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Mgt 4880 Prof:


Naomi Gardberg, PhD

Group 11: Jonathan,

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Case Agenda

Background
Central Challenge
S.W.O.T Analysis
Management Alternatives

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Jonatha

AirAsia Background

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Founded in 1996 as Malaysias second airline


AirAsia is a low-cost airline based in Malaysia
Financial problems forced a change in order to
rescue the airline
In late 2001, AirAsia was offered to investors
Tony Fernandes and other investors purchased the
airline for 26 on September 8, 2001
The new ownership agreed to pay 50% of AirAsia
net liabilities
In 2011, Tony Fernandes became the CEO of
AirAsia
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Jonatha

AirAsia Background

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Conor McCarthy is a co-founder and a member of


the executive management team
In late 2001, AirAsia was revitalized in Malaysia as
a no-frills airline to attract a niche market
In January 2002, AirAsia was launched with 3
Boeing B737 aircraft
In 2005, Boeing B737 was replaced with Airbus
A320
AirAsia was a low-fare and a domestic airline
AirAsia served Southeast Asia and its surrounding
regions
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Jonatha

AirAsia Aircrafts

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Jonatha

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AirAsia Executive & Co-founder

Conor
McCarthy

Tony
Fernandes

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Jonatha

Critical Partner

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"No-one believed that I'd get AirAsia off the ground,


no-one, except Credit Suisse
-Tony Fernandes

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Credit Suisse

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Developed appropriate solutions to help finance


the growth of AirAsia
First capital raise of $30 million in 2001
Warned AirAsia to close options which would
negatively affect the company such as overpaying
for fuel
IPO in 2004 raised $227 million (AIRA:MK)

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Jonatha

Expansion in Asia

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Government regulation in Asia forced AirAsia to


expand through Joint Ventures
Foreign companies could not control domestic civil
aviation operations
Affiliate Airlines: Thai AirAsia, Indonesia Asia,
Philippines AirAsia, AirAsia Zest, AirAsia Japan,
and Air Asia India
Air Asia X established as the long-haul operations

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Jonatha

AirAsia Routes Map


80
70
60
50
40
30
20
10
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Column2

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Perio
d

Destinations
Served

Jan-02

Jun-03

11

Jun-04

26

Jun-05

52

Jun-06

65

Aug07

75

AirAsia Central Challenges

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How to expand globally while


maintaining status as leading
low cost carrier?

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Yahya

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Challenge Drivers

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Alliance
Joint Venture
Bilateral

Deregulation
Liberalization
Privatization

Rise of
- LCCs
- Traffic

Old Airlines
Government
Controlled
- Seat Capacity
- Routes
- Fares

New Airlines
- Entry to
market
- Reduce Prices
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Competition
- Low prices
- Better Service

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Cost Drivers
Basic
products
and
services

Only single
class seats

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No
No
No
No

hot meals
baggage transfer between flights
aerobridges for un/boarding
assigned seats

Kitchen removed ( 20%


more seats)
Reduces staffs and training
costs
Ticketless flights

Yahya

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AirAsia Value Chain


Support
Activities

Infrastruc
ture
HRM
Technolog
y
Developm
Procurem
ent
ent

M
ar
g
Computer Reservation System, Yield Management, Market in

Flight Route, Pilot and Flight Attendant Training,


Incentive Management

Research

Ordering and Receiving, Delivery Instruction, Monitoring Suppliers

Ticket
Reservatio
n,
Aircraft
Operations
,
On-Board
Service

Inbound
Logistic

Operati
ons

Flight
Connection
,
Commissio
n
Payment,
Safety and
Security
Procedures

Outbou
nd
Logistic
Primary
s

Activities

Yahya

Promotion,
Campaign,
Online
Sales,
Flyer
Program

Marketi
ng
& Sales

Customer Relationship,
Complain Follow-up,
Hotel
Reservation

Route
Planning,
Fuel
Manageme
nt,
Flight
Scheduling

ar
g
in

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Business
Stakeholder
BusinessStrategy,
Strategy,Relationship
RelationshipBuilding,
Building,
Management
Stakeholder Management

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Service

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International Routes

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Berlin
Manchester
Stansted

Moscow
Prague
Shenyang Dalian
Tianjin

United Kingdom

Sapporo

Osaka
Hangzhou
Lahore
Fukuoka
Pusan
Cairo Sharjah Karachi
New Delhi
Xiamen
Jeddah Mumbai
Hyderabad
Goa
Bangalore

KUALA
LUMPUR

Brisbane
Targets July 2007

Perth

Targeted Future Destinations

Adelaide
Melbourne

AirAsia Headquarter Malaysia

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Yahya

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Closest Competitors

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Competitors Benchmark
Airlines Based in Average trip
length
AirAsia

Malaysia

Southwest U.S.

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Operating
cost per ASK
U.S. Cents

1,100 1,300

$0.034

1,000 - 1,300

$0.056

SpiceJet

India

900 - 1,100

$0.092

EasyJet

British

900 - 1,100

$0.078

Air Arabia

UAE

2,100 - 2,300

$0.038 * (Potential
threat)

Air Berlin

Germany

1,000 - 1,300

$0.066

ASK: Average-seat-kilometer or Available seat kilometer


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S.W.O.T Analysis
Strengths
AirAsia strong
management team
Strategy execution
and formulation
Brand name
Excellent utilization of
IT
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Weakness
es
Limited services and
products due to cost
strategy

High level of Customer


Services complaints
Operational policies
procedure
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AirAsia Business Model

Simple Product
No-Frill

Low Operating
Cost

Low-Cost Carrier

Positioning

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S.W.O.T Analysis
Opportuniti
es
Government funding
of infrastructure
Few substitutes
Increase population
of middle class in
Asia
Removal of subsidies
and tax expenditure

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Threats
Departure charges ,
security charges, and
landing charges, which are
beyond AirAsias control
Threats of potential
entrants and rivalry within
the industry
Increasing fuel price
around the world
Bargaining power of
suppliers and customers
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Management Alternatives

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AirAsia should form a joint venture


Operating out of secondary airports
Offer more on-board services to passengers
Sign a code-sharing agreement
Create more new routes around the world

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Entry Mode Strategy


Compa
ny

Virgin Group

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Entry
mode

Equity joint venture

Virgin Atlantic

AsiaAsia should assume

Virgin Express

a majority equity joint

Virgin Blue

venture

Virgin USA

Contributing more than


50% of the investment

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Pros & Cons of Joint


Venture
Pros
Contribution of valuable
expertise
Spreading operational
risks among several
investors
Improvement of efficiency
Access to a global market
too huge for any existing
airline to dominate
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Co
ns

Required major
changes in operation
practices
Required major new
investments
Primary in bigger planes

Loss of operational
independence

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THANK YOU

We hope you do enjoy your

Bibliography

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Fernandes, Tony. UKE First Annual Students Leaders Summit.


www.airasia.com. 4 Aug 2007. Web. 7 Mar. 2015
Grant, Robert M. "Case 9 AirAsia: The World's Lowest Cost Airline."
Bocconi University (2009), 2010. Web. 4 Mar. 2015
Lin, Eric; Wei, Richard. UBS Investment Research Asia Airline
Sector. www.Ubs.com. 1 Feb 2013. Web. 6 Mar. 2015
Shafarini, Nur; Rashidah Nur; Azmawati, Nor. MIS 750:
Management Information Systems. 1 Feb 2013. Web. 06 Mar. 2015
ST. S, Michael. "A Study on Low-Cost Leadership Strategy: The Case
of AirAsia." Jinan University, 4 2013. Web. 09 Mar. 2015
Suisse, Credit. "About the Partnership between Credit Suisse and
AirAsia." AirAsia - Credit Suisse. Credit Suisse, 11 Nov. 2013. Web.
4 Apr. 2015
UBS. UBS Transport Conference London. www.Ubs.com. 19 Sep
2006. Web. 10 Mar. 2015

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