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Air Asia’ s Core Competencies and its
success Factors
By : Nasser ALDhahli
SEGi University
DBA 2012
SCM -020314
MGT7144- Management Research Skills, Action & Strategy
Assignment 2 ( Group Discussion and Presentation)
IntroductionIncreasing liberalization of the regulatory environment in which regional and global airlines compete has created challenges for major carriers as well as opportunities for carriers that are able to deliver high-quality services at the lowest possible price.
As a result, low-cost airlines are an increasingly common sight in airports around the world where no-frill air carriers are providing reliable service at a fraction of the price charged by full-price competitors. such as AirAsia
Air Asia , Profile• Established in 1993 and commenced operation on 18 November
1996.
• 2001, it was purchased by former Time Warner executive Tony
Fernandes’s company Tune Air Sdn Bhd from the ownership of HICOM
Holdings Bhd for the token sum of only RM1, and with only 2 Boeing
737-300 aircraft together with RM40 million in debt.
• AirAsia Berhad is a Malaysia-based low-cost airline.
• The largest low-fare, no-frills airline and a pioneer of low cost travel
in Asia.
• Operates scheduled domestic and international flights to over 400
destinations spanning to 25 countries.
• Had flown over 100 million guests upon the core believe that ‘Now
Everyone Can Fly’.
• Main terminal hub is the Low-Cost Carrier Terminal (LCCT) at Kuala
Lumpur International Airport (KLIA).
• AirAsia’s associates companies- AirAsia X, Thai AirAsia (TAA), Indonesia
(IAA) and Malaysia AirAsia (MAA), and VietJet AirAsia.
Safety First
• High Aircraft
Utilization
• Low Fare, No
Frills
• Streamline
Operations
•Lean Distribution
System
• Point to Point
Network
Key Strategies
Air Asia.com 2012
Root of Competitive advantage of Air Asia
Adapted from Study slide For Dr. Abang, 2013
Capabilities Foster a dependency on Internet technology, eg. online booking,
online checking (flight status, promotions).
Investment in the AirAsia Academy.
Dynamic environment between employees.
No communication barriers between employers and employees,
friendly.
Aggressive marketing tactics, massive advertising, promotional
packages etc
Employees motivation- rewards free flights for their staff.
Offer customers the ticketless concept.
Low operating cost- wages, airport fees, short ground waits due
to simple boarding processes.
Keeping cost low- uses one type of aircraft, Airbus.
CORE COMPETITVE OF AIR ASIA
1- Usage of one type of aircraft
Economies of scale
Cost can be cut by 50%
Small inventories ( cube-square rule, power of purchasing)
Reduce time on employees training and learning curve
ASK: Available seat kilometers, which is the total number of seats available on scheduled flightsmultiplied by the number of kilometers these seats were flown.
Cost per ASK: Total operating expenses (excluding finance costs and taxation) divided by ASK. In theairline industry, this is comparable to ‘unit cost’.
Air Asia.com 2012
CORE COMPETITVE OF AIR ASIA Cont ,,,,2- Synergy between the AA management and the employees
Management support and motivate employees to work and creativity
Competitors find it hard to follow
3- Productive and Skillful employees
Employees create tips to help in procedures and save time, costs. example: the one type concept
4- Limited passenger service
Food and beverages are not included , transportation from the airplane to the airport not includes etc ….
Airport tax
Frequent, Reliable
Schedules
Standardization fleet of aircraft
High aircraft utilization
Product and skillful employees
and simple aggressive and
focused management
structure
Courteous, but limited passenger
service ( eg. No Meals)
Short Haul , point-to- point routes, often to secondary
airports
COMPETITVE ADVANTAGES LOW COST
Developed for this presentation
Strengths WeaknessesStrong management team consists of industry experts and ex-top government officials( all the board of directors have outstanding portfolio
Low cost operations (ticketless, online booking, online check-in, quick turnaround of 25 minutes, low fares and no frills)
Using single aircraft fleet (reduce the maintenance and training costs)
Enter and focus on potential market (lower and middle income group)
Multi-skilled and well-trained staffs to enhance the efficiencyStrong brand recognition, marketing approach and awareness
Service resource is limited due to low costs
Government interference and regulation on airport deals
Non-central location of secondary airports
Heavy reliance on outsourcing
Complaint from customers regarding the current overcrowded LCCT (handled about 17 million passengers instead of its capability to handle 15 million passengers)
Opportunities Threats
Expansion to new routes based on low cost philosophy (exploit growing markets like China, India)
Higher fuel costs means less profitable competitors may be forced out of business
Partnerships with Virgin airline to use existing strengths (brand recognition, landing rights)
Differentiate from old LCC model (include customer service and operation as full service airline)Long haul flight to approach undeveloped market (Air Asia X to Europe)
Accident and disaster affect customer confidence (Example: an aircraft skidded off the runway while landing at KCH International Airport on Jan 2011)
Aviation regulation and government policy (barriers in new routes expansion)
Full service airlines start cut costs to compete (MAS offered discounted fares with meals and comfortable seats)Entrance of other low cost couriers (Firefly, Tiger Airways)
Will Air Asia be able to sustain its Core?
Success factors• Combination of good timing, entrepreneurial vision and
some blind luck that may have run out• Testament to Fernandes’s capabilities as a effective leader
in a wide range of settings.• “The one thing the company managed to keep consistent
was its no-frills model and always offering value in low fares” (Lawton and Doh, P435)
Conclusion
AirAsia’s air fleet has grown with routes servicing 400 destinations in 25 countries with hubs in Malaysia, Thailand and Indonesia today. In addition, Tony Fernandes is responsible for this impressive rate of growth, with many analysts citing his no-frills, low-cost business model as some of the best industry practices.
Thank You!
NOW EVERYONE CAN FLY
References:Corporate profile. (2012). AirAsia. Retrieved from http://www.airasia.com/ot/en/about-us/corporate-profile.page.
Lawton, T. & Doh, J. The ascendance of AirAsia: building a successful budget airline in Asia. Ivey Case Study No. 2.
Clerment. Ong & Ivy Wong . Power Point Presentation on Air Aisa
Dr. Abang N Dahlan . (2013). Seminar 3 Topic 5 Strategy Research