Table of Contents

INTRODUCTION......................................................................................................................2
INDUSTRY OVERVIEW......................................................................................................2
COMPANY BACKGROUND (AIRASIA)...........................................................................4
VISION..................................................................................................................................5
MISSION...............................................................................................................................5
VALUES.................................................................................................................................6
AIRASIA STRATEGIES...........................................................................................................8
COST LEADERSHIP STRATEGY.......................................................................................8
DIFFERENTIATION STRATEGY.......................................................................................9
FOCUS STRATEGY...........................................................................................................10
MARKET PENETRATION STRATEGY............................................................................11
PRODUCT DEVELOPMENT STRATEGY.......................................................................12
MARKET DEVELOPMENT STRATEGY.........................................................................12
DIVERSIFICATION STRATEGY......................................................................................12
ANALYSIS ON AIRASIA STRATEGY.................................................................................14
SWOT ANALYSIS OF AIRASIA.......................................................................................16
GROWTH OF AIRASIA.....................................................................................................19
RECOMMENDATIONS FOR AIRASIA................................................................................21
CONCLUSIONS......................................................................................................................23
REFERENCES.........................................................................................................................24

INTRODUCTION
INDUSTRY OVERVIEW
The airline industry is a large and growing industry. In the past years, air travel has been
growing by 6% a year. The airline industry involves large capital requirements. For example,
the requirements for aircraft, close monitor by the government regulations, competition from
other tourist transport and the requirement to have high level of expertise to operate and
manage. In the airline industry, aircraft manufacturer is conquered by two companies. They
are The Boeing Company and the Airbus SAS. In Malaysia, airlines are separated into two;
passenger airlines and cargo airlines. The passenger airlines in Malaysia are AirAsia,
Malaysia Airline System Berhad (MAS). Other than passenger airlines, there are also three
cargo airlines that operate in Malaysia. They are the Athena Air services, MAS cargo and
Transmile Air Services. Despite the various kinds of air operators, the airline industry in
Malaysia is being monopolized by two main operators which are MAS and AirAsia.
The demand for air travel is sensitive to changes in air travel prices and income. However the
degree of sensitivity, for example its demand elasticity, will vary according to different
situation and factors. The demand elasticity refers to how sensitive the demand for a good or
service is to change in other economic variables. In other words it measure the change in
quantity demand of a particular of good or service as a result of changes to other economic
variables such as its own price or price of competing goods and services, income level and
taxes.
According to International Air Transport Association (IATA), the elasticity of air travel
demand varies according to the coverage and location of the market in which prices are
changed and the importance of air travel price within the overall cost of travel. For example,
demand for Intra Asia travellers and Intra North America are not the same, depending on the
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coverage whether for short haul (short distance) or long haul (long distance) and location of
the market i.e. in this case, Asia and North America.
In a report published in 2009, the Centre for Asia Pacific Aviation predicts that low-cost
carriers will see increased demand in terms of both traffic growth and earning in 2009
compared to traditional airlines. According to the report, stormy condition in 2008 have
helped low-cost segment gain larger share of global aviation market. Tougher economic
conditions and lower price fuel will boost the sector a major advantage.
Focusing in Asia, its larger low-cost carriers are continuing to expand beyond their home
markets and around region as they tap on the growing demand for cheap air travel around the
region. With its population of 600 million, Asia is still a fast growing low-cost carrier
compared to its mature market such as North America and Europe. Africa is still a continent
that is largely untouched but should be ripe enough for low-cost travel.
To accommodate such demand, AirAsia provides products and/or services that meet the
customers needs:

Customers convenience
AirAsia provides convenient services to allow customers having easier travelling and
more affordable. They can make booking through combination of ways. In August
2001, AirAsia became the world first airline carrier to introduce SMS booking where
travellers can book their seat, check flight schedule and obtain latest information on
AirAsia promotions from the convenience of their mobile phones. Recently, AirAsia
introduced GO Holiday, an online programme where guest can book holiday package

through online.
Frequent flights

To meet guest convenient, AirAsia provides high frequency flights. They practices a
quick turnaround of 25 minutes, the fastest in the region, causing high aircraft

utilization, lower costs and greater airline and staff productivity

Nationwide call centre
AirAsias nationwide call centre in Kelana Square was launched in April 2022. It is
now a fully equipped with 180 telephone line provides convenient telephone booking

service to guests. The call centre takes an average of 6000 calls daily
Ticketless service
This concept was launched in 18 April 2002, to complement with AirAsia internet
booking and call centre by providing low cost alternative in issuing printed tickets.

Guests no longer need to go ticket counter to collect their flight ticket.

Easy payment channels
In with AirAsias Easy to Book, Easy to Pay & Easy to Fly approach, on 1 st March
2002, AirAsia became the first airline in Malaysia to allow their guests to pay their
book through telephone booking using credit card or cash at any Alliance Bank
branch.

COMPANY BACKGROUND (AIRASIA)

AirAsiaBerhad (AirAsia) is a Malaysian-based low-cost airline and Asias largest low-fare,
no frills airline and pioneer of low-cost travel in the continent. It operates scheduled domestic
and international flights over 400 flights spanning 18 countries with its main hub located at
Low-Cost Carrier Terminal (LCCT) in Kuala Lumpur International Airport (KLIA). AirAsias
registered office is in Petaling Jaya, Selangor and its head office is located at KLIA.

In 2010, AirAsia which includes two of its affiliates, AirAsia Thailand and AirAsia Indonesia,
strengthen its leadership position with two remarkable milestones: flying its 100 millionth
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guest and breaking the RM1 billion profit barrier. From an airline with two aircraft flying six
routes in Malaysia in January 2002, AirAsia has soared in the last nine years covering 65
destinations in 18 countries. It is the only Truly ASEAN airline, serving the regions 600
million population from 12 hubs in three countries 4 in Malaysia, 3 in Thailand and 5 in
Indonesia with strength of 8000 employees and market capitalization of just over RM 7.06
billion.
Its virtual hub, Singapore features among the top 10 airline in terms of contribution to
passenger traffic. Further strengthening its network in ASEAN, AirAsia signed an agreement
to establish a Philippine-based low-cost affiliate in December 2010.
With all its achievement including turning around the heavily-indebted airlines, Tune Air Sdn
Bhd from government-owned conglomerate DRB-Hicom to a profit airline is no easy task for
Dato Sri Tony Fernandes. We will look into the market demand, cost structure and pricing
strategy used by AirAsia.
VISION
To be the largest low cost airline in Asia and serving the 3 billion people who are currently
underserved with poor connectivity and high fares.
MISSION

To be the best company to work for whereby employees are treated 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

VALUES

Safety: Adopting a zero tolerance to unsafe practices and strive for zero accidents
through proper training, work practices, risk management and adherence to safety

regulations at all times.

Valuing our People: Committing to our peoples development and well-being and

treating them with respect, dignity and fairness.

Customer Focused: We care and treat everyone in the same manner that we want to be

treated.
Integrity: Practicing highest standards of ethical behaviour and demonstrate honesty

in all our lines of work in order to command trust and mutual respect.
Excellence in Performance: Setting goals beyond the best and reinforcing high quality
performance standards and achieving excellence through implementing best practices.

AIRASIA STRATEGIES
In order to ensure their business sustain in future, AirAsia used so many types of strategies in
running the business. For example like cost leadership strategy, differentiation strategy, focus
strategy, market penetration strategy, product development strategy, market development
strategy and diversification strategy.

COST LEADERSHIP STRATEGY

Cost leadership strategy is related to AirAsia as the business growth by focusing on the cost
reductions in important areas of the business and it is the central theme of the companys
strategy. Currently, AirAsia are leading the low cost airlines industry in ASEAN region and
have revolutionized the airline industry. To compare other market player in airlines industry,
they are still dealing with cost minization (Porter, 2008).
AirAsia operates a single-class service without amenities such as in-flight meals and
entertainment, loyalty programs and airport lounges. As we go to airport, we cannot see
lounges provided by AirAsia to the passengers. The frequency of the flights have made it
more convenient for passengers to travel as the airline implements a quick turnaround of 25
minutes whereby it is the fastest in the ASEAN region. This has resulted in high aircraft
utilisation, lower costs and greater airline and staff productivity (AirAsia, Annual Report
2009). AirAsia offers a good distribution channel to make booking to the passengers.
In doing the business, AirAsia is a ticketless. Hence, it provides a low cost alternative in
issuing printed tickets. In doing administrative functions, AirAsia hiring employees who are
able to perform various roles to the organization. Additionally, the carrier is working towards
a single aircraft fleet, as this reduces duplicating manpower requirements drastically and

stocking of maintenance parts. By launching promotional fares of RM0.99 since its first day
of operations, AirAsia has been able to dominate the market and had created difficulties of
imitation amongst legacy airlines such as Malaysian Airlines System (MAS).

DIFFERENTIATION STRATEGY
In differentiation strategy, AirAsia was develop new revenue streams within the group of
AirAsia in order to maintain its low cost fares and withstand the effects of the global financial
crisis by expanding its range of services and products offered through their ancillary income.
Additionally, AirAsia has successfully implemented the low-cost carrier model within the
ASEAN region and with that factor this company gain attention from regional media outlets.
Hence, the opportunity has utilised in promoting and increasing brand awareness without
incurring additional sales and marketing expenses.
AirAsia use a revenue management system in order to optimize revenue from sales of
passenger seat. This system works by monitoring and adjusts its fares based on the date of
flight and the forecasted and actual demand of the flight. By doing this, it allows the carrier to
optimize its revenue from passenger seat sales and continuously offer low fares than
competitors even in the same routes. AirAsia has been expanding its ancillary income by
capitalising on its strong, dynamic brand. The combined traditional and new wings of
ancillary products and services generated revenue of RM413 million in 2009, growing by
34.4 % over 2008. The Ancillary Income per Passenger in 2009 was RM29.1, a 46% increase
from 2008 of RM19.9. The ancillary income contributes to the bottom line of the company
and also provides a buffer against rising fuel prices which enables AirAsia to maintain the
low fares (AirAsiaBerhad, Annual Report 2009).

AirAsia believes that their abilities in generating publicity, marketing and public relations
activities have led to successful in establishing a high level of brand awareness within the
ASEAN region as well as new markets that they entering. In differentiation strategy, it
includes developing AirAsia as a preferred low cost airline that provides high quality service.
Additionally, the carrier also organizes and participates in events and promotions with
celebrities to enhance its brand image and continues to refine its branding strategy to increase
its customer base while entering new markets.

FOCUS STRATEGY
The focus strategy of AirAsia is very much reliant on the growth of the LCC market in Asia
between 2001 onwards and it was built around serving the underserved market within the
ASEAN region. AirAsias corporate slogan Now Everyone Can Fly embodied on providing
affordable air travel to everyone, especially to first-time flyers and fare-conscious leisure and
business travellers who may have used alternative modes of transportation. Additionally, the
carrier believes that certain segments of this market have been underserved historically and
the Groups low fares have stimulated travel within these market segments.
Furthermore, AirAsia has used its experience and expertise in Malaysia to expand their
market to other regions, as the management of AirAsia believed that the business model
implemented in Malaysia could be replicated in other countries within the region and would
be offered strategic market positioning for AirAsia outside Asia. To sustain its competitive
advantage amongst its rivals, the first mover advantage of AirAsia has enabled the Group to
gain a foothold in neighbouring countries in ASEAN region. Although this has inspired many
other budget airlines to flourish within the region, the strategic cost structure of Asia and the
growth of the Asian market has enable AirAsia to maintain its strategic position.

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Additionally, AirAsia X has achieved its first year of profitability in 2009. The combined
short-haul and long-haul networks feeds each other with passengers using Kuala Lumpur hub
to connect to a wide range of routes. Through the AirAsia X trunk routes, the Group attracts
guests from markets such as Australia, North Asia and Europe who visits varied destinations
within the ASEAN region and travels using AirAsias short-haul network (AirAsiaBerhad,
Annual Report 2009). Currently, AirAsia has been able to dominate the short-haul network
within the ASEAN region. However, with the underserved potential customer base from
AirAsia X, the Group has created a major competitive advantage over other low-cost carriers
within the region that are limited by only having short-haul services.

MARKET PENETRATION STRATEGY

AirAsia succeeded at attacking MASs market share in the domestic airline industry. This
strategy started with the existing passengers of the organisation and is used by companies to
increase sales without drifting from the original product-market strategy (Ansoff, 1989).
AirAsia penetrated the airlines industry by gaining the competitors customers, improve the
product quality and its level of service to passengers, and attract non-users of the products or
convincing current passengers to use more of the company's products through its RM0.99
promotions and obtaining substantial media coverage due to its fairy-tale success. This
strategy is important for AirAsia because retaining existing passengers is cheaper than
attracting new ones and engaging in relationship marketing activities is pertinent to retain its
high lifetime value customers (Pearce & Robinson, 2009).

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PRODUCT DEVELOPMENT STRATEGY

The core objective of AirAsia is maximizing profit. Hence, the organization realized that
passenger seat revenue was not sufficient to sustain and grow the business. They came out
with new revenue streams through its varied ancillary products and services. The execution of
this strategy, AirAsia was able to counter competitive entry, maintain the company's
reputation as innovative product, exploiting new technology, and to protect overall market
share (David, 2009).

MARKET DEVELOPMENT STRATEGY

AirAsia still maintained profitability in its Malaysian operations even they have limited
operations and financial resources and they have used its expertise and experience in
Malaysia to expand into other countries in ASEAN region. Moreover, the enormous potential
for growth of AirAsia based on its years of operation exceeds global LCCs such as Southwest
Airlines and Ryanair. This further entails exploration of new segments of a market, new users
for the company's products and services, or new geographical areas in order to entice new
customers (Pearce & Robinson, 2009).

DIVERSIFICATION STRATEGY
Diversification strategy is when an organization essentially moves out of its current products
and markets into new areas. AirAsias related diversification strategy was in the form of
backward, forward, and horizontal integration. The airlines backward integration strategy
was executed as the company extended its operations towards its growth of its ancillary
products and services. Additionally, with online booking system such as Go Holiday and
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Get ARoom, this forward integration strategy enables AirAsia to derive its revenue by
incorporating a service fee into the hotel rates (AirAsiaBerhad, Annual Report, 2009).
Furthermore, AirAsia is expanding on its freight services on its scheduled flights, which
includes, cargo, courier and mail services. The execution of the horizontal integration strategy
enables AirAsia to venture businesses that are related to its existing operations and optimize
its revenue streams (David, 2009). Many scholars have argued that related diversification is
generally more profitable than unrelated diversification strategies (Pearce & Robinson, 2009).
Although the diversification strategy involves venturing into unknown territories and
parameters for an organization, the risks of diversification can be minimised by moving into
related markets (Ansoff, 1989) as executed by AirAsia.

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ANALYSIS ON AIRASIA STRATEGY

Referring to AirAsia vision and mission, the business objectives comes in the flow with the
strategy being used by AirAsia. What really matter with the company is to provide low cost
carrier to everyone by bringing the tag line Now everyone can fly. The business model
being used by AirAsia is also presenting the low cost carrier business model. The main
objective of the business model is to tackle a larger segments and increase the business
profits. The low cost carrier business model as follows. It uses simple product to cater on the
demand for extra payment. The usage of aircraft are also with slight and narrow seating by
consuming only a single class. Before, during the first few years of running the business,
AirAsia doesnt introduce any seat assignment but now AirAsias customer has getting
familiarize with the seat assignment and Hot Seat. Hot seat is where consumer can choose
their seating and they will be given first priority on-board. Furthermore, AirAsia also doesnt
introduce any frequent flyer programmes. Frequent flyer programmes is a loyalty program
offered by airlines to collect points and it is granted goods and services or travel class
upgrades, airport lounge access, or priority bookings. The next business model is positioning.
Positioning is more on how AirAsia place themselves for aggressive marketing because of the
competition with all transport carriers. The last business model in the airline industry is low
operating costs whereby it is more on low wages, low airport fees, high resource productivity,
low cost for maintenance, cockpit training and standby crews and no air freight, no hub
services, short cleaning times and high percentage of online sales. After pointing out the
business model in the airline industry, AirAsia gained a few competitive advantages such as
high aircraft utilization because of the usage of the type of aircraft that AirAsia use. AirAsia
uses a single aircraft which resulted in fixed cost and low cost operations and in a way
standardizing fleet of aircraft. AirAsia also announce available seat per kilometre as
competitive advantage to provide the lowest cost on any available seat, once again this is to
14

ensure cost saving, efficiency and competency. AirAsia is aggressive in its branding and
marketing campaigns where the company have productive and skilful employees to get a hold
in a very challenging situation since all employees are given equal opportunity to grow and
go far in the company as the staff may have multiple roles to save costs. Not only that, the
service provided by AirAsia is courteous but limited in passenger service for example like
free meals. Other than that, the schedules of flight provided by AirAsia is often frequent and
reliable that makes it in the limelight for many travellers.
Having blessed with competitive advantages have gained many challenges in facing difficult
trials for the benefits of future. The main challenge faced by AirAsia is the rising of fuel
prices. Many people aware of the current rising of gas prices and how it affected numerous
businesses and cost of living for countless peoples life. AirAsia too are facing the similar
issue with regards to this. Apart from that, the competition encountered is the mounting of
competition for the company. Low cost airline competitors are growing innumerable thus
having to sustain in the market is a bit tough but reachable however therere also a very
active competition against the larger airlines by way of they are also come out with many
promotional prices on travelling with added services. Dependent to poor economy, customer
may decrease that would cause deprived in profit benefits. Low cost carrier terminal was not
in the picture during the first few years of operation thus all domestic flights are station in
Kuala Lumpur International Airport. After the opening of low cost carrier terminal (LCCT),
all AirAsia flights are relocated to the new place causing inadequate infrastructure and
crowded airport. At times the route is congested triggering to tight flight and route utilization
making any flights have to reroute or hovering around in the air before landed. Referring to
9/11 incident, countless consumers are worried with respects of the safety and security issues
of plane crash or even being attacked. By means of some of the challenges, AirAsia have to
identify their internal and external factors that is encouraging to achieve their business
15

objectives. Internal factors identified such as strengths and weaknesses whereby the external
factors is more towards opportunities and threats to the company.

SWOT ANALYSIS OF AIRASIA

A SWOT analysis of AirAsia is piloted to point out the strengths, weaknesses, opportunities
and threats. The strength of AirAsia is the growth in revenue due to the profits received.
AirAsia also having a low operational cost for having a ticketless, online booking, online
check-in, low fares and no frills. This strength is making AirAsia spend a little on the
operational cost to make way to other expenses.

Apart from that, AirAsia received

recognition in Asia where the company expresses a strong brand presence and market
approach towards attractive ticket prices. Being successful as a low cost carrier business,
AirAsia is strong with the help of government support because in the early years AirAsia is
originally established by a government-owned conglomerate, DRB-Hicom. According to
Wikipedia, On 2 December 2001, the heavily-indebted airline was bought by former Time
Warner executive Tony Fernandes' company Tune Air Sdn Bhd for the token sum of one
ringgit (about USD 0.26 at the time) with USD 11 million (MYR 40 million) worth of debts.
Fernandes turned the company around, producing a profit in 2002. It was the laborious and
hard work of Tony Fernandes that makes the company turn around and profitable by day. As
mentioned, the diversification and joint ventures strategy planned by AirAsia marks the
company strong in consistently delivering lowest fares (as one of the proves of business
model) and even advantages to early birds making it easy to penetrate and stimulate potential
markets for the reason that AirAsia is entering and emphasis on potential market which
covers on the lower and middle class income group. AirAsia have few management but
strong line-up which is effective and intensive consisting of the industry experts and ex-top

16

government officials stemmed to all boards of directors of AirAsia have an outstanding

portfolio. From top management down to all AirAsia staff with comprises of multi-skilled
employees having seamless in daily operations. Other than that, AirAsia also embraces strong
strategy and execution plan on fuel prevarication by buying low cost airbuses. On the other
hand, the company also minimizes its maintenance fee by using a single type fleet for the
ease of pilot dispatch and reducing training cost. Apart from that, the strength of AirAsia is
focusing on low distribution cost and the first few airline company that works with ICT
collaboration as revealed such as online bookings.

Another SWOT analysis to emphasis on is the weakness. Although the company is

identifiable possess many strengths but therere also many weaknesses to be pointed out. The
biggest weaknesses communicated by AirAsia is from the consumer themselves when the
company received complaints from customers with regards to the current situation in the
overcrowded low cost carrier terminal. The terminal capacity hypothetically stated to handle
only 15k passenger but the fact that they go beyond the number is troublesome for
consumers. As stated before, AirAsia only fly and land at LCCT that makes the place
congested with people all over Klang Valley in fact all over the region in Malaysia. Not only
that; by lowering cost theres disadvantage upon it such as limited resources sometimes
resulted to disability of handling irregular situation. Another weakness of AirAsia is they do
not have their own maintenance repair and overhaul (MRO) facility which is problematic
especially in term of cost saving because AirAsia aircraft is mounted more than 117, to
outsource this kind of repairs is a challenge to their companys budget. By stating on the
outsourcing, AirAsia relies so much on outsourcing for the process, IT and business. Apart
from that, the airline industry have many interference from the government especially on

17

airport deals and passenger compensation. Lacking of non-central location of secondary

airports adds up to the list of weaknesses.

The external factors encouraged towards AirAsias business objectives is to have many
opportunities thrust upon the companys shoulder. The first to notice is the growth of middle
class Asians which is good because of the target market for AirAsia is more on the middle
class income families who loves travelling. AirAsia also promotes product differentiation
which offers less features at low prices to tackle huge market potentials not only in Malaysia
alone but the whole Asian regions. Since 2008, AirAsia has flown over numerous cities over
and over again due to the ASEAN Open Skies which allowing unlimited flights among
ASEANs regional air carriers resulted to good business for AirAsia. On the other hand, unserviced surroundings is bringing good opportunities for AirAsia due to excluding a few
airports causing the available infrastructure under-utilized making it a good prospect for
AirAsia to unravel. Discussing with reference to the ridiculously rising price of fuel is
definitely affecting the airline business including AirAsia making the industry eliminating
many unwanted unprofitable competitors however being a low cost front-runner, AirAsia
must sustain in providing low prices which is the biggest advantage for AirAsia due to
reduction of overall travel services. AirAsia also may recycle all the available abandoned
routes to be used, all the routes abandoned is from the rivals lost in the struggling world of
airlines.

Threats can bring many difficulties in life as well as in business. The main threats that
threatened AirAsia business is increasing of oil prices. The fluctuations really affecting
AirAsia as a low cost carrier and decreases its profits. For all airline companies, the aviation
turbine fuel cost and other operational costs are the same thus this will adds a significant cost

18

to the company. The poor airport infrastructure in low cost carrier terminal is making it
difficult for AirAsias business as therere not enough gates, counter space and even parking
bays. Apart from that, AirAsia are also lacking in term of secondary airport infrastructure
where in the European countries, low cost airlines have alternatives to reduce their cost by
avoiding landing into mainland airports thus avoiding high parking and landing fees. Then to
diminish yields per passenger is also a threat to AirAsia because the demands for traveling
using airline is increasing but the cost is reducing more and more

by the day. More

passengers are flying but they are paying much cheaper to do so. Therefore, AirAsia needs to
control its cost and maintain cost differentiation to overcome this kind of threat. The
increasing number of AirAsias competition is quite alarming referring to the Open Skies
Policy. The entrance of other low cost carriers are also a major threat to AirAsia due to the
fact that they are also offering cost effective techniques. Although this has been debated due
to the fact the open skies policy is bringing major threat to low cost carriers business due to
incursion of global players in the regional market. Other than that, another threat could be the
possibility of system disruption because AirAsias business is heavily reliance on online
sales. The company must take extra precaution and spend more money on maintaining the
extra resources and great service to customers.

GROWTH OF AIRASIA
The growth of AirAsia with regards to their compact strategies and business objectives is
rising tremendously throughout the year. According to AirAsia, they delivered an outstanding
financial results and industry leading profit margins while conveying low cost fare of
travelling services to the Southeast Asia and AirAsia X in 2009. As Tony Fernandes once said
AirAsia are expected to fail due to abstaining to open the company with only two aircraft

19

and 40mil in debt but with the right strategies as mentioned and strong perseverance and
determination is making AirAsia the leading and largest low cost carriers in Asia. The
strategies that AirAsia applies is really helping the company cut cost and gain more profits
especially with no frills, no free seats preference, single class of travel (for AirAsia only,
AirAsia X have dual configuration seating system), and the use of e-ticket only policy
momentously contributed to a lower cost. Technology also help improve the low cost
advantage by espousing competent technology. Meanwhile, the importance on effective and
efficient administering of customers enquiries and complaints, maintaining effortlessness,
practicing higher disclosure than industry averages, transparency in decision makes AirAsia
stand out in the airline industry thus generates customer loyalty. Furthermore, cost savings
are relished since AirAsia assigns multi-skilled cabin crews with only 3 crew members per
flight compared to 6 in some other airlines. The company also capitalises in cost-effective
training, performance based reward and incentive systems to maintain productive and
motivated employees. Therere also business requirements related technologies and cost
effective technology supporting are the major core of AirAsias competencies where it
actively engages in effective and efficient technology acquisition (IT and communications).

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RECOMMENDATIONS FOR AIRASIA

Referring to the analysis as revealed, AirAsia should focus more on cost and prices but
recommended to have more promotions especially on travel packages and also cheaper group
rates. People nowadays are keen on travelling for a vacation with their loved ones so by
promoting cheaper group rates, AirAsia can increase their sales due to cumulative of
demands. Travel packages for example like what other travel agents did by doing promotions
when customer booked 3 days 2 nights at certain hotels. Apart from that, although AirAsia is
having to cut more services because of low cost of fare; it is recommend for AirAsia to offer
more on board services to the passengers such as taxi booking service, internet WIFI access
on board Newspapers and place advertisings on the planes cabin. AirAsia can also maintain
their international development across Asia in association with low cost carrier business
especially in Philippines and Japan whereby in terms of low cost carrier penetration, it is still
at its early stages and there is the potential of growth. Tony Fernandes envisioned to achieve
similar domination somewhat like what AirAsia did for Malaysia, Thailand and Indonesia.
AirAsia are also recommended to open more Asian market to attract countries like India. In
terms of non-Asian countries; conferring to Tony Fernandes, India is an exciting market due
to the liberalization of aviation sector of India is another reason for AirAsia to open more
Asian market. Thanks to the Indian government for liberalizing the aviation sector long
dominated by the national carriers. It is time for AirAsia to exploit the potentials of affordable
air travel by Asias growing middle class. Moreover, the national carriers, Indian Airlines or
Air India, regardless of their domination of the Indian skies, do not seem to be paying much
attention in operating low-cost services. Hence, it is a good prospect for AirAsia to open the
Indian market. As known, in 2004 AirAsia has started their services in the Pearl River delta
in south China in 2004 to top up AirAsia can expand its services to the coastal cities in China.
21

Besides China and India, AirAsia can also venture in other countries to grow in the business
for example like Vietnam, Cambodia, Laos, Brunei, Myanmar and even Korea. AirAsia
Besides the growth of Asian middle class. Besides that, AirAsia may want to put an effort in
joint venture with Virgin Blue Airlines due to the fact that Virgin Blue has suggested that the
company wants to extend their services to South East Asia. Virgin Blue Airlines is based in
Brisbane serving Australia and New Zealand and the company is the second largest airline
co-founded by Richard Branson. There is also some opportunity to partner with Virgin Blue
Airlines to take advantage for their existing strengths or competitive advantages such as
brand name, landing rights and landing slots. Other recommendations to be considered is
AirAsia can introduce the usage of smart cards in helping with green environments. AirAsia
be able to issue a smart card which is compatible with the existing ticketless booking for
example offering different kinds of smart cards. The first example of smart card, intended and
designed for ordinary travellers offered instant rewards when topped up, offering greater
value than its purchase price. The card can also be used by other people but with the same
family name as the cardholder. The second type of smart card determine to offer unlimited
travel for frequent flyers where cardholders will be allowed make as many trips as they want
within a specified timeframe.

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CONCLUSIONS
To conclude; the strategies introduced by AirAsia in term of cost effectiveness emphasizing
on lower the maintenance and administration cost are a good entity for the business. For
AirAsia, the mixture of low cost pricing policies and efficient cost reducing measures are
essential for maintaining the competitive edge and surviving competitions and challenges in
the airline industry. The SWOT analysis covered are also bringing future growth and to
sustain in the market of low cost carrier. The management of AirAsia is also keeping the
assurance of maintaining competitive advantage by taking care of the employees as Tony
Fernandes once said AirAsias first priority is on their employees. When the company took
care of the employees, they will definitely take care of the companys gold the customer
thats why the company trying hard to train their employees to have an innovative mind-set.
The company also are keen on the budget to maximize profit where the management
construct, initiate and implement appropriate expenses reducing strategies while pricing also
needs to be formulated to save fuel cost and to capture as much seats and capacity utilization.
As mentioned, AirAsia are also keen in partnership strategy with financial institutions and
with various corporate organization as this will provide extra revenue stream and increase its
brand power and image, via indirect marketing. The diversification strategy will also help in
advertising to market new ideas and seek to enter other countries and regions.

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REFERENCES
1. http://www.AirAsia.com
2. http://www.AirAsia.com/my/en/corporate/iraboutAirAsia.page
3. http://www.AirAsia.com/my/en/corporate/irwhatislowcost.page
4. http://en.wikipedia.org/wiki/Air_asia
5. http://www.ameinfo.com/189041.html
6. http://www.flightglobal.com/news/articles/low-cost-carriers-growthexpectations-355702/
7. http://www.iata.org/SiteCollectionDocuments/air_travel_demand_su
mmary.pdf
8. http://www.codewit.info/articles/onwutalobi31217.pdf
9. Porter, M.E. (2008) On Competition, Updated and Expanded edition, Boston,
Massachusetts: Harvard Business School Press.
10. Pearce, J.A., & Robinson, R.B. (2009) Formulation, Implementation & Control of
Competitive Strategy, 11th editionMcGraw-Hill International Edition.
11. David, F.D. (2009) Strategic Management: Concept and Cases, 12th edition Pearson
International Edition.
12. Alexander, Keith L (2004). The Economics of Low Cost Carriers All the Numbers
Add Down for the Nations Low Cost Carriers. Washington Post, Feb 29, 2004.
13. Scheiderbauer, Dieter &Fainsilber, Olivier (2002), Impact of Low Cost Airlines
Summaryt of Mercer Study, Mercer Management Consulting.
14.

http://www.123helpme.com/air-asia-strategic-management-

view.asp?id=163631
15.

http://www.navitaire.com/res_and_dist/openskies.asp

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16. IBM Institute, The future of CRM in the airline industry: A new paradigm for
customer management. (2002)
17. Wernerfelt, B., &Karnani,A. (1987). Competitive strategy under uncertainty.Strategic
Management Journal, 8, 187-194.
18. http://www.academia.edu/3797833/An_Exploratory_Study_On_AirAsias_Critical_Int
ernal_Success_Factors_A_RBV_View_Of_Sustainable_Competitive_Advantage_of_
LCA_Business_Model
19. http://www.themalaysianinsider.com/litee/business/article/AirAsias-forward-thinkingmarketing-strategies-key-to-success/
20. http://thestar.com.my/lifestyle/story.asp?
file=/2005/11/27/lifefocus/12601219&sec=lifefocus
21. http://www.chinaabout.net/cvp-analysis-business-strategy-analysis-air-asia/
22. http://AirAsia-businessplan.blogspot.com/

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