equal
and willing to commit to their needs (Shashank Nigam, 2009).

Strategies used by AirAsia that contributed to its success

The overall business strategy employed by AirAsia is that of cost leadership, targeting
markets such as short-haul flights as well as long-haul flights within a region. This coupled
with pricing their services well below the industry average in order to increase their market
share.
Beyond price competition, AirAsia has also brought into market a range of value-added
services e.g. free seating policy, ticketless travel etc. Under the pretext of offering more
choice, AirAsia also began the trend of monetizing services previously taken for granted
under premium airlines. For example, AirAsia offered a web check-in service allowing

customers to print their own boarding passes. They introduced additional charges for seat
selection and early boarding; pre-booking of checked baggage etc.
Realizing that cost as well as convenience are the two most important factors for their target
customers, AirAsia embarked upon and achieved superior cost leadership by employing
innovative strategies like a single class in aircrafts, low fares without any seat preference
etc. It also keeps coming up with regular promotions during lean periods to encourage early
booking. This is coupled with continually increasing booking avenues like sales offices,
phone, travel agents, post offices and local banks, along with internet and mobile apps.
Lastly, strategic alliances with industry associations of prominence have also boosted
AirAsias image as a market leader in its segment.
AirAsia can be expected to sustain its competitive advantage by sticking to low fares, no frills
strategy, and continuing to expand their operations throughout Asia and the world. Armed
with their robust marketing and sales strategy, AirAsia seems set to beat competitors in the
airlines industry. Besides, their strong foundation and business practices has allowed them
to remain people's preferred choice to fly. The low-cost advantage seems to continue to work
in favour of AirAsia vis--vis its competitors.
Given the first mover advantage, cost-leadership continues to be a viable strategy for AirAsia
to maintain its leadership position. Nonetheless, the key is to strengthen other aspects, such
as customer comfort, and integrated lifestyle packages, rather than merely focusing on cost.
This is essential so that they are not left in a fix in the scenario where escalating costs
render them unable to sustain their cost-leadership. It also needs to leverage upon its
existing brand value to diversify and monetize more of its offerings.
In conclusion, the cost leadership strategy makes sense for AirAsia in an industry rife with
rivalry and competition. Due to the nature of the service offering and the industry, the room
to differentiate ones service from other providers on other parameters is quite limited.

6. Conclusion - Sustainability of the company based on the internal / external

environment
Porter (1996) suggests that in order to outperform rivals, the organisation needs to deliver
increasingly more value to customers while building comparative value at lower costs. Airline
industry is at a growing stage, hence stiff competition from new and existing low cost carriers

is bound to surface. To sustain competitive advantage, AirAsia will need to leverage its cost
advantages over competitors more significantly. Presently, AirAsia only differentiates on the
basis of no frills, low fares concept and by offering new flight routes.
Murray (1988) recommends that sustainable differentiation through product differentiation is
uncertain. He suggests that this could better be attempted through service and quality.
While Porter (1996) highlights that positioning is successful based on the activity system and
simple consistency between each activity aligning with the organisation strategy. AirAsia built
its reputation by providing quality service at low prices. Further, AirAsia continues to focus on
brand building through marketing and advertising campaigns such as the sponsorship deal
Oakland Riders, an American football team.
During its inception stages, AirAsia remained focused on domestic destinations but have
since ventured into international destinations. AirAsia X today remains the first choice for
customers looking at long-haul low-cost carriers. Based on the similar no frills model, its
prices are up to 80% lower than competitors. Additional services such as food and
entertainment etc. are priced additionally. AirAsia also continuously introduces innovations
that create excitement among customers such as self check-in. Customer loyalty is build by
the differentiation, which could act as a defence against rivalry (Eng, 1994).
Considering AirAsias phenomenal success, it is possible that competitors will try to copy its
business model. However, AirAsia has the first-mover advantage in South East Asia, as well
as experience and an established brand image. Competition also exists across segments
(full-service vs. low-cost). AirAsia has the advantage to lay down the norms and accepted
standards in the industry.
To remain market leaders in customer satisfaction, we propose the following
recommendations for improvement in their current strategy:

Thorough technical and feasibility study before introducing any major changes to
their overall organizational strategy, so as to avoid unforeseen risks.

Price of Oil is a big cost factor for the airlines industry, more so the LCCs. Hence
AirAsia should enter into long-term engagements with oil suppliers to ensure stability
and hedging against wild swings in oil prices.

To circumnavigate any unforeseen circumstances and considering their hectic flight

schedules, the company should consider maintaining a spare aircraft at each of its
hubs.

AirAsia should aggressively consider making itself into a green company including
systems such as carbon offsetting to save environment and promote its image as an
environment-friendly company.