SIddhant Pandey

Section-A

281050

Air Asia Strategic Analysis

Value chain of Air asia

Firm Infrastruture

Human resource Management

Technology

Procurement
Inbound Operations Outbound Marketing Service
logistics Logistics and Sales

Primary activities :

 Inbound Logistics :
 Finding the shortest way
 Fuel efficiency
 price cutting.
 Operations :
 No frill flights
 Single type aircrafts
 Outsourcing for maintenance
 Outbound Logistics :
 Online ticket booking,
 customers can book it themselves,
 easy printing of boarding pass.
 Marketing and sales :
 Expenditure on Tv,print and internet advertisement,
 Sponsorship deals with Manuchester united,AT&T,referees of EPL,Time
magazine
 Service :
 Pre-book checked luggage for low rate
 Bok hotel online
 Rent taxi
 Voucher for flight delay
Supporting Activities :

 Firm infrastructure :
 Provides lowest price for customer
 Expanding service to different countries
 Human resource management :
 Hiring multiple skill personnel
 Increasing efficiency and decreasing cost for company
 Single type of aircraft so reducing cost of training
 Technology
 Using yield management system
 Computer reservation system for web based booking
 Enterprise resource planning system for speeding up reporting and data
retrieval process.

Value chain of Malaysian airline

Firm Infrastruture : has a flat organizational structure such as planning and

controlling system. It consists of finance, legal and other departments.

Human resource Management : It consists of recruitment of employees based on

its high-specialized skills,

Technology

Procurement

Inbound Operations Outbound Marketing Service

logistics Logistics and Sales
 Key features and differentiating factor for Air Asia
 Low Fare, No Frills : The absent of in flight services helped reduce pre flight
preparations like loading of food and drinks,cleaning time,cost of meals.So this led to
cost saving.
 Investment in Latest Technologies & Efficient Operations : AirAsia has heavily
invested in purchasing the most modern aircraft A-320s. The new aircraft allow
AirAsia to enjoy substantial lower fuel cost as these modern airplanes had lower fuel
usage by as much as 12%. By operating a single aircraft type allows AirAsia to
achieve efficiency in executing its primary and secondary activities
 Low Fixed Costs : By operating a single aircraft type allows AirAsia to achieve
efficiency in executing its primary and secondary activities, its aircraft maintenance
contract costs were also reported to be substantially lower than any other airlines
 Lean Distribution System : The use of e-ticketing helps to save the cost of issuing
hardcopy tickets. The company also saved on agents’ commissions and avoided the
need for large and expensive booking and reservation systems.
 Minimise Personnel Expenses : AirAsia implemented flexible work rules and
streamlined administrative functions which allowed employees to perform multiple
roles. This human resource policy facilitated AirAsia in lowering its personnel costs.
 Use of Secondary Airports : Typically, AirAsia operates out of secondary airports,
which involve lower landing, parking and ground handling fees. These airports were
also less busy and had shorter runways, thus helped reduce fuel consumption while
aircraft queue for takeoff or taxy on the ground.
 Reliability : AirAsia also chose more consistently secondary and regional airport
destinations instead of busy and congested main airports. Generally, less busy airports
can be expected to provide higher rates of on-time departures
 Higher Frequency of Service : , AirAsia offers point-to-point flights on short-haul
routes – less than 4 hours flight time. The company is also able to achieve higher
plane utilisation due to short turnaround time and as mentioned point-to-point routes

Air Asia vs Malaysian Airlines

1. Malaysian airline has a very different route network ie it has a large proportion of
long haul routes.
2. From the data available in the case it is clear that the available seat kilometers of AA
(18.72b)is very less compared to Malaysian airline(53.38)
3. AA has a fleet of 78 aircrafts compared to MA’s fleet of 109 aircrafts.The
maintenance cost goes high for MA because of that.
4. The number of employees of AA is almost one of MA (3799 vs 19094 employees)
 5. Due to differences in companies volume,revenues of AA are much lower with respect
to MA but the other costs like maintenance costs,fuel costs,staff costs,other operating
expenses of AA are so lower in comparision to MA that it justifies the difference in
revenue.

Which is better option for LCC: national or international?

 Air asia has a strategy of cost leadership and after analyzing on different
parameters,we can say that to be a LCC and maintain cost leadership operating
nationaly is a better choice.
 In International flights,certain amenities needs to provided which increases the costs
and an airline which cuts down the costs in the same area will face problems.
According to ANSOFFS MATRIX
Any airline will be entering an existing market with an existing product will need
market penetration but doing that with so many big players in the market will be
very difficult.

How is it operating internationally and still maintaining low cost?

 Air Asia X was started as a sister company of Air Asia,which is a budget
airline for long haul flight operations.

The question remains that how it still reduces costs while operating
internationally?
 The answer lies in the integration of Air Asia and Air Asia X
 Combining and sharing service components.
 Mutual benefit from :
 Shared pilots
 Cabin crew
 Guest service staff
 Website
 IT platform
 Marketing and distribution
 Kuala lumpur connection hub
So with integration of Air asia and Air Asia X and sharing the service components Air Asia
X benefits from utilization of Air Asia services and thereby reducing it’s cost of
operation.Ultimately,it serves as a budget airline even while competing with big players in
the international market.