Table of Contents

1.0. 2.0. 2.1. 2.2. 2.3. 2.4. 2.5. 3.0. 4.0. Introduction............................................................................................................................................. 1 Strategies of AirAsia ................................................................................................................................ 2 Competitive Scope .............................................................................................................................. 2 Geographical Scope Strategy ............................................................................................................. 3 Pro active Strategy .............................................................................................................................. 4 Reactive Strategy ................................................................................................................................ 5 Strategic Alliances and Partnership ................................................................................................... 6 Conclusion ............................................................................................................................................... 7 References ............................................................................................................................................... 8

1.0. Introduction
Air travel is a vital element in each and every countrys economy. Air transport facilitates economic growth, trade & tourism and open up the country to the globalization. With the growth of the air transport industry new concepts and models has been developed. Low cost airline is an airline concept that has been developed in the recent history of the air transport and was adopted throughout the world by many airlines like AirAsia, Rayann Air, Jet Star and etc which has proved the success of the low cost airline model. This report analyzes AirAsia and its strategic management approaches in terms of competitive scope strategies, reactive strategies, proactive strategies, geographical scope strategies and joint venture strategies that has led the airline to its current successful position. AirAsia Berhad is a Malaysian based Asias largest low-fare, no-frill airline who is a pioneer of low cost travel in Asia. The group operates scheduled domestic and international flights to over 400 destinations spanning 25 countries. Its main hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai AirAsia and Indonesia AirAsia have hubs in Suvarnabhumi Airport and Soekarno-Hatta International Airport respectively. Furthermore AirAsia won the Skytrax World's best low-cost airline award in 2009 and 2010. It has the world's lowest operating costs at $0.035/seat-kilometre in 2010 (AirAsia.com, n.d). It is also the first airline in the region to implement fully ticketless air travel system. Currently AirAsia operates a fleet of 105 Airbus and Boeing aircraft and 122 are in order to be delivered (AirAsia.com, n.d). As mentioned above this report investigates the strategies that the AirAsia has employed which have led to their success today as the best low cost airline in the region. Page 1 of 8

2.0. Strategies of AirAsia

2.1. Competitive Scope

The competitive strategies identified on Air Asia are as follows; low cost and price leadership (AirAsia.com, n.d)

Low cost and low price is a specialty of the low cost airlines. AirAsia is one of the leading low cost carriers (LCC) in the Asia which provides a lower cost with a better connectivity and a service to its customers. AirAsia focuses on to provide air travel at a competitive quality along with a lowest price. This lower cost is provided by the airline through saving on the particular feature or facility that customers do not care because when it comes to low cost carriers or no frill strategy it is pursued by LCC and also is clearly communicated to the passengers/customers that they will be served by operating the flight services at lowest fare, prompt schedules where facilities like baggage transfers, meals, seat arrangement is provided at a charge. Therefore the target market of the LCCs it this group is not concerned about the in flight meals, entertainment and other bundle of services associated with an air ticket. Furthermore some of the value added services provided by the airline to enhance it level of service include AirAsia holidays where the passengers can also booked into hotels, renter car etc when they purchase a ticket through the partners of the airline. Based on the preference passengers can select and customize a package for themselves and purchase the whole package online (AirAsia.com, n.d). However AirAsia provides the service to its customers not only at a lower price but also with enhanced features than the other LCCs and through that the carrier has differentiated it among Page 2 of 8

the other carriers. AsiaAsia is one company that continuously strives to reduce cost and in the market place it has got the image of Worlds best low cost Airline and Now everyone can fly with the affordable airfare they offered.

2.2.
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Geographical Scope Strategy

Point-to-point operations

AirAsias operations are distributed at the local, regional and global level. The LCC has different strategies at these levels. One of the main strategies that the AirAsia has adopted is the pointto-point operational strategy (AirAsia.com, n.d). This operational model is focused on operating from one destination to another as explained in the below figure 2.1.

Figure 2.1 At all geographical levels AirAsia has a strategy focuses on this model as the figure where they do not consider connectivity between these points or to carry passengers from one point to

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another by uplifting passengers from the over passing state. Therefore when entering a market airline focus on short haul sectors and the accessibility to the market is also easier. E.g. Consider CMB-MEL sector where the airlines fly through Kula Lumpur, Singapore or Thailand. AirAsia do have services to MEL but it is not a direct service from CMB-MEL. AirAsia only operate the sector KL-MEL or either CMB-KL. The direct flight to the whole sector is not provided. If a passenger wants to fly the whole sector he/she should make arrangements for the connecting flights. The Airline has adopted this strategy for the local, regional and global level operations where they enter the markets easily with less regulatory barriers and also when it comes to profit maximizing and minimizing the cost the airlines primary objectives are fulfilled.

2.3.
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Pro active Strategy

Fleet Selection and Aircraft Utilization

As mentioned in the introduction of the report the current fleet of AirAsia is a mix of Boeing and Airbus aircraft. When considering Boeing and Airbus aircraft models Airbus is considered more fuel efficient for the AirAsia because the airlines point-to-point operational model. As a proactive strategy before the fuel price increase airline placed an order of 175 units of Airbus A320 aircraft so that the airline can replace the Boeing 737-300 (AirAsia.com, n.d). Through this strategic decision the airline can overcome the fuel price increase and also reduce the total cost of the airline enhancing customer service with a quality aircraft. Furthermore it simplifies the operational model of the airline by having a single aircraft fleet because then the same

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equipment, tools, spare parts and most importantly the personnel for the maintenance and repair purpose as well the crew can be shared.

Fuel Hedging

Fuel Hedging is a contractual tool used by airlines to stabilize jet fuel costs as a solution to the increasing fuel price. Through the fuel hedge contract it allows the airline to pay a predetermined price for the jet fuel not the current market price but the market price at the time existed when the airline entered the fuel hedging contract. As a solution to the unpredictable market volatility of the fuel price AirAsia entered into fuel hedging contract as it was predicted that oil price would hit US $200 (Annual Report, 2010). The crisis unfolded during the second half of 2008 and due to timely strategic decision taken, airline was able to minimize the direct cost component of the airline. Currently AirAsia purchases fuel at a low market price while other airlines pay a higher price for the oil.

2.4.
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Reactive Strategy
In House Training Facility

Most of the airlines have their own in house training facilities for flight crew, cabin crew and also for aircraft maintenance purposes. Training of personnel engaged in the civil aviation activities is necessary to be comply with the regulations imposed by the ICAO and also national level regulations. Most of the airlines send the personnel, required training to the training facilities of the other airlines or to the ICAO training programmes. But with the expansion and

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establishment airlines maintain their own training facilities to minimize the cost and also to provide high quality training to the personnel. As a reactive strategy to go hand in hand with the other competitors of the industry AirAsia also started their won in house training facility to minimize the cost of the airline. Through this training facility airline provides cabin crew and flight crew training to the personnel in AirAsia (Annual Report, 2010).

2.5.
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Strategic Alliances and Partnership

GE Aviation Partnership

Maintenance is one of the factors that has affected on the airline performance and operations. It is imperative for the good will of the airline to maintain a good safety record which is a result of efficient, accurate and correct maintenance procedures carried out from the certified and authorized personnel. As a solution for this, AirAsia entered into a partnership with world famous maintenance provider GE Aviation (Annual Report, 2010). This partnership ensures that its fleet is always perform in safe and best condition. GE is an established maintenance organization with more than 50 years experience in the industry. Currently GE has world class capabilities, technology and manpower to provide best aviation services to AirAsia. The strength of AirAsia is to maintain low cost; whereby they dont have to provide benefits to their workers, but still can maintain the best quality of their fleet.

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AirAsia Citibank Partnership

AirAsia launched a partnership with Citibank as a marketing tool to the airline. Though this partnership customers can convert the points on their credit card into AirAsia vouchers to redeem free flights, airport taxes, fuel charges, administrative fees and purchase of Xpress Boarding. Furthermore the exclusive promotions like fixed re bate of RM36 on airport tax are also provided for those who sign up AirAsia Citibank card (Annual Report, 2010).

3.0. Conclusion
The strategic decisions that the AirAsia has employed to be a winner in the global competitive market is explained through this report in depth to provide an better understanding of its current successful position in the industry. It is evident by employing timely pro-active, reactive, geographical, competitive and joint venture strategies organizations can not only establish their position in the industry furthermore stabilize the operations as well.

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4.0. References
AirAsia 2007-2010, AirAsia.com, n.d, viewed on 10th June 2011 <http://www.airasia.com/lk/en/home.html>

AirAsia 2007-2010, Annual Report, 2010, Viewed on 10th June 2011, http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR10.pdf

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