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Introduction……………………………………………………………………. 2
Appendix……………………………………………………………………... 17
Bibliography………………………………………………………………….. 18
Introduction
Air Asia Indonesia is an originally Malaysian airline company, which started to operate in
Indonesia in year 2006. The report is about Air Asia Indonesia and strategies to make it a
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Air Asia Current Business Strategies
Air Asia wants to be the lowest short-haul airline in every market it goes in. To achieve
the goal, it has some strategies such as lean cost structure, different ways of promotion,
2007, Internet).
Air Asia always tries to keep the operations simple and efficient to keep the costs low, for
employee of Awair – the airline company bought by Air Asia, the tickets that have been
booked online can printed by the customers or the customers can just remember the
booking code and show their identity card for checking-in, so Air Asia can also save
some amount of money that it should spend on thick ticket material, like what other
airlines do, which cost approximately IDR 5000,00 each, and on ticket printing which
Another Air Asia’s way to save costs is not to provide food and drinks on the plane, as the
goal of the airline is just to ‘move someone from one to another place’ cheaply. It sells
food, snacks, and beverages, on the plane, so customers who want to eat or drink can just
buy what they want. By implementing this strategy, Air Asia can gain profit from the
sales of the food and beverages because it sells the products for higher prices than
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A source said, Air Asia Indonesia may do retrenchment by cutting day-to-day cost, such
as providing only drinking water in the office and not coffee or tea. Providing coffee or
tea cost more because coffee or tea also needs sugar or creamer to drink with, so cutting
cost on drinks may be possible. Employees who want to drink coffee or tea might bring it
Fu Sen said, Air Asia also tries to keep the costs low by recruiting only numbers of
workers needed and selecting only capable and hard workers, so each worker will have
works to do and the company does not have to pay workers who do not work efficiently.
The company also gives multiple task to some of the employees, for example, Air Asia
does not hire cleaners to clean used planes that stop in airports. Instead, the stewardess or
stewards of the planes have to clean the used plane. So, other than saving another amount
of money, it also can make maximum use of the human resources available.
Air Asia does promotions by television, in tabloids, and in the newspaper, but other than
that, Air Asia also promote the brand by sponsoring The Amazing Race Asia along the
show and to have a sponsorship deal with Manchester United (MU). By having the
sponsorship deal with Manchester United, Air Asia tries to attract loyal MU fans in Asia
newsletter by email to registered customers to inform free seats promotion for flights to
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One of the characteristics of no frill airlines is to do fuel hedging program, where
advance purchase of fuel at fixed price for future delivery is done to anticipate rises in
prices (Wikipedia.com, 2007, Internet). Rises in prices will hit oil prices at the
Air Asia also maintains the safety of the airplanes by complying with the highest
International Aviation Safety Standards and practices. To guarantee the safety of the
airplanes, all Air Asia’s airplanes machines are taken care by GE Engine Service since
July 2002 for 5 years. Air Asia also has a US$ 3 million partnership with Volvo Aero who
will provide plane structure and machine spare parts for all Air Asia planes
(AirAsia.com, 2007, Internet). So, for customers who want cheap but safe flight
can choose Air Asia, because even though the ticket price is cheap, the safety is
guaranteed.
For airplanes that are parked in the airport, airline companies have to pay hourly rated
fare. To save some money from paying airplane-parking fare, Air Asia tries to keep the
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flight schedule efficient and on time. The planes only stop for approximately 25 minutes
for cleaning, so everytime the airplanes stop in the airport, the plane will be cleaned
before the passengers come into the plane, and the airplanes will take off right away.
Air Asia realized that satisfying customers is the key for long-term success, and that is
why it always tries to satisfy its customers by flying on time and to be friendly to every
Air Asia customers. 90% of Air Asia Indonesia’s flights in May 2007 flied on time
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Possible Alternative Strategies Evaluation
There are three types of strategies that Air Asia can pursue in order to be a major player
in the Indonesian airline market. They are substantive growth strategy through
Diversification
Diversification is when the company is selling new product into new market.
Diversification is a risky strategy and the company has to be sure and well prepared
before doing diversification because diversification strategy mostly costs more money
than doing limited growth strategy. There are types of diversification such as horizontal,
In horizontal diversification, the company will be developing activities that are directly
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Indonesian airline company. The joining helps Air Asia to know the condition of
Indonesian airline market, so the company will have guidance on how to enter and
If Air Asia does vertical diversification, for example by selling all the flight tickets
without the help of agents and open many Air Asia ticket spot, Air Asia will be able to
control all the prices and can sell the tickets for lower price. It will also prevent the
customers from having bad service that the agents might give, because Air Asia can
maintain and train the staff to be friendly and helpful at all time and it might help Air
Asia to maintain customers’ satisfaction. But, it means Air Asia will have to spend some
By doing unrelated diversification such as conglomeration, Air Asia might spread risk if
suddenly airline industry is stuck and have high profit opportunity from the new business.
But, to open up a new company, high quality of management and financial ability is
needed in order to make it successful, but if the new business is not successful, it might
create unstable condition for Air Asia because of loss of money and resources.
Overall, diversification strategy needs a lot of money for building rent or to build new
office buildings, to pay more employees, and the company also needs knowledge about
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Market Penetration
Market penetration is a strategy to grow the same product of the company in the same
market. The only way to gain more market share with the same product in the same
market is to attract competitors’ customers and get more loyal customers by marketing
strategies.
By doing market penetration, the cost will not be as much as doing diversification
because the company can finance the strategy by using marketing budget and using the
Market Development
The other ways to gain growth by of limited growth strategy are product development
and to sell the product in new geographical market. Air Asia might open up new routes to
other places than the existing routes: Bali, Balikpapan, Batam, Kuala Lumpur, Medan,
Until June 2007 Air Asia airplanes from Indonesia still cannot land directly to Singapore
because the Civil Aviation Authority of Singapore rejected the landing rights application.
Air Asia airplane from Indonesia landing directly in Singapore is going to bring
Singapore, Hongkong is also a potential destination because there are a lot of Indonesian
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Even though opening up more routes is going to be advantages, it costs more than doing
market penetration because more avtur will be needed and may be more capable pilots.
Retrenchment Strategy
Retrenchment is when the company tries to cut costs or spending in doing the activities
(Oxford American Dictionaries, 2005). Air Asia has been very cost effective and
efficient since the first time, so a new possible retrenchment strategy might be difficult to
find because every aspect of the company are already operating with the lowest cost
Retrenchment strategy can be done by withdrawal from offering some products, in this
case might be a flight destination that is not really profitable. But, Air Asia Indonesia
destination will decrease the expenses of the company, it might bring the customers to Air
Asia competitors.
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Air Asia Indonesia Resources Evaluation
To implement a strategy, Air Asia has to review the resources because if the resources are
not enough to do the strategy, the implementation will not be maximized and there will be
the possibility that the strategy will fail. There are resources to be evaluated before
For diversification strategies, a lot of money will have to be allocated to run the strategy.
New employees who understand about the new business also need to be recruited to run
the new business, and it means there will be another cost for employee trainings and to
pay the employees’ salaries. The company might have to build a factory or buy/rent new
building for the new business activities. So, diversification strategy is a high cost strategy,
For market penetration and market development strategies, less money will have to be
and market development strategies only develop existing resources to get more profit or
bigger market share, and the budget for these strategies are mostly taken from marketing
budget.
Air Asia always wants continuous costs reduction from the activities to get more profit.
So, lower cost strategy such as limited growth strategy will be preferred at the moment.
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Possible Future Strategies for Air Asia Indonesia
Limited growth strategies such as market penetration and market development will be the
best strategy for Air Asia at the moment. Even though diversification might bring bigger
profit to the company, the strategy is usually used when the company is having surplus
money that can be invested in other business. Air Asia Indonesia started in 2006 and is
still a new airline company that needs to survive in the industry, so at the moment it
would be better if the company tries to increase its brand image and get more loyal
Air Asia may increase its brand image by promoting cheap, on time and safe traveling
experience campaign. There are many cheap Indonesian airline companies who are weak
on these spots, so the campaign might attract business people, who want to save cost,
arrive at the meeting place on time and safely, to try Air Asia. To make the promotion
more attractive, if a flight is delayed, Air Asia can give 30% discount voucher that will be
posted to all passengers who went on the delayed flight, and they can use the voucher on
Promoting on television is expensive but effective to increase the brand image, so Air
but efficient to reach everyone in the country. To reduce the cost, the advertisement time
may be made shorter and the advertisement may not be aired very frequently. According
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advertisement spot in RCTI or SCTV television station costs IDR 30-35 million, while a
15-second spot costs 60% of it. Air Asia may use the 15-second spot and only advertise in
Air Asia Indonesia might also open up a new route to Indonesian’s favorite international
holiday spots such as Hong Kong and Singapore, or educational spot such as Australia.
By opening up new routes, even though more resources may be needed, it will enable Air
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Air Asia Indonesia and Adam Air – Roles and Responsibility
Air Asia Indonesia entered the market in 2006 while Adam Air has been operating since
2003. Both airlines are well-known low-cost carriers. Both companies have strategies to
One of the suggested strategies for Air Asia is to create image of safe and cheap airlines.
Air Asia has to emphasize cheap price and safety in its marketing campaign, because
nowadays what people find is mostly cheap but unsafe flights. So, by proving and
maintaining the safety of Air Asia aircraft continuously, Air Asia Indonesia is maintaining
a part of marketing. It might held press conference to talk about why Air Asia would be
the best low cost carrier, or throw events that are managed by outsourced PR companies.
Air Asia might also advertise its prices on Television and Newspaper and hire an
Adam Air had done press release to inform developments in the service of the company.
Adam Air neglected its responsibility to take care of the safety of the aircrafts and did not
because it saves a lot of money. As the result, there are some Adam Air accidents that
caused death. Since the last deadly accident, Adam Air has been heavily criticized and a
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lot of customers left Adam Air because they are scared that someday the accident will
happen to them.
After deadly accidents that happened, Adam Air did a press conference to try to get back
customers’ trust by announcing that they are having a contract with an experienced
The third strategy is to open up new important destinations, such as Singapore, Hong
Kong, and Australia. This project will be the responsibility of Product Department as new
destinations are considered as product and market development. The department might
have to conduct research on other popular destinations that are still unavailable. Hiring
experienced research company such as AC Nielsen, to get the best result, can do the
research.
the costs needed, also Human Resources Department to calculate how many new workers
need to be recruited.
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Targets for Achievements of The Strategies
The preparation for market penetration strategy will be started on July 2007 and finished
in October 2007. There will be one month for strategy operation review and training the
employees for the new programs, and then the market penetration strategy is targeted to
start in November 2007. The strategy will be operating for one months, then there will be
For opening new international routes, higher-level pilots and stewardess are needed, so
Air Asia might have to do selections and trainings to provide the best on-board staff. The
company will also have to send landing rights applications to the new international
destinations. So, opening new international routes may be long-term strategies so the
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Appendix
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Bibliography
Wikipedia.com, 2007,
‘Adam Air’, http://en.wikipedia.org/wiki/Adam_Air (accessed 23/6/07)
‘Fuel Hedging’, http://en.wikipedia.org/wiki/Fuel_hedging (accessed 18/6/07)
‘Diversification (strategy)’,
http://en.wikipedia.org/wiki/Diversification_(strategy) (accessed 22/6/07)
Other Source
Mr. Fu Sen
Ex-employee of Awair (Air Wagon International Airlines)
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