AirAsia Berhad

Sanjay Velan

Keith Woo

Dharshviny Sasidharan

Marketing Principles

Assignment 1

Executive Summary

AirAsia Berhad is an airline company that provides airlines services domestically as well as

internationally. Within Malaysia, AirAsia has targeted a consumer market that consists of young

adults, working adults as well as middle income groups. The distributions of AirAsia’s services

for Malaysia as well as other countries are through its official website, www.airasia.com and

travel agencies which are scattered around Malaysia. Through an analysis of the internal and

external environment of AirAsia, it indicates that AirAsia enjoys important strengths in its low

cost services, its effective and focused management and its simple business model. Meanwhile

their weaknesses are limited service resources due to low cost, limited human resources as well

as its heavy dependency on outsourcing. AirAsia faces a healthy external environment

highlighted with the low cost tickets that could be bought by all levels of society.

Marketing Objectives

The AirAsia marketing objectives are, “to be the lowest cost short haul airline in every market

that they serve, to continuously launch new routes under AirAsia as well as to own 175 Airbus

A320 models by year 2015.” (AirAsia Berhad Annual Report,2009)

Marketing Strategy

In order to accomplish its goals, AirAsia will lead its marketing activities toward the following

strategies:

Target Market Strategy: AirAsia will continue to target its existing customers while

expanding its routes to more developing and developed countries.

Positioning Strategy: AirAsia will continue to position its brand as the lowest cost airline

by giving away incentives in order to attract customers from other airlines services.

Product Strategy: AirAsia will maintain its efficiency in providing services which are

convenient to customers as well as increasing its flight frequency to maximize its profits.

Pricing Strategy: AirAsia maintains its fares to be as low as possible and exercises its

‘pay only for what you want’ philosophy amongst its customers.

Promotion Strategy: AirAsia aims at generating positive customer feedback by giving

away tickets for free as well as venturing into hotel lines and endless promotional fares

and holiday packages to gain constant attention from its customers.

Place Strategy: AirAsia moves away from the traditional way of services placement. It

launches mobile facilities, call centers and much more to facilitate customers.

Internal Environment

Mission Statement

The mission statement of AirAsia is to:

“Be the Asia's leading low fare no frills airline and first to introduce "ticketless"

traveling, AirAsia will be unveiling more incentives in the future to encourage more air

travel among Malaysians.” (Now Everyone Can Fly, 2007)

Organizational Structure

The organization structure of AirAsia is quite a large one since it includes AirAsia Indonesia as

well as AirAsia Thailand. (AirAsia Berhad Annual Report, 2009) However, the main personnel

are as below:

CEO of AirAsia, Dato’ Sri Dr. Tony Fernandes leads AirAsia. He is responsible for

overlooking the entire operations of AirAsia.

Deputy CEO and co-founder of AirAsia, Dato’ Kamarudin Meranun helps by being

involved in the development of the company and its other ventures.

Thai AirAsia’s CEO, Tassapon Bijleveld, heads the operations in Thai. His duty is to

oversee all the aspects of Thai AirAsia as well as to boost the growth in Thailand.

Indonesia AirAsia’s CEO, heads the operations in Indonesia. He administers the business

in Indonesia as well as tries to enhance the growth of Indonesia AirAsia.

Corporate Culture

AirAsia has developed a brand that is accessible to everyone. The driving force underneath their

brand is the unique and friendly AirAsia experience. This conducive AirAsia culture is

everywhere in their operations including the management, guests services, ground and flight

operations. To fulfill their mission by providing the lowest cost flights to customers in order to

be the leading low-cost carrier, their positive, warm and welcoming service has in turn won

many long term customers for AirAsia.

External Environment

Competitive Environment

AirAsia faces a few different levels of competition. Among its direct competitions are companies

that also provide airline services in Malaysia as well as other country’s low cost carriers, such as:

MAS (Malaysian Airlines)

Firefly (Subsidiary of Malaysian Airlines)

Tiger Airways (Low Cost Carrier based in Singapore)

Cebu Pacific Air (Low Cost Carrier based in Philippines)

AirAsia faces indirect competition from the following:

Holiday packages offered by traditional full service airlines which are cheaper than

AirAsia flights give customers a better option of flying.

AirAsia faces trouble with the Indonesian culture of as they do not prefer to fly with light

and minimum baggage. This opens up opportunities for other airlines that are able to

provide value added extras although at a relatively higher cost.

AirAsia faces problems with its cheap flights as fuel prices are on the rise.

Economic Environment

AirAsia was set up in Malaysia, a developing country, where the industries, standards of living

as well as the utilization of technology are inclining. Like many other developing countries,

Malaysia is made up of more practical middle class society who usually works very hard to raise

the standards of their lives. Parallel to the society in Malaysia, AirAsia’s low cost concept is well

accepted since the society is always searching for cheaper alternatives when it comes to

travelling via air. AirAsia also therefore sets up its main hubs at other developing neighboring

countries such as Thailand and Indonesia. Starting off and setting up AirAsia in developing

countries has helped AirAsia as it is the are of their target market as well as obtaining skilled

labor forces are much easier and cheaper. The economic environment of AirAsia also includes

its recent introduction to AirAsia X, which flies long haul routes. Amongst its routes are the

developing countries such as United Kingdom, Japan and many more.(AirAsia-Flight routes,

2007) Developing countries have given AirAsia the opportunity of gaining more market potential

for its services. It also helps AirAsia to be internationally recognized. Apart from these,

AirAsia’s economic environment also involves a good economic infrastructure to its growth.

AirAsia‘s rapid growth sees the government of Malaysia building a new hub to house its

aircrafts. The Low Cost Carrier Terminal (LCCT) which handles almost 9 million passengers a

year has provided AirAsia with a better opportunity of growth. (LCCT to Get Bigger and Better,

2008)

Technological Environment

AirAsia relies heavily on technology in conducting their business. The technology usage by

AirAsia has enhanced its business greatly because all of their ticket bookings are done online as

they are well known for the ‘ticketless’ service that they offer. It also enables customers to check

flight information, allows them to do online shopping as well as gives opportunity to customers

to book hotel rooms in their Tune Hotel services and so on. Apart from their main website,

AirAsia also has created a blog in which it gives valuable insights about their company, their

cultures and much more. The blog also enables customers to give their feedback, regardless of

whether it’s positive or negative. Through the blog, customers not only get more information on

AirAsia but also help AirAsia improve its quality of services. The use of technology in AirAsia

is also utilized maximally as it also serves as a portal that carries AirAsia’s brand name.

Political and Legal Environment

Safety measures in an airline company are the most important element. Hence, even to start the

airlines, AirAsia has obtained an AOC which is the Air Operator Certificate issued by the Civil

Aviation Authorities. Their pilots too, have all obtained flying license from the Civil Aviation

Authority. As for their main hub in Kuala Lumpur, the Low Cost Carrier Terminal (LCCT), the

Malaysian Airport Holdings Berhad regularly inspects the management, operation as well as

maintenance of it. They also ensure that the operations are carried out efficiently as well as the

safety and security of passengers is heeded. The political and legal environment at AirAsia also

sees it successfully obtaining open skies agreement with neighboring countries such as Thailand,

Singapore and Indonesia.

Sociocultural Environment demographics

The sociocultural environment of AirAsia sees it taking many things into account while serving

its customers. The demographics of AirAsia sees it appealing to a wide selection of income

groups. AirAsia not only targets the medium income groups but also the low ones. It is designed

in such a way that customers can customize their flying experience matching to their income.

Customers who can afford paying extra can opt for variety add-ons such as food and beverages,

sleeping kit and so on. However, those who can’t can disregard these add-ons and continue

flying with AirAsia. AirAsia also pays much attention to the mores of people in Malaysia as well

as its neighboring countries. Since the majorities are Muslims, AirAsia avoids all its food on air

from pork products as well as other ‘non halal’ items such as alcohol and so on. In order to cater

its international customers, AirAsia provides alcoholic beverages on air which is only restricted

under the AirAsia X service. Apart from that, AirAsia also overcomes the barriers of language

almost efficiently in its website. AirAsia’s official website that handles all the booking and sales

of tickets provides customers with a range of languages to choose from. At the moment,

AirAsia’s website can be visited under languages such as Thai, Mandarin, Japanese, Indonesian

Language, Tieng Viet (Vietnam language) as well as Bahasa Malaysia and English. (Now

Everyone Can Fly, 2007) By offering its website in many languages, AirAsia not only makes its

website user-friendly but also is able to advertise its services effectively.

SWOT Analysis

The SWOT analysis provides a summary of the strengths, weakness, opportunities, and threats identified

by Air Asia through of its internal and external environments. (Analyzing AirAsia in Business

Competition Era, 2009)

Strengths

The following are the strengths identified by Air Asia:

Low cost operation

Less management level, effective, focused and aggressive management

Simple proven business model that consistently delivers the lowest fares

Penetrate and stimulate to potential markets

Multi-skilled employees means competent and inducement workforce

Weakness

The following are the weakness identified by Air Asia:

Service resource is limited by lower costs

Limited human resources could not handle irregular situation

Government interference and regulation on airport deals and passenger compensation

Non-central location of secondary airports

Brand is essential for market position and developing it is always a challenge

Heavy dependency on outsourcing

Constant competition with other low cost carriers as well as traditional full service airlines.

Opportunities

The following are the opportunities identified by Air Asia:

Growing middle class population creates a larger market for AirAsia

Optional addition of services allows passengers to obtain full service airline with low fare

Opportunity to partner with other low cost airlines

Being low cost gives an upper hand despite the high fuel prices and eliminates competitors

Threats

The following are the threats identified by Air Asia:

Full service airlines start cut costs to compete

Entrance of other (low cost carrier)LCCs

Users perception that budget airline may compromise their safety features to keep the costs low

Accident, terrorist attack, and disaster and affect customer confidence

More traditional airline services create subsidiaries which consists of low cost carriers

Enhance in operation cost in constructing value-added services

System disturbance due to heavily dependence on online sales

Marketing Objectives

Following are the marketing objectives set by AirAsia Berhad (AirAsia Berhad Annual Report,

2009):

To be the lowest cost short haul airline in every market

To continuously launch new routes under AirAsia

To own 175 Airbus A320 by year 2015

Marketing Strategies

Target Markets

AirAsia will continue targeting its existing target markets. AirAsia’s primary consumer target

market is as follows:

Demographics

Male and female young adults, working adults and middle income group

Age: 20-50

Household income : MYR 45 000

Education of Head of Household : Diploma and above

Psychographics

Travel via air for holidays at a cheaper rate

Fly to domestic and international routes for business purposes under a small budget

Alternative means of transportation to travel during festive season in a short period of

time

Convenient travelling for students who travel from the West Coast to the East Coast of

Malaysia

Media Habits

Individuals on the target market are most likely to receive news and updates regarding

AirAsia via Internet or SMS compared to newspapers or the television.

The consumers are mostly technology savvy and thus are always connected to social

networks such as Facebook, Twitter and MySpace.

They are most likely to listen to radio in their automobiles as well as in their hand

phones.

Organizational Markets

In order to increase distribution and sales of its services, AirAsia will target the following in the

future:

Media organizations that travel abroad for advertising shooting

Companies that hire international citizens as their staffs.

Travel agencies that offer holiday packages.

Media organizations often have to conduct advertising shooting for their clients at international

locations. Thus, a large group of people involved in those tasks need to travel via air to get to

their location. AirAsia targets these organizations as they can profit through group travels.

AirAsia can also benefit via group travel by targeting companies that outsources for staffs and

experts from other countries to work in Malaysia. They also benefit greatly by targeting travel

agencies as it indirectly increases its frequency; from individual travelers to travelling with

family and friends as well as tour groups.

Positioning Strategy

AirAsia’s positioning strategy involves two levels of positions. Primarily the strategy

revolves around Re-positioning AirAsia as a brand itself and De-positioning its competitors in

the airlines industry.

In its Re-positioning strategy, AirAsia targeted to involve itself in the airlines industry as

a low-cost carrier, affordable, efficient and without the frills of full service cost flights. In their

branding, they use the slogan ”Now everyone can fly”, pointing customers towards the fact that

under their flagship, flying is now a very feasible and affordable option in travelling.Giving

away free seats during certain celebrations, events and so on is AirAsia’s way of pushing more

attention towards the airlines rather than allowing people to focus on other options. The incentive

behind these strategies generates tremendous amounts of competitive interest for the seats,

hence, raising up the fact that: “Now everyone can fly”.

The other half of their positioning strategy is to De-position competitors in the airlines

industry. By pushing AirAsia out as a budget airline, they mark out a plan to communicate to the

masses the idea that AirAsia is indeed the cheapest, most affordable, and economical low-cost

carrier there is in South East Asia. On top of that, they also communicate the idea that AirAsia is

efficient, dynamic and provides quality service as part of their operations. The goal in this

section of the De-positioning strategy is to increase the demand of low-cost flights. With that,

they will be able “reposition” their competitors as alternatives that are more expensive in nature.

As of late, AirAsia has also adopted a new positioning strategy which is more holistic in

nature by not only providing flights, but also optional hotel bookings, packages, and other

options that are customizable to the consumer’s budget. The goal is to generate a feel of ease and

efficiency as consumers only need to rely on one direct source to sort out all their travel

arrangements. They’ve also packaged with their flights their own hotel chain, Tune Hotel, to go

with the positioning strategy.

AirAsia’s expansion into most of South East Asia also shows that they are determined to

compete with the other fleets as part of their route strategy. In order to profit from the routes,

they will need to be competitive in terms of two way routes rather than just one way routes.

Marketing Mix

Product Strategies:

AirAsia’s philosophy is girded by the fact that they have been seen as a small airline

competitor for many years. Therefore, in order to win more customers and return customers, they

need to ensure that their primary products and services are up to par and meet the defining needs

of customers.

Efficiency:

AirAsia is all about convenience and efficiency. Their aim is to allow customers to travel

for as low as possible without losing profit for the airlines. Hence, the buzz is to create as

many products and services that are circled around efficiency and convenience, such as,

online bookings, check-ins, pre-ordered food, kiosks, mobile detailing. And alongside,

their strategy, they’ve also created convenience in the form of holiday packages and

tours.

Flight frequency:

In order to maximize profits, the airlines must be able to transport passengers. The more

they transport, they more they profit. Therefore, AirAsia practices higher frequency in

certain “high traffic” routes. This also serves the convenience of customers who fly

frequently in and out of certain areas.

Mobile centre:

AirAsia has launched booking services via mobile phone or landlines in order to provide

customer efficiency when it comes to ticket booking and check-ins. The less steps and

troubles a customer’s goes through, the faster profit is generated and consumers are

satisfied.

Easy payments:

With the huge structural change in banking dynamics, AirAsia became the first airlines to

launch services that enable customers to pay for tickets via Credit Cards over the

telephone or cash at Alliance Bank outlets. This is also on top of their online transactions

which only require a few steps and verifications.

Pricing Strategies:

Penetration pricing:

AirAsia’s pricing is designed to penetrate the market in order to capture volume. Hence,

with lots of cost cutting exercises, they are able to bring the fares for as low as possible

with the knowledge that consumers will be getting what they want for what they are

paying for. The “low fare, no frills” concept is designed to basically just transport

customers. Of course, with that in mind, AirAsia has also diversified its in-flight products

by providing services that are “on-site” for the customers’ conveniences.

Promotion Strategies:

Positive consumer benefits:

AirAsia’s promotional strategy is deployed in such a manner in order to generate positive

consumer feedback via its efficient and cost-effective options. Even in the instance of giving

away free seats and tickets, the promotional strategy is aimed at generating attention rather

than purely sales. Once the set numbers of free tickets are given away, there is still much

buzz about the remaining packages and other alternative offers.

Publicity:

AirAsia pushes its strategy in terms of generating tremendous amounts of publicity with their

endless strings of promotional offers. And with the generous amount of diversification in

their hotel chain, alternative cost-reduction options, and publicity stunts, consumers were

more than willing to give AirAsia the attention it wanted. And being a low-cost carrier

alternative, AirAsia was able to capture a fair share of the current local market.

Supply Chain Strategies:

Place:

AirAsia has designed its strategy in such a way that enables itself to move away from

traditional placement of services. The strategy being deployed is in order to bring placement

services to the customer, rather than inconvenience the customer. Hence, the primary designs

of mobility and telephony services that empower the customer to retrieve services wherever

they are and for whatever it may be when it comes to the airlines.

References

AirAsia Berhad Annual Report (2009). Our Commitment. Retrieved from

http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR09.pdf

AirAsia Berhad Annual Report (2009). Senior Management. Retrieved from

http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR09.pdf

AirAsia-Flight Routes (2007) Route Map. Retrieved from http://www.airasia.com/id/en/travel

information/routemap.html

Analyzing AirAsia in Business Competition Era (2009) SWOT Analysis. Retrieved from

http://elearning.lib.fcu.edu.tw/bitstream/2377/28913/1/M980005798101.pdf

Metro Star (2008, April 28) LCCT To Get Bigger and Better. TheStar Online. Retrieved from

http://thestar.com.my/metro/

Now Everyone Can Fly (2007) Country and Language. Retrieved from

http://www.airasia.com/my/en/aboutus/irstrategy.htmlstory.asp?file=/2008/4/1/central/

20795047&sec=central

Now Everyone Can Fly (2007) Mission Statement. Retrieved from

http://www.airasia.com/my/en/aboutus/irstrategy.html