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AIR ASIA-DIVERSIFICATION & GROWTH PLAN

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COMPANY BACKGROUND:

 Founded in 1993, commenced operations in the year 1996

 Started as a 2-plane operation has now expanded to a fleet of more than 150
Airbus A320 jets with a further 200 aircraft on order.
 Headquartered in Kuala Lampur, Malaysia
 It flies to about 70 destinations across Asia
 Affordable flying for people as it operates on the LCC (Low Cost Carrier)
Model
 It operates in countries like India, Indonesia, Malaysia, Philippines and
Thailand through joint ventures with other corporates in the operating
countries
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EXISTING MODEL:

 Committed to low fares-the aim is to make flying

affordable for everyone
 Low turn-around time-Lesser time on the ground,
more time flying enhances aircraft utilization,
reduces costs, increases productivity of staff
 LCC Model: Self check-ins to save on operational
costs, pay only for what you want when it comes to
in-flight services, use of Airbus A320 that lower fuel
consumption
 No compromising on passenger safety
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SWOT ANALYSIS:
STRENGTHS:
• Low Cost Carrier-affordable by the masses
• Brand presence in the Asian subcontinent is pretty strong
• Government of Malaysia’s support
• Joint Ventures with country-specific corporate houses
WEAKNESSES:
• Lack of profitability with respect to certain brands
• Tough competition from other players

OPPORTUNITIES:
• Growth of the middle class in the Asian countries
• ASEAN “Open Skies” agreement
• Can collaborate with other low cost carriers
THREATS:
• Increasing oil prices
• Increasing cost of labour
• Increase in maintenance costs
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CUSTOMER SURVEY RESULTS:
A market survey was conducted with a sample population of 34
respondents based out of the Indian sub-continent, asking them to
identify the areas where they feel that airlines could
change/modify/add certain services was conducted. The findings
from the survey is as mentioned:
 64.7% of the respondents fly more than thrice a year, of which
50% travel to visit their families residing in other parts of the
country
 61.8% of the passengers travel light, hence the hand-baggage
only fares can help attract that segment
 55.9% prefer travelling by Indigo flights
 Indian customers are price-sensitive, hence prioritize low fares
while selecting airlines
 Customers feel that on-board internet facilities would make their
travelling experience better
 Exorbitant cancellation fees happen to be one of the biggest
woes of the customers while planning a trip
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COMPETITOR STRATEGIES:
The aim of any company is proliferation of revenues and reduction of costs. One of the
fastest growing airlines in India, INDIGO has adopted the following strategies to
increase its revenues:
 Buying a single aircraft model(A320 Aircrafts) in bulk: Pilots, mechanics and
cabin crew need to be certified for just a single aircraft thus lowering the cost of
training by a great extent
 Leasing the aircraft: Indigo places a bulk order for aircraft and pays as less as 5%
of the price to Airbus for order confirmation. The order is delivered in 4-5 years, by
which time, the market valuation of the aircraft would have gone up by a huge
margin. Indigo immediately sells off the aircraft after acquisition to a lessor at a
premium and hence makes immediate profits
 Limiting number of bases: Indigo carriers fly between Delhi and Mumbai almost
20 times a day, thereby increasing the frequency of flights in passenger-heavy routes
like this one. This in turn increases the revenue per seat kilometer.
 Hand baggage only fare: Most passengers look for low airfares. By introducing
this hand baggage only fare, which is priced around Rs. 1000 below the normal
price, Indigo has increased its customer base since it helps attracts a lot of price-
sensitive travelers who travel light.
Because of these strategies the airlines has witnessed unprecedented growth in the 10
years of its existence. In the period between 2016-17 itself, it witnessed a growth of
31.5% in passenger capacity during the year.
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COMPETITOR STRATEGIES(contd.):

 Similarly, let us take the example of certain Airlines like United,

Spirit Airlines, American/US Airways, Delta which have made
huge revenues using ancillary products and services. The
global ancillary revenue as seen in the year 2016, for the top 10
airlines was around $28 billion
 Malindo Airways, an affiliate of Indonesia’s Lion Air offers
competitive prices and lures passengers with complimentary
meals on-board, pre-booked luggage allowances,
comfortable seating arrangements
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HOW CAN AIR ASIA DIVERSIFY/GROW IN TERMS OF REVENUE?

 Like Indigo, it can restrict itself to one particular model of

aircraft, thus reducing the expenditure on training of personnel and
maintenance of the aircraft. Air Asia also needs to expand its
number of carriers in order to cater to the increasing number of
fliers.
 It can limit the number of bases, but cater more to the profitable
routes, i.e., increase the frequency and number of flights in routes
that are passenger heavy. An efficient route structure will help
increase its profitability.
 Passengers travelling long distances need some form of
engagement during their flight. In-flight entertainment and
Internet connectivity can become a differentiator for Air Asia.
This will help them in concentric diversification and increase
ancillary revenues.
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REFERENCES:
•http://www.airportspotting.com/about-airasia/
•https://www.marketing91.com/marketing-mix-indigo-airlines/
•https://centreforaviation.com/insights/analysis/airasia-x-swot-challenging-times-but-first-mover-advantage-and-
fleet-flexibility-are-huge-strengths-188591
•http://www.ideaworkscompany.com/wp-content/uploads/2017/07/Press-Release-118-Ancillary-Revenue-Top-10.pdf
•https://www.airasia.com/in/en/about-us/hi-we-are-airasia.page
•https://www.stuff.co.nz/business/world/99083890/best-lowcost-airline-in-the-world-airasia-eyes-next-big-things
•http://www.airlinetrends.com/category/ancillary-revenues/
•http://www.dnaindia.com/money/report-india-s-aviation-growth-piloted-by-indigo-2405811
•https://www.goindigo.in/content/dam/goindigo/investor-relations/annual-report/2016-17/Annual-Report-2016-
17.pdf
•http://fortune.com/2015/07/14/airlines-highest-fees/
•https://w3.accelya.com/blog/5-ways-to-increase-airline-ancillary-revenue
•http://www.traveller.com.au/budget-price-full-service-airasia-faces-new-competitor-2npfd
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