vision & strategy

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Management Strategy
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Management Strategy AirAsias goal is to establish itself as a leading low-cost carrier in Asia. The principle components of AirAsias strategy are as follows: Maximize Shareholders Value Profit creation by expanding business reach within Asia Expand routes and network via a prudent calculated manner Invest and enhance brand - raising investors' returns Safety Never compromise safety Ensure the security of staff and guests Comply with every regulations; maintain highest standards Focus On Customers Needs Stimulate demand by offering the lowest fares Comprehensive distribution channel Develop various products and services while maintaining simplicity Operational Excellence All staff are contributors no ranks or hierarchy Continuous cost management Performance based remunerations and incentives Management Transparency Transparency in decision-making Disclosure higher than industry norms High accessibility to media and investment community Strategic Direction Many people keep forgetting that we are only three years of age. We are still at infancy in terms of our timeline and there are still lots more to do. Below you can find the directions we aspire to reach.

Stage 5 Become a multi specialist Yield maximization for matured routes Significant ancillary composition Stage 4 Pursue regional market domination. Optimise routes and development of new secondary hubs Further enhance route network, venture destinations previously uncovered Yield enhancement due to benefits of maturity Ancillary expansion Stage 3 (we are here) Pursue regional expansion & expanding business on existing platform (ancillary) Expand network to new countries Develop strategic partnership for mutual benefits Use strong brand to drive new business Stage 2 IPO Capital Raising and become publicly traded company Strengthen financial sheets Improve company credibility & rating Ability to negotiate favourable terms with our suppliers Stage 1 Entry to market. Aggressive brand building & recognition Introduction to the market Focus on market penetration Induce first time flyers & open up new market

INTRODUCTION
About The Product
Air Asia is a low cost airline based in Kuala Lumpur, Malaysia. It operates scheduled domestic and international flights and is Asias largest low fare, no frills airlines. Air Asia pioneered low cost travelling in Asia. It is also the first airline in the region to implement fully ticketless travel and unassigned seats. Its main base is the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai Air Asia and Indonesia Air Asia fly from Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively. The airlines established in 1993 and started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB Hicom. On December 2, 2001 the heavily indebted airlines was purchased by the former Time Warner executive Tony Fernandess company Tune Air Sdn Bhd for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $ 0.29). Air Asia operates with the worlds lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day.

Air Asia currently is the main customer of the Airbus A 320. The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. The first unit of the plane arrived on 8 December, 2005.

Support
As a pioneered in low cost air transportation in Asia, Air Asia has several subsidiaries and associate company to support its operation. Subsidiaries Thai Air Asia was established as Subsidiaries of Air Asia Berhad on 8 December 2003 as joint venture with Shin Corporation. Flight operation was commenced on 13 January 2004 from its base in Don Mueang International Airport. Since 25 September 2006, the airline is based at the new Suvarnabhumi Airport. The other subsidiary is Indonesia Air Asia. This airline is based in Soekarno-Hatta International Airport. Air Asia acquired the then defunct Awair in 2004 with a 49% stake in the airline. Awair commenced services on behalf of Air Asia in December 2004; full rebranding to Indonesia Air Asia was completed on 1 December 2005. The airline is based in Soekarno-Hatta International Airport. Associated companies They also have associate companies such as Air Asia X, Fly AsiaXpress, Tune Hotels and Tune Money. Air Asia X is a service operated by Air Asia X sdn.Bhd. (previously known as Fly AsianXpress Sdn.Bhd.) as a franchise of AirAsia. It has started offering long-haul services from Kuala Lumpur to Australia and China using Airbus A330. The inaugural flight was on 2 November 2007 to Gold Coast, Australia. The first AirAsia no-frills hotel, Tune Hotels, is ready for occupancy in Kuala Lumpur and Kota Kinabalu and later in Penang, Johor Bahru, KLIA, Miri, Kuching and Sandakan. Tune money is Asias first no-frills online financial service owned by Tune Air Sdn.Bhd. Modelled aftaer Virgin Money, it comprises life, home and motor vehicle insurance as well as prepaid cards. Destination Air Asia operates over 200 flights a day, to over 75 domestic and international routes covering Malaysia, Thailand, Indonesia, Singapore, Brunei, Myanmar, the Peoples Republic of China, Vietnam, Laos, Cambodia, Australia and the Philippines. In 2007, 19 new routes had been introduced over the Air Asia wide network. These include routes from Kuala Lumpur to Gold Coast (Via Air Asia X), Vientiane and Banda Aceh and the connection of Southern China (Macau and Shenzhen) with different Malaysian hubs and Bangkok. In 2008, new routes were introduced which included destinations in India and China. Air Asia future plan is seeking to set up a hub in Malacca serving Medan, Pekan Baru, Palembang, Padang, Penang and Langkawi. Air Asia has gained approval from India authorities to start flying to destinations in India such as Chennai, Madurai and Kochi.

Value Added Services On 15 May 2007, a service named Xpress Boarding was launched, enabling passengers to get priority boarding for a fee. This product is available in all hubs including Thai Air Asia and Indonesia Air Asia. On Air Asia X flights, passengers are given a choice of purchasing extra baggage weight, meals, comfort kit and seat selection all with nominal fees. On 26 November 2008, Air Asia has launched its Air Asia X London flights to London Stanstead Airport.

PRODUCT ANALYSIS
As with living organisms, products have a life cycle. For some, such as the Boeing 747, the life cycle is measured in decades whilst for others, for example the merchandising spin offs from popular movies, the life cycle may be measured in mere weeks. The Product Life Cycle (PLC) A product enters the market in one of three ways. The first may be as an improvement on an existing product, in which case there will already be a customer base. The second is as a competitor to an existing product, in which case a customer base exists, but its loyalties may lie elsewhere. The third way is as a totally new product, in which case a customer base needs to be built up. Research has shown that many new products never move out of the launch stage. In the 1960s it was stated that 96 per cent of all new product launches failed. By the 1980s this had improved to the extent that only 80 per cent of product launches failed. Reasons for failure were given as: Incorrect segmentation trying to reach the wrong market. Incorrect pricing either too expensive to provide consumer value or too cheap to sustain the costs of production and market activities. Incorrect communication mix failure to create the required levels of awareness, interest and action. Incorrect distribution not in the right channels or if in the right channels, not in enough of them. The product itself by far the most common reason. The product does not provide any new benefits or it provides benefits that are not sought or valued by the customer. It has no beneficial differentiation to existing products already established in the market. Air Asia, Airlines Company with 58 flight destination is in the growth phase position of Product Life Cycle (PLC) stage. The growth phase is when loyalty begins to be built up. Some products or services can be taken up by the customer base very quickly and achieve rapid growth. Sales of Air Asia Airlines grew tremendously in every country in which they were available.

It is during the growth phase that the product will begin to recover its development and launch costs and slowly move through the break even mark to begin to make a profit for the organization. During the growth stage of a new market or a new product, competitor will also enter the market with similar products or services and competition will become increasingly evident. The characteristics of products or services in the growth phase are Gain market share instead of create awareness and promote trial as the objective, increasing the sales, moving from the non profits into profit, the competition is growing. As Air Asia gain high market share begins to make a contribution to overall profitability. Revenue pays off the development costs. It will begin to make rival product or service into problem. As the market still growing, revenues can be expected to increase. This period correspond to the star phase of the Boston Consulting Group (BCG). The market mix elements during in the Growth phase are as follows. Product Product extension and minor modification. Price Penetration Pricing for Market Share. Advertising Heavy media even not as heavy as introduction phase, to build awareness and create brand. Sales promotion Reduce as demand increases instead of intensive sales promotions to encourage trial likes introduction phase. Distribution Move from selective distribution to intensive distribution. SWOT Analysis A SWOT (Strengths, weaknesses, opportunities and Threats) analysis is a common component of organizational planning and marketing. The analysis is in two parts, the first part looks at the strengths and weaknesses of the organization and is thus an internal analysis and the second part considers the threats and opportunities facing the organization from the external environment, which are derived from the external analysis. The strengths of an organization are those things it does particularly well, especially when viewed against the operations of its competitors, where as its weaknesses are areas in which it is weaker than the competition. However well run and competitive an organization is, it will still have weaknesses. Opportunities are those external factors on which the organization can use its strengths to

outclass the competition, and threats are those factors from external environment from which the organization may suffer because of its weaknesses. STRENGTHS Low cost carrier (Value for money) Internet booking systems (Reduce the man power cost and cut down the channel and time of distribution as they as close to the market already) Reputation gained over time (the market share is gained as Air Asia is not in the introduction phase) Added value on the service. We can book the hotel, rental car, tour package, meals in the same time of ticket booking thru the internet instead.

WEAKNESSES Inflexible, when passenger needs to change his flight reservation. Operate out of less popular airports (Budget terminal). Lack of spare aircraft hinder flexibility and occasionally caused flight delay. Less varieties of in flight shopping Meal and drink are not provided by the airlines. No reward mileage for customer loyalty. Tight leg room makes it uncomfortable for bigger size passenger. Certain flights departs at odd hours (ie. 4 or 5 am) No fixed seat selection resulting in passenger rushing for seats.

OPPPORTUNITIES Due to current economic situation, many people moved to budget airlines. Increase the uses of Internet. (More people aware and understand how to work with and the using of Internet) Alliance with other carriers and hotels. Mass segment is wider than premium target. People like travelling and they like to pay low cost. Other low cost operators such as value air, tiger air, jet air, etc Cutting price (promotion class) offered by traditional airlines such as Garuda Q Class. Increases in airport charges. Fluctuation in fuel price. Threat of world recession. Travel is often one of the first activities to be hit.

THREATS

STRATEGIES AND TACTICS

Strategy is used to refer to an overall plan of action. The strategic plan of a company will indicate where the organization is going and how different functions fit into the plan. Tactics are the smaller scale actions that are taken to realize the objectives of the strategy. Gaining 40 percent market share for a product in order to boost profits is a strategy. Lowering the price of that product for a time in order to stimulate sales is a tactic. The Internet plays a vital part in the Air Asia business and has proved to be critical to the success of the business. As a low cost operation, controlling the cost of doing business is clearly highly important to the airlines ability to be competitive by offering low fares. The Internet provides the most cost effective distribution channel available.
Blue Ocean Strategy - Example : Air Asia

Posted on February 14th, 2008 by admin

One of the significant changes that airline industry have changed is the evolvement of budget airline industry. The good example in Malaysia is Air Asia.

Air Asia have managed to avoid the red ocean (compete with Malaysia Airline and regional airline) by looking into the factors that industry take for granted and also factors that important to customers. With the Four Actions Framework proposed by Blue Ocean Strategy authors, Air Asia have implemented many strategic move to ensure they are making Malaysia Airline and regional airline company irrelevant. Example of the strategic move as follows: Eliminate:
Over the counter booking system Free Food/Beverage on the plane Seating Class booking system luxury facilities provided by Airport Lounge No of attendance service on the plane Seat Quality Focus on several key destination Increase frequency of flight

Reduce :

Raise:

Create :
Online Booking system Point to point travel system

With this strategic move, Air Asia able to focus on factors that really bring value to the customers such as point to point travel system, easy booking system etc. This will help Air Asia to reduce cost and at the same time increase the value to the customers - Value Innovation.

AirAsia Offers 2 Million Free Seats in Big Marketing Push

6 December 2005 Bernama - Malaysian National News Agency

AirAsia Bhd will give away two million airline seats in a "no holds barred" regional marketing campaign to mark its fourth anniversary beginning tomorrow. The two million free seats are available for all domestic and regional flights departing from AirAsia's hubs in Kuala Lumpur, Senai, Bangkok and Jakarta. The campaign will be launched simultaneously in the eight countries where the budget airline operates over 100 domestic and regional flights -- Malaysia, Thailand, Indonesia, Singapore, Macau, Vietnam, the Philippines and Cambodia. "This is the first time AirAsia has launched a major regional marketing campaign of such magnitude and it will be the biggest online free seats campaign ever offered in Asia," its executive vice president (commercial), Kathleen Tan, said today. AirAsia has so far carried 15 million passengers in the region. To be eligible for the free seats, bookings must be completed online at www.airasia.com or via mobile.airasia.com between Dec 7 and Dec 28, 2005 for travel from Feb 7 2006 to Oct 10, 2006. The free seat offer excludes airport taxes and fees, fuel surcharges, and is applicable for one way travel only. Tan also disclosed that AirAsia's Internet bookings at www.airasia.com had increased by 65 percent in the last four years, making it one of the most successful distribution channels to date.

AirAsia aims for a fleet of 400 planes to serve region

8 December 2005 The Nation (Thailand)

AirAsia chief executive Tony Fernandes foresees the day when his airline will operate a fleet of more than 400 aircraft. Speaking at the Centre for Asia Pacific Aviation's (CAPA) "Outlook 2006 Summit" in Kuala Lumpur this week, Fernandes said AirAsia could grow as big as the US low-

cost carrier Southwest Airlines. So far, the company has more than 100 planes and continues ordering new aircraft to achieve its expansion plans. Its role model, Southwest Airlines, began business with three aircraft and it now operates a fleet of more than 400. While Southwest Airlines focuses only on the US market, AirAsia has a wider, regional field of operation, Fernandes said. The AirAsia chief executive was recently named CAPA's aviation executive of the year, a distinction he has held for two consecutive years. He said that the past two years have been a time of investment in AirAsia's network, and it is expected to begin paying off soon. The airline recently signed an agreement to buy 60 Airbus A320 aircraft, the first of which will be delivered to Kuala Lumpur today. The aircraft are expected to reduce AirAsia's costs by 12 per cent - mainly through more efficient use of fuel - while offering better service to its customers. The Malaysian carrier and its international joint ventures in Thailand and Indonesia are profitable operations, he said. This is the first year that all three operations have seen positive cash flow. "It's a great time to be in the airline business if you've got the right business model," Fernandes said.

AirAsia Fully Prepared To Service All Domestic Routes

12-12-2005

KUALA LUMPUR, Dec 11 (Bernama) -- South-East Asia's largest discount carrier, AirAsia Bhd, is fully prepared to service all the domestic routes it has proposed to take over from Malaysia Airlines (MAS), says its group chief executive officer Datuk Tony Fernandes. He had recently said that AirAsia could operate all domestic routes, except for Lahad Datu, Limbang and Mulu in East Malaysia which are being operated by MAS' De Havilland DHC6 Twin Otter aircraft. "We have ordered 100 Airbus aircraft. We can speed up (delivery)," he told reporters at the 2005 Asean Business and Investment Summit 2005 here Sunday. He was asked whether AirAsia could serve the routes if the government decided to pass the bulk of them under the rationalisation of domestic routes. MAS, the national carrier, will submit a turnaround plan, which may cover its domestic routes, to the government by February next year. AirAsia had made a firm order for 60 Airbus A320s and 40 purchase rights of the same aircraft.

It took delivery of its first Airbus A320 on Dec 8 and is scheduled to receive its second A320 on Dec 25, 2005. Fernandes was also asked about the five hour-long meeting he had recently with MAS newly-appointed managing director, Idris Jala. "The five hours was more than what I had with MAS in the last four years," he said but he declined to provide details of the meeting.

AsiaAsia to use nasi kandar as selling point Business Times, April 29, 2010 PENANG'S gastranomic icon - the nasi kandar - will be the marketing channel tapped by lowcost carrier AirAsia Bhd to promote its newly launched Penang-Chennai route. Chairman Datuk Aziz Bakar said nasi kandar outlets in the island state will be one marketing source for the airline, where restaurant workers are mainly Indian nationals. "The nasi kandar operators, who themselves are wealthy, are also another potential group of travellers for us," he told reporters at the Penang International Airport yesterday. Aziz welcomed 165 passengers on board AirAsia's inaugural AK 5702 flight, which landed from Chennai at 3.40pm. The route is a welcome relief to South Indian-bound passengers from the northern states who have had to fly either via Kuala Lumpur or Singapore to Chennai previously. Malaysia Airlines had stopped serving the Penang-Chennai route more than eight years ago. "With this new route connecting Malaysia's most popular northern state and India's fifth most populous city, we hope to bring in more Indian tourists to discover Penang, and the rest of Malaysia, in line with Tourism Malaysia's target of 650,000 Indian tourist arrival this year," said Aziz. AirAsia conquered the Indian skies in January this year by launching six new routes to the subcontinent. They include Bangalore, Hyderabad, Mumbai and New Delhi. The Kuala Lumpur-Chennai route will be operating on May 17.