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AirAsia

NOW EVERYONE CAN FLY

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EXECUTIVE SUMMARY
This study is focused around Malaysian low cost carrier AirAsia Berhad. AirAsia Berhad was
founded in 1933 and is the largest airline in Malaysia with destinations and fleet size. The
company is the subsidiary of tune group and has successfully positioned itself as a low cost
carrier. Now it has become the first choice of lower and middle class customers of Asia Pacific
region due to its lower and affordable fares. With being the low cost carrier AirAsia has
received the achievement of world best airline company among world’s largest low cost carrier
companies. In order to be a largest low cost carrier in Asia and to be an award winning, AirAsia
has been expanding its operations and business since the 2001. Its dynamic nature of
conducting business in based on providing low fares, safe and convenience journey to its
customers with providing holidays and business arrangements locally and internationally. In low
cost carrier AirAsia’s main competitors are Firefly, JetStar and Tiger Airways. AirAsia need to
improve its service and communication with its customers as there are a lot of complaints
received by organization regarding the poor service and communication. The purpose of this
study is to examine and analyze the internal and external environment of organization and to
focus on its marketing strategies. The study provides the analysis and assessment of AirAsia
business environment. SWOT and PESTEL analysis of AirAsia are done in this study.

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TABLE OF CONTENTS
1. INTRODUCTION………………………………………………….……………………………………3
2. VISION and MISSION………………………………………………………………………………………..3
3. SWOT ANALYSIS…………………………………………………………….…………………………………5
3.1. Strengths……………………………………………………………………….……………………………5
3.2. Weaknesses……………………………………………………………………..…………………………6
3.3. Oppertunites………………………………………………………………………………………………6
3.4. Threats……………………………………………………………………………………….………………7
4. PESTEL ANALYSIS……………………………………………………………………………………..………7
4.1. Political……………………………………………………………………………………………………….7
4.2. Economic…………………………………………………………………………………………………….7
4.3. Social………………………………………………………………………………………………………….7
4.4. Technological………………………………………………………………………………………………8
4.5. Environmental…………………………………………………………………………………………….8
4.6. Legal……………………………………………………………………………………………………………8
5. COMPETITIVE ADVANTAGE OF AIRASIA……………………………………………………………8
6. SEGMENTATION……………………………………………………………………………………………….9
6.1. Income……………………………………………………………………………………………………….9
6.2. Social Class………………………………………………………………………………………………….9
6.3. Usage Rate……………………………………………………………………………………..…………10
6.4. Time………………………………………………………………………………………………………….10
7. POSITIONING………………………………………………………………………………………………….10
8. RECOMMENDED OBJECTIVES AND GOALS………………………………………………………10
9. RECOMMENDED MARKETING STRATEGIES…………………………………………………….11
10. CONCLUSION…………………………………………………………………………………………………12
11. REFERENCES…………………………………………………………………………………………………..13

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1. INTRODUCTION
The competition among airline industries is getting intense day by day. With some of the
world’s largest airlines engages in intense over Asian Skies, the air wars in Asia are hotting up.
Each of Airplanes Company within the world is attempting to conduct effective strategies to
compete with another competitor in their industry. Various airplane companies come out with
distinctive strategies to create their company way better than their competitors. To compete
with their competitor within the business environment, a company needs to adopt a strategy to
realize their long terms objective and to achieve these goals to stay in the business (Daniel
Chan, 2000). Daniel further stated that airline industry is a fascinating and unique industry. It
captures the attention of a wide group of audience with its reach and impact on the expansive
and developing numbers of consumers/travelers worldwide (Daniel Chan, 2000). Because of
this reason, there is a big opportunity associated with airline industry for AirAsia. With the
continuously increased number of travelers AirAsia has a big opportunity for conducting its
business.
The Malaysian low cost airline, AirAsia Berhad is the largest airline in Malaysia with destinations
and fleet size. The company was founded in 1933 and was able to start its operation in
November 1996. AirAsia is a subsidiary of parent grouch called Tune Group and position itself
as a force reckon in Asia region. AirAsia a being the low cost airline company with a good
strategic environment, it has built its successful story in world’s airline industry. With being the
low cost carrier AirAsia has received the achievement of world best airline company among
world’s largest low cost carrier companies. In order to be a largest low cost carrier in Asia and
to be an award winning, AirAsia has been expanding its operations and business since the 2001.
Its dynamic nature of conducting business in based on providing low fares, safe and
convenience journey to its customers with providing holidays and business arrangements
locally and internationally (AirAsia, 2018).

2. VISION and MISSION


Vision
To be the low cost airline in Asia airline industry while serving 3 billion people who are currently
underserved with high fares and lower connectivity.

Mission
 To be the best company for employees where providing employees with comfortable
working environment by considering them the part of a big family.
 To be a globally recognized ASEAN brand.
 To maintain the low cost so that everyone can fly with AirAsia.

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 Maintain highest quality products, embracing technology to reduce cost and enhance
service levels (UK Essays, 2018).

AIRASIA SITUATION ANALYSIS


3. SWOT ANALYSIS
3.1. Strengths
 Strong management team with strong links with government and airline
industry leaders.
The company is consisted of strong management team having qualified industry experts and ex
top government officials all contributing towards the effective strategies formulation and
execution. The association with government and industry leader is another major strength of
AirAsia that it enjoys. For example in Thai AirAsia, 50% stake is hold by the Shin Corp. this
provided AirAsia the chance to capture a sizeable Thailand market. In addition to this, the
association with the Airbus made it able for AirAsia to get a reasonable discount for purchases
of aircrafts that are more fuel efficient than Boeing 737 planes that are used by other
competitors.

 Well established brand in Asia Pacific.


As being the low cost leader the brand is very well established in Asian region making it
affordable for all types customers from lower class to top class. The brand is extensively
advertised in all over the targeted regions. The advertisements and promotions are very
friendly, sharing the latest information on AirAsia. The sponsorship with Manchester United
(famous football team) is another smart move in this regard.

 Effective Utilization of Information Technology


The effective utilization of IT have straightforwardly contributed to its promotional exercises
(email alerts and desktop gadget which was mutually created with Microsoft for new
advancements), brand building activities (with over 3 million hits per month and on the
foremost widely surfed booking engines within the world) as well keep the low cost by
providing customers with direct purchases that results in saving airline agent fees.

 Low Cost Leader


As being the low cost leader company maintains its lower operating cost as a result of no frills,
online reservation systems and quick check ins.
With its lower cost it has the ability to target those customers who are using no air modes such
as Bus, Trains and cars for traveling.

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3.2. Weaknesses
 Huge amount of Investment and Operational Costs
Large amount of investment is needed to purchase the planes and huge operational costs are
needed for implementing advanced technologies. Another important factor in this regard is the
increasing fuel prices that also result in increased operational costs.

 A lot of complaints received by AirAsia from customer related to inefficient


service.
AirAsia receives various complaints from customers regarding to inefficient service these
include flight delays complaints, not getting refunds, being not able to change the flights.

 The lack of maintenance and repairing facility


The company does not have its own maintenance and repairing facility and therefore it has to
outsource these operations.

 Brands extensive dependency on outsourcing various operations such as


maintenance and repairing.
 Government regulations and inferences on passengers’ compensations and airport
deals.

3.3. Oppertunites
 Growing Middle class
As being the low cost carrier, growing middle class provide with a large market for AirAsia that
results in higher market shares. Therefore a massive opportunity is associated with Asian
middle class for AirAsia.

 The opportunity to join hands with other low cost airline leaders
The company has the opportunity to partnership with other airline leaders that will help it in
lowering more its cost and boosting its sales.

 Increased Revenue
Asia will have the opportunity to advance Malaysian tourism, which will result in increasing
company’s revenue. This is due to AirAsia good government and citizen relationship of
Malaysia. Moreover, AirAsia have contract with Malaysia within the ‘Cuti-Cuti Malaysia’ and the
complete client that relate to the ‘Cuti-Cuti Malaysia’ will advance the Air Asia fly (UK Essays,
2018).

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3.4. Threats
 Some of the charges are beyond of the control of company such as airport
departures, security charges and landing charges.
Almost all airline companies suffer from this threat. For example all customers that depart from
Singapore pay SGD21 in Changi Airport Singapore.

 Declining Profit Margins


Many competitors are attracted by the declining AirAsia profit margins. In this regard mostly
competitors are about to create a subsidiary to directly compete with AirAsia.

 Increased Fuel Costs and Labor Cost


AirAsia suffers from the increased fuel and labor costs threat. Increased fuel prices is the major
barrier in low cost production.

4. PESTEL ANALYSIS
The PESTEL analysis helps in creasting the comprehensive list of influences on failure and
success of an organization’s strategies. With the help of analyzing the Political, economic,
social, technological, environmental and legal aspects of macro environment, managers will be
able to draw the relevant implications of these influence on organization (Yasmin Yashodha,
2012).

4.1. Political
The political impact on airline industry is instrumental to the growth of the airline company
especially in Asia Pacific and ASEAN region. The support of government related to national
carriers and minimal restrictions on migration is suitable for the growth of airline companies.
However security control needs to be retain in order to reflect the integrity of airline (Yasmin
Yashodha, 2012).

4.2. Economic
The fluctuations in fuel prices helped low cost carriers to decrease their costs for reserving the
quota for changes of fuel prices. The airline industry expanding market is about to increase in
GDP. For example in India in 2016 it has increased from 6.6% to 7.6% (Tan Xin Yi, 2017).

4.3. Social
With having a 50% world population within a six hour flying journey from Kuala Lampur and five
hour flying journey from Bangkok, there is a huge potential available for ASEAN aviation
market. Airline industry enjoys 50% sales from return customer than any other industry. So the

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customer satisfaction and trust is more important for airline companies (Yasmin Yashodha,
2012).

4.4. Technological
AirAsia has the opportunity to generate more sales with having the advance technology and
online based system that attract and helps customers in tickets booking easily. The advanced
technology has enhanced the AirAsia business greatly. The online system also helps customer to
check the flight information and status and make them able to do online purchases and book
hotels for them on AirAsia Tune Hotel services.

4.5. Environmental
The no frill Service is installed to better the cooperation between airline and airports as this
helps to minimize the airport overall expenditures. Airline industry has a great concern about
the environmental issues and energy efficiency. With the help of controlling the carbon
footprint, the air pollution can be minimized so much. The natural disasters including 2015
earthquake in Nepal, volcano eruption in Indonesia had a great impact on the airline operations
(AirAsia, 2016).

4.6. Legal
AirAsia has achieved the AOC, the air operator certificate that is issued by the civil aviation
authorities. The AirAsia pilots have also got the flying licenses from aviation authorities. As for
their fundamental center in Kuala Lumpur, the Malaysian Airport Holdings Berhad regularly
monitors the management and operations as well as the maintenance of it. They also ensure
that the operations are carried out efficiently as well as the safety and security of passengers is
heeded.

5. COMPETITIVE ADVANTAGE OF AIRASIA


Huge Market
Being the first low cost carrier enables AirAsia to yield higher market shares as compared to the
competitors in Asia Pacific region with a market size of approximately 500 million people.

No Legacy Problems
There is a potential advantage associated with the fresh start no legacy problem older airlines.
The AirAsia does not use the older booking system, instead they use new online booking system
that makes it easier for customers to make bookings that increases the customer satisfaction
and expectations.
Standardized aircraft fleets

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AirAsia enjoys another competitive advantage due to its standardize aircraft fleets that makes
pilot training simple and helps in quicker turnarounds that ultimately leads to greater utilization
of aircrafts. In addition to this no frill flights, use of advanced technologies and direct sales also
helps in higher revenues.
First Mover
The first mover advantage has made AirAsia enabled to gain access to the neighboring
countries such as Indonesia, Thailand and Vietnam. The rapidly growing Asian market made it
able for AirAsia to maintain its strategic position (Yasmin Yashodha, 2012).
Airasia has been exceptionally inventive in making their own company branding and image
which effectively impacted their customers. They have embed an oppose image of flying with
aircrafts which are exceptionally costly and non-affordable to buyers (AirAsia, 2016). In addition
to this they have been focusing on marketing their brands via all Social Medias to reach their
potential buyers.

6. SEGMENTATION
For segmentation purposes AirAsia uses different segment bases including demographics, user
related, social class and user situation to segment their markets.

6.1. Income
Income is the major demographic variable for AirAsia for its segmentation purposes. With the
help of this variable AirAsia determine which customer segment to target. For example
customer segment with lower and middle income ranges from MYR 20000-MYR6000 are most
suitable for AirAsia as compared to the higher income earners. Because of being the low cost
carrier the lower and middle income earners who are most price sensitive would be more
attracted to AirAsia as compared to its high cost airlines. This is because these customers have
less disposable incomes as compared to high class and can’t afford to buy the expensive airline
tickets. And this makes pricing the major factors for airline industry that affect the customers
purchasing behaviors.

6.2. Social Class


With respect to social class AirAsia segment market includes lower and middle social class. On
the basis of social class different customers have different purchasing behaviors and brand
preferences. A customer’s social class is associated with its earnings if a customer earns lower
he will fall in the lower social class category and if he earns higher he will be categorized and
upper social class. And his expectations and preferences will also vary with his class. For
example a customer with upper class will not fly with less expensive airline company because of

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his negative perceptions about low cost carrier as they provide less comfortable services as
compared to high class airlines.

6.3. Usage Rate


Usage rate is another importatnt factor for segmentation. With respect to usage rate customers
can also be segmented into three different group lower, moderate and higher usage rate. A
customer with lower usage rate will travel once or twice in a year because of his less disposable
income and will fall in lower social class category. A customer with moderate usage rate will
have moderate income and will fall in middle class. A customer with high usage rate travel
frequently because of their high disposable income. Mostly these are business executive who
travel frequently because of their business meetings at different destinations.

6.4. Time
Time is another variable for segmentation for AirAsia. The time variable is classify as business
and leisure. Customers’ priorities vary with the purpose of traveling. If lower class customer
plan to go for holidays trips, they keep checking for discounts and cheaper ticket prices.
However business travelers don’t have time for this and they would be willing to pay even for
higher prices for businesses purposes.

7. POSITIONING
With the low costs AirAsia has successfully positioned itself as the low cost carrier in airline
industry. With their famous slogan “Now Everyone Can Fly” AirAsia has a strong believe in low
fares, hassle free, and no frills business concept and that requires effectiveness and efficiency in
every part of conducting business. With their low costs AirAsia has made a tremendous
revolution in airline industry and has become a preferred airline in Asia Pacific customers
especially for the lower class and middle class customers. Despite being the leader of Asia’s low
cost carrier AirAsia lack the ability of efficient and quality services as compared to its major low
cost carrier giants such as JetStar and FireFly. However still AirAsia with its lower costs hopes to
stay longer in the business and maintain its position as the leader of low cost carrier by
providing better services.

8. RECOMMENDED OBJECTIVES AND GOALS


 AirAsia is recommended to provide its customers with efficient and quick service as
already described that AirAsia receives a lot of service complaints from its customer.
AirAsia needs to pay closer attention to the service factor.
 As competitors are continuously cutting their cost, AirAsia needs to improve more its
product and service quality and to reduce the costs further.

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 AirAsia needs to better maintain its communication with customers and to develop a
better communication relationship with customer by continuously keeping customers
updated with the latest organization’s information.
 In order to increase more product and brand awareness, AirAsia needs to expand
further its media strategy with the help of extensive advertising and promotions.
 In order to better compete with the competitors AirAsia has to ensure its customers a
secure, safe and sustainable airline organization with the help of advanced technology
and continuous monitoring.

9. RECOMMENDED MARKETING STRATEGIES


Product Strategy
It is recommended for AirAsia to provide better products and convenient services to its
customers to maintain its effectiveness and efficiency with the help of frequent and increased
number of flights.

Pricing Strategy
AirAsia needs to cut more its prices down for customers in order to better satisfy the customer
needs and to prove its slogan “Now Everyone Can Fly”.

Place Strategy
AirAsia needs to make its presence in more developing countries while expending its routes
further.

Promotion Strategy
In order to increase product and brand awareness AirAsia needs to increase further its
promotion and advertising activities by giving tickets for free, increasing sponsorships,
providing customer with affordable holidays and tour packages and more promotional fares.

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10.CONCLUSION
AirAsia is a successful Malaysian leader in low cost airline industry because of its low costs. And
because of this reason it is the first choice of more than 80% travelers of Asia Pacific region.
Their slogan “Now Everyone Can Fly” has successfully made AirAsia a low cost airline especially
for lower and middle class customers. At the beginning of AirAsia their tickets were cheaper
than the train or bus tickets and that leads to the tremendous success of the brand. However
despite being the leader in low cost airline industry AirAsia still lacks the ability of effective and
efficient service. The involvement of advanced technology in conducting business such as online
ticketing system proved a major factor in organization success. In addition to this the
advertising over mass media and social media channels also played a major role in
organization’s success. There is still need for AirAsia to create more product and brand
awareness. This can be achieved with the help of providing free tickets to customers at
different occasions, offering cheaper holidays and tour packages and promotional fares.

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11. References
AirAsia, 2016. AirAsia Annual Report, s.l.: AirAsia.

AirAsia, 2018. About Us. [Online]


Available at: https://www.airasia.com/my/en/about-us
[Accessed 28 Mar 2019].

Daniel Chan, 2000. Air wars in Asia: competitive and collaborative strategies and tactics in action.
Journal of Management Development, 19(6), pp. 473-488.

Tan Xin Yi, 2017. Environment Audit on AirAsia Berhad, London: s.n.

UK Essays, 2018. AirAsia International Business Operations. [Online]


Available at: https://www.ukessays.com/essays/marketing/pest-and-swot-analysis-of-airasias-
international-business-operations-marketing-essay.php#citethis
[Accessed 28 Mar 2019].

UK Essays, 2018. AirAsia Strength Management. [Online]


Available at: https://www.ukessays.com/essays/management/swot-analysis-for-air-asia-strengths-
management-essay.php
[Accessed 28 Mar 2019].

Yasmin Yashodha, 2012. AirAsia Berhad: Strategic analysis of a leading low cost carrier in the Asian. Elixir
International Journal, pp. 2-3.

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