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8/8/2019 Air Asia - A Case Study
http://slidepdf.com/reader/full/air-asia-a-case-study 1/24
Group ± 6 Sec- C
8/8/2019 Air Asia - A Case Study
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AirAsia is a Malaysian low-cost airline.
Initially it was a Malaysian Govt. controlled company.
It was re-launched in Jan 2002 as an LCC(Low Cost Carrier) after
takeover by Tony Fernandes.
It operates scheduled domestic and international flights.
AirAsia is a pioneer of low-cost flights in Asia and is the largest Asian no-
frills airline.
In a very short time, after launching as an LCC, Air Asia converted from a
debt ridden company to a profit making company.
AirAsia is a Malaysian low-cost airline.
Initially it was a Malaysian Govt. controlled company.
It was re-launched in Jan 2002 as an LCC(Low Cost Carrier) after
takeover by Tony Fernandes.
It operates scheduled domestic and international flights.
AirAsia is a pioneer of low-cost flights in Asia and is the largest Asian no-
frills airline.
In a very short time, after launching as an LCC, Air Asia converted from a
debt ridden company to a profit making company.
8/8/2019 Air Asia - A Case Study
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The airline was established in 1993 by a Malaysian government-owned conglomerateDRB-Hicom and started operations on 18 Nov 1996.
2001 Dec ± Tony Fernandez takes over the loss making AirAsia for US$ 0.26
2002 Jan ± Re-launched as first no frills LCC.
2002 Dec ± First profit of US$ 6 million
2004 - Starts regional flights to neighbouring countries. Formation of Thai Air
Asia in partnership with Thai Shin Corporation. 2004 Nov ± Listing on the Malaysian stock exchange.
2005 - Indonesia Air Asia established, hubs in Jakarta and Bali.
2006 Mar ± Main Hub moved from KLIA to neighbouring specifically built LCCterminal
2006 Aug ± Domestic Route rationalisation arrangement with MAS, took over two
third(96 out of 118) of MAS¶s loss making routes. Becomes largest airline in Malaysia. 2007 - µAir Asia X¶ launched, First long haul flight to Gold Coast, Australia.
2008 May ± 25th consecutive quarter of profitability since 2002.
2009 - Servicing 18 countries, 84 Aircrafts, 136 routes, 627 flights per day in theasia pacific route.
8/8/2019 Air Asia - A Case Study
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Change in ownership pattern FROM Government owned or Supported
TO Private.
Deregulation in airline industry leading to greater competition and
pricing freedom.
In order to increase efficiency, carriers are entering into new strategicalliances with each other.
Fierce competition, rising fuel prices leading to streamlining of
operations to enhance the value chain.
Emergence of Low Cost Carrier (LCC) market due to rising economies,
increasing business travel and growing disposable incomes especially in
Asia.
8/8/2019 Air Asia - A Case Study
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BusinessMission
SWOT Analysis
GoalFormulation
StrategyFormulation
Program Formulationand Implementation
Feedbackand Control
8/8/2019 Air Asia - A Case Study
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To be the best company to work for, whereby employees aretreated as part of a big family.
Create a globally recognized ASEAN brand.
To attain the lowest cost so that everyone can fly with AirAsia
Maintain the highest quality product, embracing technology to
reduce cost and enhance service levels
To be the best company to work for, whereby employees aretreated as part of a big family.
Create a globally recognized ASEAN brand.
To attain the lowest cost so that everyone can fly with AirAsia
Maintain the highest quality product, embracing technology to
reduce cost and enhance service levels
8/8/2019 Air Asia - A Case Study
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SWOT Analysis
Strengths
Low OperationalCosts
Highly Trained, wellpaid and motivated
staff. High Utilization of
Resources. First mover
advantage. Influential Political
Support. Strong Brand
Presence
Weaknesses
Frequent flight delays Limited variety for
flyers Lack of infrastructure
and congestion atairports hit bottom-line.
Opportunities
Very limited presencein the long haulsegment
Liberalization of
ASEAN countries. Alternate sources of
revenue through VAS. Diversifying into
sectors like air cargo.
Threats Increasing
competition Rising Fuel Prices
Substitutes like highspeed rails and other LCC¶s.
Terror attacks andhealth risks
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To be the largest low cost airline in Asia and serve the people
who are currently underserved with poor connectivity and
high fares.
To be the largest low cost airline in Asia and serve the people
who are currently underserved with poor connectivity and
high fares.
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To provide basic airline experience to customers by curtailing
costs. This was achieved by providing only the requisite facilitiesand keeping the prices as low as feasible. To provide requisite
safety and focus on simplicity.
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Operating Expenses Cost/ASK for Air Asia
2009 2007
Reason
Staff Cost .35 .33 1.) Superior Productivity ±Similar trainingand incentives .2.) To and fro flight on the same day
Fuel and Oil 1.21 1.59 Multi layered Hedging StrategyNewer, fuel efficient Aircraft.Efficient flying skills of pilots
Maintenance and Overhaul .16 0.28 1.)New aircraft requires less maintenance.
2.)Single Type of aircraft reduces need for diverse spares, skills etc.
Sales and Marketing .14 .11 1.)In-house marketing team reduces costsand turnaround time.2.)Stress on e-ticketing and telephonebooking .
3.) Free publicity through media
User Station and Aviation .26 .22 1.) Reliance on secondary airports.2.) No amenities like passenger lounges.
Cost of Aircraft,depreciation, amortization
.42 .48 1.) Reduced leasing costs.2.) High aircraft utilization
Total cost per ASK 2.95 3.16 Approx 6.7 % less than 2007 figures.
8/8/2019 Air Asia - A Case Study
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` Lowest prices without compromising on customer service.
` VAS to flyers-
x Ticketless check-in ± saved time and hassle free
x
Single class seating- no bias amongst flyersx Standard operating procedures ensured uniform
level of competence amongst the staff.
x Multi-lingual website
x Customer µdelight¶ services like lucky draw
x Shunned µhub and spoke¶ for µpoint to point¶ system.
x Reliance on ITES
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Tony Fernandes invited Connor McCarthy to join AirAsia'sexecutive team.
They restructured the complete business model and adopted low-fare, no-frills concept.
They planned to offer only one standard class cabin.
It did not provide in-flight entertainment or free meals.
Seats were sold through telephonic booking centre, sales office,travel agents and at local banks and post offices.
Multiple hubs within Malaysia to serve better.
Innovative marketing.
Tony Fernandes invited Connor McCarthy to join AirAsia'sexecutive team.
They restructured the complete business model and adopted low-fare, no-frills concept.
They planned to offer only one standard class cabin.
It did not provide in-flight entertainment or free meals.
Seats were sold through telephonic booking centre, sales office,travel agents and at local banks and post offices.
Multiple hubs within Malaysia to serve better.
Innovative marketing.
8/8/2019 Air Asia - A Case Study
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March2001
June2002
June2003
June2004
June2005
June2006
June2007
291 611 1.481
2.839
6.289
9.312
12.992
Passengers Flown by Air Asia Group(in thousands)
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8/8/2019 Air Asia - A Case Study
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Bargaining
power of customers
Bargaining
power of supplier
Threats of
potentialentrants
Threats of
substituteproducts
CompetitiveRivalry
Medium Customers
highlysensitive to
prices.
Competitiongives buyersmore choices
LowVolatileinternationalcrude oil prices. ±
tacked throughhedging policy
Limited aircraftmanufacturerslimits suddenexpansion plans
SizeableAttractivemarket for fullcost carriers to
start low costsubsidiaries.
Develop-ment of newlow-costcarriers.
Medium Train, bus
and car travelare
developing
Other LCC¶slike JetStar Asia, Tiger Airways,ValuAir Nok Air etc.
High Hard
competition
Price cuttingandcartelizationby bigger players.
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Ancillary income increase Offer more on board services/ products to the passengers-
Taxi booking service
Internet WIFI access on board
Newspapers, Movie renting,«
Merchandising. (perfum, make-up, toys«),
Ticket price differentiation.
Place advertisings in the plane¶s cabin.
8/8/2019 Air Asia - A Case Study
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Increasing AIR Asia's assets - Enlarging this existingfleet.
Cargo¶s installations to load/unload the aircraft
Invest in joint ventures
Diversification - AIRASIA should acquire new know-howin a view to offer More Service to the consumer.
i.e. To take over an online travel agency
OK
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Thank You!!
Questions??
Thank You!!
Questions??