StrategIC Analysis

PT Indonesia Tbk

Group Members :
Khairunnisa Ismah Lutfi (1606878171)
Putu Merra Sri Diana (1606823531)
Athiyya Nabila Ayu (1606911414)
Vidya Intani Athfalina (1606911036)
Company Profile
● 1989 → PT Centris Multi Persada Pratama Tbk
2017 → PT AirAsia Indonesia Tbk

● Line of business : Scheduled Commercial Air Transport Services.

● An aviation enterprise, the Company has 1 head office and operates 33

service and sales offices located throughout Indonesia’s main cities.
 To grow PT Indonesia AirAsia as Indonesia’
largest low-cost carrier and to provide the
best service possible to Indonesian consumers
by enabling cost-efficient connectivity.
VISION

1. Best Employer
2. Globally Recognized ASEAN Brand
3. Consistently Affordable
MISSION 4. Service and Product Quality Guaranteed
INDUSTRY ANALYSIS
Porter’s
5 Forces
Rivalry among existing firms
● Increasing demand due to globalization has triggered the increasing rivalry among airline
industries especially the development of new LCCs which provide lower airfare compared to
traditional airlines (Yashodha, 2012).

● Aviant industry has high exit barrier due to its relatively high cost nature.

● Indonesia as a maritime country, makes the role of air transportation very vital as part of the
national transportation system. The growth of air transportation in Indonesia is among the
highest in the world, reaching 17 percent per year compared to the growth of world air
transportation which is only around 5.5 percent per year.

Conclusion: High

→ AirAsia’s strength to compete in the industry is their cost efficiency that made their products
relatively cheaper than the other competitors, especially Citilink Garuda. Air Asia is even being
awarded the “Best Low Cost Carrier in the World” for 9 consecutive years.
Domestic Market Share

Compared to Garuda, one of Air Asia biggest competitor in the airlines industry, Air
Asia relatively has a smaller market share for domestic flight. Especially for the
fact that Garuda is the first mover in Indonesia market. In this case, Garuda
definitely has bigger advantage.
Threat of new entrants

● Building an airline service required huge investment cost. Either spend on

purchasing aircrafts or advertising required large amount of start up capital.

● Caused by its high risk environment, the government have to make a safety
control for aviation companies. Thus, the industry has a very strict law. One
of the law enforced in Indonesia is UU Penerbangan No. 1 Tahun 2009

Conclusion: Low

→ both Air Asia and Garuda face the same low threat for new entrants
 Bargaining power of suppliers

● Aircraft manufacturing industry is monopolized by Boeing and Airbus.

● Limited fuel suppliers in the market. Even Indonesia has a relatively higher
avtur price compared to other ASEAN countries

Conclusion: High
→ both Air Asia and Garuda face the same high threat of bargaining power of
suppliers
Bargaining power of customers
● Airasia is not the only low cost carrier in Indonesia; with no significant
difference between one to another (low product differentiation)
● Switching cost of customers is low due to easiness of accessing information
● Airasia sold more ticket individually rather than in groups

Conclusion: bargaining power of customers are moderately high

Threat of substitute
● Main substitute: land transportation (train or bus)
● Switching cost is moderate because even though land transportation has
cheaper fare, it takes longer time to travel. In this term, the main cost is time.

Conclusion: Moderate
BUSINESS STRATEGY
ANALYSIS
LOW-COST AIRLINES
Simple Product
A typical low cost airline product is extremely basic. It focuses on getting
passengers from point A to B, cutting out all the “extras”.
Positioning
The low cost airlines the world over are known to target Non-business
passengers, leisure traffic and the price-conscious business passenger
segment.
Low Operating Costs
Low cost airlines have a very lean organization structure and operating
costs are kept to the bare minimum with low wages (as crew/staff
requirements are low and generally freshers are preferred), low airport
fees, low costs for maintenance and cockpit training (as these are
typically outsourced).
Management Strategy
AirAsia’s goal is to establish itself as a leading low-cost carrier in Asia. The principle components of
AirAsia’s 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
● 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
 PEST
Analysis
 Political
Aviation industry in Indonesia is regulated under Ministry of
Transportation.

- Political events
Ex: election period
- Tariff Regulation
Ceiling Price & Floor Price of low cost carrier (LCC)
- Uncertainty of government moves related to current high
price in airline industry. (ex: Will Indonesia adopt foreign
airlines to stabilize the price war?)
- Tax regulation related to airplane leasing, avtur price, etc.
 ECONOMICAL

Exchange Rate and Fuel Price

- Bank Indonesia announced the closing as of 31 December 2018 rupiah at the level of
Rp. 14,385 per US dollar (US). During 2018, the rupiah depreciated by 5.7%
- As the majority of the aircraft leasing and maintenance costs are paid in US dollar,
depreciation of Rupiah against the US dollar inevitably led to rising operational
expenses.
- Significantly higher jet fuel price during the year put a heavy pressure not only for
AirAsia, but also for all airline operators in Indonesia. Average jet fuel price increased
by around 32.8% from around US$64/ barrel in 2017 to as US$85/barrel in 2018.

Overall, considering that fuel, aircraft lease and maintenance costs account for about 70% of the airline’s cost
structure, the increase in airline operating costs was unavoidable for Indonesian aviation sector in 2018.
 ECONOMICAL
Potential Cartel of Airline Industry
- The shrinking number of domestic aviation business actors opens opportunities for greater
oligopoly practices. Oligopoly is the offering of goods or services that are only controlled
by a few companies so that they can determine their market structure, including regulating
consumer prices
- Based on data from the CAPA Center for Aviation, Lion Group still
has the largest Indonesian aviation market share with control of
50%. Underneath there is the Garuda Group with a market share of
33%, followed by Sriwijaya Group at 13%. However, recently
Sriwijaya's operations were taken over by Garuda, bringing the total
market share to 46%. Air Asia and other airlines account for only 4%
of the market share.
- AirAsia has withdrawn its tickets from Traveloka. The move follows
an incident in which the low-cost airline’s flights were unavailable on
the sites of several online travel agents,
 ECONOMICAL

Natural Disasters
The natural disasters which disrupted Indonesian tourism
sector only slightly curbed foreign tourist arrivals as the
number still grew by around 15% to 16 million in 2018.
This increase were supported by the robust growth of the
aviation industry, highlighted by expanding fleets and
increased flights, and the growing number of Indonesia’s
middle-class population. Not to mention as an
archipelago of more than 17,000 islands, air travel is still
the transportation of choice for Indonesian people and
their goods.
 SOCIAL - CULTURAL

- Increasing world’s population, tourists and number of educated people helpful for the growth
of aviation industry.
- Customers have a common mindset which doubted the safety of LCCs (Welford, 2010). It is
important to gain customer satisfaction and trust. This is because according to a research,
50% sales in airline are from return customers (Welford, 2010). AirAsia named the World's
Best Low-Cost Airline for the 10th year in a row.
- Outbreak of the Severe Acute Respiratory Syndrome
(SARS) has scared people to fly. AirAsia commits to “Safety
First”; comply with all regulatory agencies, set and maintain
consistently high standards; ensure the security of staff and
guests.
TECHNOLOGICAL

- Technological innovations in company’s operational used to improve

cost efficiency, marketing and promotional activities, as well as
business operations through efficient automations.

- Development using e-business and online based system can attract

and ease consumers to use the system which prove to contribute extra
income to airlines business.

- To achieve environment friendly, Airbus 320 aircraft built with ‘sharklet

wing tips’ are used to lower wind drag which help for preferable fuel
consumption (Vazquez, 2015). Air Asia become AirAsia becomes first
airline to use Airbus A320 with fuel-saving wing tips
Conclusion

● As a conclusion, PESTEL analysis shows that the number of airlines and air passengers has
grown as the increasing demand for airline services. Besides that, Porter’s 5 forces
demonstrate the airline industry is highly competitive, low threat of new entrants, moderate
bargaining power of buyers but high bargaining power from supplier and moderately threat of
substitutes.
● With the successful run of pioneer low cost carriers, it is imminent that more players will enter
the market. Currently, there are several players waiting in the wings to start no frills
operations in Asia Region skies, following the success of AirAsia. Competition between carriers
pursuing this business design will inevitably be intense.
Recommendation

● Building up their own MRO facilities and maintenance teams for repair and service airplanes.
Besides that, on financial perspective, AirAsia has to ensure that they are able to achieve below
following initiatives to be achieved in order to sustain the targets for the following years.
● Improvements to gain customers’ trust, for example AirAsia should work out to reduce the
increasing rate of customer complaints on their service by allowing phone calling for easy reachable
customer service,
● Collaborating with famous brands to build relationships with them for branding images purpose.
Lastly, AirAsia can strive into educations fields by provide education funding and build training
centres or maybe few years later can organise an AirAsia University.
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