Ridiculously low ticket prices are not their main marketing strategy for AirAsia but the airline regularly promotes its business in this way as it correlates directly with the airline’s mission of enabling everyone to fly. Being a low-cost airline, it needs to constantly remind customers of its benefit and regularly advertisements promoting their unbelievably low ticket price in order to generate word-of-mouth publicity. (AirAsia, 2005) People might wonder how can AirAsia sell tickets at those prices regulary and still make millions of ringgit revenue in the process.
The answer is simple because AirAsia is simply making lemonade out of lemons, right where the lemons are found (Sen Z. & Ng, J. , 2008).
AirAsia realized that not every seat on every plane that takes off is occupied, so rather than to allow seats to go unoccupied, AirAsia is willing to offer them at incredibly low price. AirAsia does not care whether the seats are sold or not, but with this business tactic it eventually enable the company entrenching its position in the minds of customers as a true low-cost airline. Besides the innovation of AirAsia in providing cheaper ticket prices, Tony did not stop in expanding its business network.
Some analysts compliment that Tony was so creative in breaking the ice between countries by setting up joint ventures with regional partners and expanding routes first routes to Thailand and Indonesia, and later to Macau and China. (CNN Travel, 2004) For example, Thai AirAsia was established on 8 December 2003 as joint venture with Shin Corporation. In this joint venture, AirAsia hold 49 percent of Thai AirAsia with 1 percent being held by a Thai individual and the remaining 50% is held by Shin Corp, which is owned by the family of Thailand’s prime minister, Thaksin Shiawatra.
An airline’s ticket price is determined by several factors to include time of day a consumer wishes to travel, day of the week such as Tuesday’s and Thursday’s are usually the most affordable days to travel, popular versus non-popular destinations, first class costs more than general class, cost of fuel, competition from other airlines, special factors such as discounts for military, government or ...
Shin Corp has financial strength, synergy in information technology and telecommunications, which is able to support AirAsia internet and mobile phone bookings. With this politically powerful backer, AirAsia can even grow faster than it expected because this helps AirAsia to open the Thailand market. (The Wall Street Journal, 2004) Besides aviation business, Tony also diversified his business so that the company sustainability will continue growing. For example, Tony started a hotel chain, Tune Hotels, based on the no-frills concept in 2007.
The first Tune Hotel was opened at the intersection of Jalan Sultan Ismail and Jalan Tuanku Abdul Rahman in Kuala Lumpur, Malaysia. As the company continue grow, Tony is aiming to have 100 hotels in world by 2015. (BERNAMA, 2011) 2. 7 Management of risk In today’s environment of economic uncertainty, AirAsia is doing everything possible to reduce costs and conserve cash. Tony always defined these risks are actually his opportunity for AirAsia to survive if they are being well managed.
The strategies to encounter this risks are identifying all critical risk, quantifying their impact and developing and implementing integrated risk management solution that align people, process and technology to maximize company revenue. For example, analysts and investors really worry about the pressure of oil prices may affected airline business. But AirAsia still performs excellent in financial results compared to MAS which declared its losses. When people asked Tony how he battle for the high oil prices, he covering it quite comfortably because of the highly effective cost structure that his management team has developed.
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He also did mention that his airline management team knows the price of every item for them to negotiate everything for example the cost of their senior management team, engineers, pilots and stewardesses. (Sen Z. & Ng, J. , 2008) Low cost is the only formula for AirAsia’s survival. Cost pressure is a real threat to its operations, and the price of oil is a more crucial issue to AirAsia compared with full-service airlines like MAS. People might think if AirAsia raises the ticket price, they will lost their customer else they will lose out on profits.
But Tony is confident that there are hundreds of ways to solve this problem rather than blaming the market fuels price. And AirAsia staffs will continue religiously working on it in order to keep its cost low. (Sen Z. & Ng, J. , 2008) 2. 8 Management of Change The launching of AirAisa X in 2007 was a great change in the company mission with the tagline “Now Everyone Can Fly Xtra Long”. Previously all AirAsia flights are short-haul airline within three-hour radius and all within Asia. To run this business he needs to have long-haul budget model flight and other landing facilities in Europe.
Therefore Tony take this opportunity to joint venture with Virgin Group and announced the formation of AirAsia X, as a new low-cost long-haul carrier that would provide fares from as low as RM9. 90 from Kuala Lumpur to the UK and a lot of cheaper fares were the average price would be 50 percent cheaper than market price. This huge change in Tony decision is due to the highly market demands for cheaper long-hauls fares. (Thestar Online, 2008) 2. 9 Management of Time Tony Fernandes is good in time management. In his company he is very emphasizes about the punctuality of his staffs.
Because he believes that if everyone is punctual to the work place then it will become a good culture in his company. Therefore it will eventually reduce the chances of flight delay due to the late arrival of the pilot for instance. Moreover Tony thinks everyone in his company play a part and there is no hierarchy between them. Without this position hierarchy different, he is actually creating a flat organization in his company where everyone is welcome to give their opinion in order to make the company grows.
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As a result, it allows tops management to get new information in shorter time compared to hierarchy organization where the information needs to be filtered by each department before it can go to the top management. 2. 10 Ability to See the Big Picture Initially, Tony had invited MAS to sit down and discuss the possibility of collaboration for the sake of national interest, before MAS partnered with other regional airline to set up a joint-venture of low-cost carrier.