Air Asia

Air Asia

Frame Work

HistoricalView

Current ConditionWhat Air Asia Should Do

Next

EstablishmentLucrative Offering

Professional HR Support

Mission & Vision

Existing Key Business Strategic

Its Achievement

The Challenge

Competitive Advantage

SWOT Analysis

Growth Strategy

Strategy FormulationRecommended Air Asia Strategic Program

Key Success Factor

Research Conduct

Frame Work

HistoricalView

Current ConditionWhat Air Asia Should Do

Next

EstablishmentLucrative Offering

Professional HR Support

Mission & Vision

Existing Key Business Strategic

Its Achievement

The Challenge

Competitive Advantage

SWOT Analysis

Strategy FormulationStrategy PrioritizingRecommended Air Asia Strategic Program

Research ConductedKey Success Factor

Research Conducted

Customer Preferences* Most Important Factors according to Consumers

Price Scheduling(time of flight) Punctuality Ease of booking tickets Seating and general in-flight cleanliness Baggage Capacity Rescheduling and Refund policy Ground handling services Customer Service

* ) Sources : Thesis, Factors Influencing Consumer Preferences while choosing between Budget Airlines, Zarine Susan George, 2011

Most Less Important Factors according to Consumers Quality of food available in-flight In-flight entertainment Baggage capacity Premium services such as priority boarding,seating etc Ground handling services

Reason to Choose Each Carrier Type

Reason to Choose Full Carrier Services Punctuality Services Safety

Reason to Choose Low Cost Services Attractive Fare Accessibility to Ticket Distribution Channel Safety

Reason to Choose Air Asia

Cheap Destination Travel Package Excellence Services Pre-Booking Advantage

Key Success Factor

Services Promotion (Attracting Customers) Efficient Management of Cost (Managing

Finances) High Operational Efficiency (Managing the Fleet) High Core Service Standards (Managing the

Services) Strong People and Management (Managing

People)

Five Forces

Industry Rivalry = HIGH

•Price competition is intense•fixed cost is high,•low marginal cost•Excess capacity

Suppliers = HIGH

•Few aircraft makers •Bulky aircraft purchases•Labor unions with negotiationpower,•Aviation fuel•Uncontrollable airport related cost

Customers = MEDIUM – HIGH and INCREASING

•Customers are highly price sensitive and have lot of power•No switching cost•Loyal toward major brand

Substitutes = LOW•international airlines : airline is the only way for travelling to long destinations. •national airlines : passengers can use ground travel like train or bus as substitute.

Potential Entrants = LOW

•High barrier to entry and exit•High investment•Loyal toward major brand•FSC enter LCC market

Internal Analysis - Air Asia vs Other LCCFunction Capabilities Strength Weaknes

sNote

Inbound Logistics

Aircraft Scheduling

x High utilization aircraft

Operational Quality of food x quality of food available in-flight need to be improved

Punctuality x Better on time take-off, less delay and cancellation

OM Facility x Does not have own OM facility

Outbound Logistics

Ground handling services

x Better check-in process and baggage handling

Location on Airport

x Caused by secondary airport used

Marketing & Sales

Price x Cheaper than other LCC

Brand x Brand name is well established in Asia Pacific.

Distribution Channel

x Easy to Access

General Services

Customer Services

x Many complaint from customer (didn’t answer, etc)

Cost Management

Business Model x Low cost philosophy

Human Resources & Organization

Management Team

x Very strong management team with strong links with governments and airline industry leaders

Organization x Flat organization structures and effective staff policy

Internal Analysis - Air Asia vs FCSFunction Capabilities Strengt

hWeaknes

sNote

Operational Punctuality x Worse on time take-off, less delay and cancellation

On-board services

x Worse on-board services

Outbound Logistics

Ground handling services

x Related to baggage handling, free ckeck-in, etc

Location on Airport

x Secondary vs primary airport used

Marketing & Sales

Distribution Channel

x Easy to Access

Price x Cheaper

Product Premium services

x Related to low fare no frill

Cost Management

Business model x Low cost philosophy

SWOT Analysis - Air Asia

Support

Opportunity

1. ASEAN open skies and other region in East Asia

2. The population of Asian middle class will be reaching almost 700 million by 2010

3. Technology in term of Internet use, mobile internet iand e-payment is growing rapidly

4. Higher fuel costs means less profitable competitors may be forced out of business.

Strength

1. High utilization aircraft2. Effective cost management through

well-proven business model 3. Better in punctuality than Other LCC4. Better in ground services than Other

LCC5. Well-establish brand name in APAC

through business group 6. Effective distribution channel (via IT

and partnership)7. Strong management team with strong

links with governments and airline industry leaders

8. Flat organization structures and effective staff policy

Weakness

1. Does not have its own maintenance, repair and overhaul (MRO) facility.

2. Non central location on secondary airports.3. quality of food available in-flight need to

be improved4. Lack of customer services quality5. Worse in Punctuality than FSC6. Worse in ground services than FSC7. Worse in on-board services than FSC8. Premium services need additional cost

Threat

1. Increasing of oil price2. Certain rates like airport departure,

security charges and landing charges are beyond the control of airline operators

3. Users’ perception that budget airlines may compromise safety to keep costs low.

4. Entance of new rivalry from FSC (lower cost offering from FSC)

5. High competition among other LCC (especially in term of price war)

Barrie

r

Strategy Formulation – TOWS Matrix

SO Strategy

•Enhance route system to new potential destination city in ASEAN and East Asia and Australia (market penetration)•Enhance the use of internet by implementing mobile ticketing & check-in•Build partnership with e-money provider to facilitate the payment•Maintain price at the same level to give pressure to less profitable competitor•Continue develop add-on services & bundling services with travel and tour company

WO Strategy

•Develop internet and mobility based customer relationship management to improve customer services quality•Build own MRO to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low

ST Strategy

•Maintain cost leadership business model as the rising of oil price and uncertainty airport cost related will lead to decreasing profit. •Deploy aggressive campaigne to increase more customer confidence regarding LCC safety•Focus on profitable route and exit from unprofitable route

WT Strategy

•Build own MRO to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low and increase customer confidence regarding LCC safety•Improve customer services quality by deploying contact center services to increase customer satisfaction•Re-define integrated planning process to improve punctuality to compete with FSC•Improve the rest with as is effort (with no significant extra cost)

STRENGTH (S) WEAKNESS (W)

OPPORTUNITIES (O)

THREATS (T)

Strategy PrioritizingStrength Weigh

tScor

eTota

l

1. Aircraft utilization 7.5 4 30

2. Cost management 20 4 80

3. Punctuality (versus LCC) 10 3.5 35

4. In Ground services (LCC) 10 3 30

5. Brand name in APAC 10 3.5 35

6. Effective distribution channel 15 3 45

7. Strong management team 20 3.5 70

8. Organization & Staff policy 7.5 3 22.5

TOTAL 100 347.5

Weakness Weight

Score

Total

MRO Facility 15 2 30

Location at Secondary airports 10 2 20

Quality of food 10 2.5 25

Lack of customer services quality 30 3 90

Punctuality (versus FSC) 15 3 45

In Ground services (versus FSC) 7.5 3 22.5

On board services (versus FSC) 7.5 3 22.5

Permium services 5 3 15

TOTAL 100 270

Strength Weight

Score

Total

1. ASEAN open skies 30 3 90

2. Asian middle class population 30 3.5 105

3. Trend for IT use 20 3 60

4. Elimination of competition 20 2.5 50

TOTAL 100 305

Weakness Weight

Score

Total

Oil Price 25 3 75

Airport rates 15 2 30

Users’ perception of safety in LCC 15 2.5 37.5

Competition from FSC 20 3 60

Price War 25 3.5 87.5

TOTAL 100 290

Strategy Prioritizing – TOWS Mapping

PertumbuhanMengoptimalkan kekuatan untuk menangkap peluang

yang ada

Diversifikasi

Stabilisasi

Bertahan

OO

TT

SSWW

SW = 77,5

OT = 15

Recommended Strategic Program• Keep existing competitive advantage “low fare no frills” to

compete with Full Carrier Services, without giving extra frill to customer

• For a short period of time, keep price as is for giving pressure to less profitable competitor

• Advertise in any media like internet, television and newspaper about safety factor in LCC especially in AirAsia

• Develop supply – demand analysis to choose new route system for market penetration and retention

• Develop mobile application for reservation, cancellation and for CRM

• Add more partner in travel packaging services, bundling with flight services

• Implementing outsourcing contact center for outbund and inbound services to facilitate communication with customer

• Evaluate exsiting integrated planning process and improve business process in managing the flight