Air Asia

Frame Work
Historical View Current Condition What Air Asia Should Do Next

Establishment

Mission & Vision

Research Conduct

Lucrative Offering
Professional HR Support

Existing Key Business Strategic

Competitive Advantage Its Achievement The Challenge

Key Success Factor

SWOT Analysis Growth Strategy Strategy Formulation Recommended Air Asia Strategic Program

Frame Work
Historical View Current Condition What Air Asia Should Do Next

Establishment

Mission & Vision

Research Conducted

Lucrative Offering
Professional HR Support

Existing Key Business Strategic

Competitive Advantage Its Achievement The Challenge

Key Success Factor

SWOT Analysis Strategy Formulation Strategy Prioritizing Recommended Air Asia Strategic Program

Research Conducted
Customer Preference

Research
Reason to Choose Air Asia Reason to Choose Carrier Type

Customer Preferences*

Most Important Factors according to Consumers

Price Scheduling(time of flight) Punctuality Ease of booking tickets Seating and general in-flight cleanliness Baggage Capacity Rescheduling and Refund policy

Ground handling services

Customer Service

Most Less Important Factors according to Consumers

Quality of food available in-flight In-flight entertainment Baggage capacity Premium services such as priority boarding,seating etc Ground handling services

* ) Sources : Thesis, Factors Influencing Consumer Preferences while choosing between Budget Airlines, Zarine Susan George, 2011

Reason to Choose Each Carrier Type

Reason to Choose Full Carrier Services

Punctuality Services Safety

Reason to Choose Low Cost Services

Attractive Fare Accessibility to Ticket Distribution Channel Safety

Reason to Choose Air Asia

Cheap Destination Travel Package Excellence Services Pre-Booking Advantage

Key Success Factor

Services Promotion (Attracting Customers) Efficient Management of Cost (Managing Finances) High Operational Efficiency (Managing the Fleet) High Core Service Standards (Managing the Services) Strong People and Management (Managing People)

Five Forces
Potential Entrants = LOW
High barrier to entry and exit High investment Loyal toward major brand FSC enter LCC market

Suppliers = HIGH
Few aircraft makers Bulky aircraft purchases Labor unions with negotiationpower, Aviation fuel Uncontrollable airport related cost

Industry Rivalry = HIGH

Price competition is intense fixed cost is high, low marginal cost Excess capacity

Customers = MEDIUM HIGH and INCREASING

Customers are highly price sensitive and have lot of power No switching cost Loyal toward major brand

Substitutes = LOW international airlines : airline is the only way for travelling to long destinations. national airlines : passengers can use ground travel like train or bus as substitute.

Internal Analysis - Air Asia vs Other LCC

Function Inbound Logistics Operational Capabilities Aircraft Scheduling Quality of food Punctuality OM Facility Outbound Logistics Ground handling services Location on Airport Marketing & Sales Price Brand Distribution Channel General Services Cost Management Human Resources & Organization Customer Services Business Model Management Team x x x x x x x x x x Strength x x Weakness High utilization aircraft quality of food available in-flight need to be improved Better on time take-off, less delay and cancellation Does not have own OM facility Better check-in process and baggage handling Caused by secondary airport used Cheaper than other LCC Brand name is well established in Asia Pacific. Easy to Access Many complaint from customer (didnt answer, etc) Low cost philosophy Very strong management team with strong links with governments and airline industry leaders Flat organization structures and effective staff policy Note

Organization

Internal Analysis - Air Asia vs FCS

Function Operational Capabilities Punctuality On-board services Outbound Logistics Ground handling services Location on Airport Marketing & Sales Distribution Channel Price Product Cost Management Premium services Business model x x x x Strength Weakness x x x x Note Worse on time take-off, less delay and cancellation Worse on-board services Related to baggage handling, free ckeck-in, etc Secondary vs primary airport used Easy to Access Cheaper Related to low fare no frill Low cost philosophy

SWOT Analysis - Air Asia

Weakness Strength 1. High utilization aircraft 2. Effective cost management through wellproven business model 3. Better in punctuality than Other LCC 4. Better in ground services than Other LCC 5. Well-establish brand name in APAC through business group 6. Effective distribution channel (via IT and partnership) 7. Strong management team with strong links with governments and airline industry leaders 8. Flat organization structures and effective staff policy Opportunity 1. ASEAN open skies and other region in East Asia 2. The population of Asian middle class will be reaching almost 700 million by 2010 3. Technology in term of Internet use, mobile internet iand e-payment is growing rapidly 4. Higher fuel costs means less profitable competitors may be forced out of business. 1. Does not have its own maintenance, repair and overhaul (MRO) facility. 2. Non central location on secondary airports. 3. quality of food available in-flight need to be improved 4. Lack of customer services quality 5. Worse in Punctuality than FSC 6. Worse in ground services than FSC 7. Worse in on-board services than FSC 8. Premium services need additional cost

Support

Barrier

Threat
1. Increasing of oil price 2. Certain rates like airport departure, security charges and landing charges are beyond the control of airline operators 3. Users perception that budget airlines may compromise safety to keep costs low. 4. Entance of new rivalry from FSC (lower cost offering from FSC) 5. High competition among other LCC (especially in term of price war)

Strategy Formulation TOWS Matrix

STRENGTH (S) WEAKNESS (W)

SO Strategy
Enhance route system to new potential destination city in ASEAN and East Asia and Australia (market penetration) Enhance the use of internet by implementing mobile ticketing & check-in Build partnership with e-money provider to facilitate the payment Maintain price at the same level to give pressure to less profitable competitor Continue develop add-on services & bundling services with travel and tour company

WO Strategy
Develop internet and mobility based customer relationship management to improve customer services quality Build own MRO to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low

OPPORTUNITIES (O)

WT Strategy
Build own MRO to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low and increase customer confidence regarding LCC safety Improve customer services quality by deploying contact center services to increase customer satisfaction Re-define integrated planning process to improve punctuality to compete with FSC Improve the rest with as is effort (with no significant extra cost)

ST Strategy
Maintain cost leadership business model as the rising of oil price and uncertainty airport cost related will lead to decreasing profit. Deploy aggressive campaigne to increase more customer confidence regarding LCC safety Focus on profitable route and exit from unprofitable route

THREATS (T)

Strategy Prioritizing
Strength 1. Aircraft utilization Weight 7.5 20 10 10 10 15 20 7.5 100 Weight 30 30 20 20 Score 3 3.5 3 2.5 Score 4 4 3.5 3 3.5 3 3.5 3 Total 30 80 35 30 35 45 70 22.5 347.5 Total 90 105 60 50

Weakness MRO Facility Location at Secondary airports Quality of food Lack of customer services quality Punctuality (versus FSC) In Ground services (versus FSC) On board services (versus FSC) Permium services TOTAL Weakness Oil Price Airport rates Users perception of safety in LCC Competition from FSC Price War

Weight 15 10 10 30 15 7.5 7.5 5 100 Weight 25 15 15 20 25 100

Score 2 2 2.5 3 3 3 3 3

Total 30 20 25 90 45 22.5 22.5 15 270

2. Cost management
3. Punctuality (versus LCC) 4. In Ground services (LCC) 5. Brand name in APAC 6. Effective distribution channel 7. Strong management team 8. Organization & Staff policy TOTAL

Strength 1. ASEAN open skies 2. Asian middle class population 3. Trend for IT use 4. Elimination of competition

Score 3 2 2.5 3 3.5

Total 75 30 37.5 60 87.5 290

TOTAL

100

305

TOTAL

Strategy Prioritizing TOWS Mapping

Stabilisasi
SW = 77,5 OT = 15

Pertumbuhan
Mengoptimalkan kekuatan untuk menangkap peluang yang ada

Bertahan T

Diversifikasi

Recommended Strategic Program

Keep existing competitive advantage low fare no frills to compete with Full Carrier Services, without giving extra frill to customer For a short period of time, keep price as is for giving pressure to less profitable competitor Advertise in any media like internet, television and newspaper about safety factor in LCC especially in AirAsia Develop supply demand analysis to choose new route system for market penetration and retention Develop mobile application for reservation, cancellation and for CRM Add more partner in travel packaging services, bundling with flight services Implementing outsourcing contact center for outbund and inbound services to facilitate communication with customer Evaluate exsiting integrated planning process and improve business process in managing the flight