AirAsia’s most prominent strength lies in its highly profitable Low-cost Business Model. This is attributed to their relentless drive of dragging costs down through operating on a no-frills concept. AirAsia, however, has experienced difficulties in operating their flights on time leading to various directives from the government to improve their on-time performance. On the other hand, AirAsia has great potential in enhancing its passenger traffic spurred by the favorable growth of major Asian economies leading to a sizeable middle-class.
On the contrary, rising oil prices will magnify its fuel costs which currently account for about 60 per cent of its annual operating costs. The paper further necessitates on the importance of expanding AirAsia’s revenue channels to create a more sustainable and comprehensive revenue model. A major overhaul of its service delivery process is required to overcome the troubles of on-time performance. Also, subsequent in-depth analysis of the emerging economies should be carefully carried out to capture the first mover advantage.
Moreover, in minimizing the risk of rising fuel costs, AirAsia should consider maximizing its hedging policy. 1. 0INTRODUCTION The purpose of the report is to provide a medium of information sharing among various stakeholders of AirAsia. The report will also be useful for further research purposes by academicians. Various online sources, books and other aviation industry documentations were used in conceiving the report. 1. 1INDUSTRY OUTLOOK The cold reality is that the airline industry is difficult to gauge and complex in structure. Most markets eventually mature into intensely ompetitive arenas where very few players are able to earn consistent profits. Asian airlines have enjoyed a few years of healthy returns, reflecting relatively light competition and robust growth, but the signs of deepening competition and worsening market conditions are now evident in the region. Indicative trends include recent trends of profit erosion in the industry, and the withdrawal of state protection granted to Asian carriers. Furthermore, the threat from growing low-cost carriers (LCCs) will mean a loss of market share for the traditional full service carrier.
The Term Paper on Cost Leader Firm Strategy Market
Business-level strategy can be defined as the strategy that is chosen by a company to hold a competitive advantage within the market that it is involved with. Such a strategy has to be chosen by firms because of the intense competition that exists within a certain industry and thus managers, see the need to formulate business-level strategies that are geared towards creating and maintaining a ...
Projections show that LCCs in the Asia Pacific region will increase their presence, resulting in an increase of capacity share from less than 10% to 25% of the available seats. (Malaysia Airlines, Five Star Value Carrier: Business Transformation Plan 2008) AirAsia boasts of an impressive turnaround, which at best can be described from rags to riches. With its spurring growth and impressive profits cementing its status as the largest and best-performing low-cost airline in Asia, backed by extensive route coverage and a low-cost concept popular among the commoners, the carrier is an icon capable of pursuing and resisting competition.
Presently, Firefly which has been in existence for a year is an emerging airline in the low-cost market. Firefly – Malaysia’s first community airline is a wholly owned subsidiary of Malaysian Airline System Berhad. Firefly has experienced steady growth by offering the quickest routes in the air within Peninsula Malaysia, and to famous tourist destinations in Thailand, aligning itself with the Indonesia-Malaysia-Thailand Growth Triangle (IMTGT) agenda.
The carrier pursues the theme of enabling people to reach their destinations faster, bring communities closer by overcoming geographical constraints and linking Malaysia to the rest of the world in line with the policy of simple air service, no frills and cost efficiency. Firefly looks to engage itself in a competitive scenario with its rival airline – AirAsia, by replacing its current fleet with an environmental friendly aircraft. (Getting to know Firefly n. d) Emerging statistics during the past year have shown that emerging low-cost carriers in the Asia-Pacific region are recording more positive earnings.
The Term Paper on Is it Ethical for Regional Airline to Pay First Year
As compared to other airline workers, pilots are the most costly with labor being the largest cost for all airline companies. In fact, contract negotiations between pilot unions and the airline management are usually bitter. Recently, contract negotiations between the world’s largest airlines, UAL Corp’s, and its pilots resulted in the increase of costs throughout the airline or aviation industry. ...
Despite AirAsia reporting more than 100% growth in net profit and earnings before interest and tax for the financial year ending June 2007, other carriers such as Singapore’s Tiger Airways, Thai low-cost carrier Nok Air and Jetstar Asia are thought to have sharply reduced their losses over the past year (Ionides, N 2007).
Philippine carrier Cebu Pacific has meanwhile been going from strength to strength while another player to watch, privately held Lion Air of Indonesia, is talking of a major expansion (Ionides, N 2007).
In 2001, the airline was purchased by former Time Warner executive, Tony Fernandes’ company, Tune Air Sdn Bhd. He then turned the heavily indebted airline around and made profits in 2002 and launched new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as US $0. 27. A second hub was opened at Senai Airport in Johor Bahru near Singapore in 2003. It has since then added numerous destinations to its routes some of which include Bangkok, Singapore, and Indonesia.
In 2004, flights to Macau were launched and in 2005, AirAsia started flying to Philippines, Mainland China, Vietnam and Cambodia. The first of its kind in Asia, a budget terminal was opened near Kuala Lumpur International Airport in March 2006 at a cost of USD 29. 2 million and spanning over some 116, 000 square feet as the home of AirAsia Bhd with an initial capacity of 10 million passengers per year with an expected rise to 18 million by the year 2007. AirAsia is currently the main customer of the Airbus A320.
The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. With the aid of the ever-fast evolving mobile technology, AirAsia became the first airline in the world to introduce mobile booking where guests can now book their seats, check flight schedules and obtain latest updates on AirAsia promotions in August 2003. (Company profile – The story so far n. d. ) January 2004 saw a milestone in Asian aviation history when AirAsia formed a partnership with Shin Corporation to develop a low fare carrier in Thailand, Thai AirAsia.
The Business plan on Airline Operations Under Far 135
Airline Operations Under FAR 135 Being the aircraft operator under the Federal Aviation Regulation 135 is a very complicated and responsible task. The approval for operating in these conditions is usually given to large aviation companies, which operate in heavily loaded destination and utilize the latest and most capacious aircrafts. Given the case of FAR 135 and New York-Los Angeles route with ...
AirAsia went public in November 2004 when the airline listed itself on the Bursa Malaysia (formerly Kuala Lumpur Stock Exchange) in what was one of the largest initial public offering (IPO) in Malaysia. The airline raised a whopping RM 717. 4 million that it said would assist in its rapid network expansion. In December, 2006 AirAsia announced its five year plan to further boost its presence in Asia. This plan included the enhancement of its route network by connecting all the existing cities in the region and expanding further into Indochina, Indonesia, Southern China and India.
Hubs in Bangkok and Jakarta would be developed through its sister companies Thai AirAsia and Indonesia AirAsia, which would increase the airline’s frequency and develop new routes. AirAsia now operates over 200 flights a day, to 75 domestic and International routes covering Malaysia, Thailand, Indonesia, Macau, China, Vietnam, Laos, Cambodia, Australia and the Philippines. Figure 1 1. 3COMPANY OPERATIONS With the simple business philosophy of ‘Now everyone can fly’, AirAsia’s low fares aims to make flying affordable for everyone. It strives to make travelling easier and convenient for all its customers.
Today, it is the best low fare airline in the Asia – Pacific Region. AirAsia’s operations are based on the following key strategies: 1. 3. 1. Low fare, No-frills AirAsia’s fares are considerably lower than those of other operators. The “no frills” tag would mean that guests will have to do without other accompaniments such as meals, frequent flyer miles or airport lounges in exchange for low fares up to 80% as compared to other low-cost operators. AirAsia recently introduced ‘Snack Attack’, where guests now have the choice of purchasing food and drinks on board at affordable prices. 1. 3. 2. Frequent flights
With high frequency service, the carrier ensures guest convenience is met. The airline practices a quick turnaround of approximately 30 minutes –the fastest in the region, resulting in high aircraft utilization, lower costs and greater airline and staff productivity. 1. 3. 3. Guest Convenience and Satisfaction Convenient service, ease of travelling and affordability are believed to be the key components in achieving guest satisfaction. This has been done through accommodating telephone booking service via its nationwide call centre equipped with 180 lines receiving an average of 6,000 calls daily.
The Essay on Recommending a Low-Cost Customer Service
Executive Summary Acme De Mexico’s Manager has requested assistance in developing a minimum cost daily assignment schedule for the customer service employees in their newly built store. Specifically, he wants to know the minimum total cost per day, which is the decision variable. He also wants to know the exact amount of part time and full time employees which will determine the total cost. The ...
Also, as Asia’s first online airline providing internet booking facility, AirAsia offers a new dimension in buying seats by logging on to its website, thus eliminating the need for phone calls and queuing. This complements the idea of “Ticketless service”, where guests no longer experience the hassle of collecting tickets. 1. 3. 4. Safety Safety has been at the core of its low-cost policy. The airline complies with the rules and regulations of International Aviation Safety and is regulated by the internationally reputed Malaysian Department of Civil Aviation.