University of South Pacific MBA – 439

2013Business Economics

Group 3

"Now Everyone Can Fly".

Please fasten your seatbelts…

Revenue: 4Q 12 USD 1.62 Billion(1 Malaysian ringgit = 0.3257 USdollars)

Number of employees: 8,000+

HQ location: Kuala Lumpur, Malaysia

Ownership: Listed on the Malaysian stock exchange

Year founded: 2001

The company grew from two planes in 2002 to a fleet of 120 aircraft flying 30 million people

AirAsia

AirAsia History

• 7 September 2008 - 106 new routes added to its then-current list of 60.

• On 2 April 2012 Air Asia had their first flight from Sydney to Kuala Lumpur.

• August 2011, AirAsia agreed to form an alliance with Malaysia Airlines by means of a share swap.

Subsidiaries• Indonesia AirAsia

• AirAsia Japan

• Thai AirAsia

• Air Asia X

• AirAsia Philippines

• Air Asia India

Destination Map

• 142 routes to 78 destinations (Over 400 daily flights covering Indonesia, Malaysia and Thailand).• International routes:

• Australia• Brunei, Cambodia• People's Republic of China• India, Nepal• Japan• Laos, Philippines• South Korea, Singapore• Sri Lanka, Taiwan, Vietnam.

•Over 400 daily flights covering: Indonesia

• Malaysia and Thailand

FLEETFleet size 120 (+355 orders)

Competitors• EasyJet plc

• Malaysian Airline System

• Ryanair Holdings

• Singapore Airlines Limited

• Tiger Airways.

• Southwest Airlines

• Thai Airways International

Organizational Structure

STRATEGY

Vision

“To be the largest low cost airline in Asia and serving 3 billion people who are currently underserved with poor connectivity and high fares.”

Mission

• To be the best company to work for whereby employees are treated as part of a big family

• Create a globally recognized ASEAN brand

• To attain the lowest cost so that everyone can fly with AirAsia

• Maintain the highest quality product, embracing technology to reduce cost and enhance service levels

VALUES

• Safety first

• High aircraft utilization

• Low fare, no frills

• Streamline operations

• Lean distribution system

• Point to point network

Employees before customers

"employees come number one, customers come number two. If you have a happy workforce they'll look after your customers anyway.“ Tony Fernandes.

Financial KPI’s

Third straight increase in quarterly profit as a surge in passenger numbers helped offset higher fuel costs.

Net income increased 3.6 percent to 157.8 million ringgit ($52 million) in the three months ended Sept. 30 2012.

Revenue rose 15 percent to 1.24 billion ringgit.

• Outsourcing

•Limited human resources

•Heavy reliance on IT

• Non-central location of secondary airports

• Outsourcing

•Limited human resources

•Heavy reliance on IT

• Non-central location of secondary airports

WEAKNESSES

• Strong management Team • Strong Strategy and Execution – plan on fuel hedging, buying low cost airbuses.• Low cost Model• Single type fleet• Efficient Operations• First to market with ICT collaboration• Strong Brand Name• Multi-skilled Staff – seamless transition within workforce

• Strong management Team • Strong Strategy and Execution – plan on fuel hedging, buying low cost airbuses.• Low cost Model• Single type fleet• Efficient Operations• First to market with ICT collaboration• Strong Brand Name• Multi-skilled Staff – seamless transition within workforce

STRENGTHS

INTERNAL

SWOT Analysis

•Entrance of new LCCs • High fuel price decreases yield • Regulations and Policies• Customer confidence affected by Terrorist Attacks, Accidents• Increase in operation cost in producing value-added services • System disruption on IT

•Entrance of new LCCs • High fuel price decreases yield • Regulations and Policies• Customer confidence affected by Terrorist Attacks, Accidents• Increase in operation cost in producing value-added services • System disruption on IT

•

THREATS

• Long haul flights – new routes

• High fuel prices – survival of the strongest airlines

•Industry consolidation means new routes and airport deals

•Recycling routes abandoned by struggling rivals

• Long haul flights – new routes

• High fuel prices – survival of the strongest airlines

•Industry consolidation means new routes and airport deals

•Recycling routes abandoned by struggling rivals

OPPORTUNITIES

EXTERNAL

SWOT Analysis

• Threat of Entry – Low

• Power of Suppliers – Moderately Low

• Power of Buyers – Very High

•Threat of Substitutes – Medium/Low

• Rivalry amongst existing competitors – very high

• Threat of Entry – Low

• Power of Suppliers – Moderately Low

• Power of Buyers – Very High

•Threat of Substitutes – Medium/Low

• Rivalry amongst existing competitors – very high

Porter’s 5 Forces

• Oligopoly – Since Air Asia and MAS are large firms competing with each other.

• As a oligopoly market structure both firms have ability to control their prices to maximize profits.

• Both Air Asia and MAS formed high entry barriers due to economies of scale and limited licences.

•However if these two decide to collaborate, it becomes a large monopoly.

• Oligopoly – Since Air Asia and MAS are large firms competing with each other.

• As a oligopoly market structure both firms have ability to control their prices to maximize profits.

• Both Air Asia and MAS formed high entry barriers due to economies of scale and limited licences.

•However if these two decide to collaborate, it becomes a large monopoly.

Market Structure

Low Cost Model

• Compete in the budget carrier space, currently dominated by IndiGo and SpiceJet.

• JPMorgan said. “Challenging to sustain higher yields and entry of a new player could put pressure on pricing."

• Shares in SpiceJet, India's No. 4 operator by market share, fell sharply.

• Compete in the budget carrier space, currently dominated by IndiGo and SpiceJet.

• JPMorgan said. “Challenging to sustain higher yields and entry of a new player could put pressure on pricing."

• Shares in SpiceJet, India's No. 4 operator by market share, fell sharply.

Economic Outlook –

Entry into India - The target: "1 million people that travel by train".

Opportunities:

• Vast population. • Enormous size and growing middle class.

Opportunities:

• Vast population. • Enormous size and growing middle class.

Economic Outlook –

Economic Outlook –

Challenges:

• Indian airports are very expensive. • Jet – Etihad deal looming. • Regulator uncertainty - Indian govt.

• High operating costs.

Challenges:

• Indian airports are very expensive. • Jet – Etihad deal looming. • Regulator uncertainty - Indian govt.

• High operating costs.

Awards and Recognition

Sustainable Growth and Competitive Advantage

•Aggressive in its branding and marketing campaigns

•“Single aircraft type” in use, which results in fixed costs and low cost operations.

•Its flat organizational structure

•Employees have multiple roles so as to save on costs.

•Employees are given opportunities to grow in the organisation.

•Available Seat per Kilometre (ASK) - Having the lowest cost on available seat/kilometre ensures efficiency and cost savings.

Conclusion

Innovative mindset and keeping faith in its employees to maintain a competitive advantage.

Financially shrewd and have dynamic layered-hedge strategy so as to save on fuel costs due to volatile oil prices.

Partnerships with various corporate organization and diversify its services such as partnerships with Financial institutions. Not only will this provide extra revenue streams but increase its brand power and image, via indirect marketing.

Diversification would also spread risks among partners. It should continue to be aggressive in advertising, innovative and first to market new ideas and seek to enter other countries/regions.

Referenceshttp://en.wikipedia.org/wiki/AirAsia_Group_destinations

http://www.flightglobal.com/blogs/asian-skies/2009/10/airasia-tries-to-move-low-cost.html

McNamara,F, 2013, ‘Academia.edu’ ,Air Asia: The Worlds Lowest Cost Airline, viewed 12 March 2013,