Executive Summary

AirAsia Berhad is an airlines organization that gives aircrafts benefits locally as well

as globally. Inside Malaysia, AirAsia has focused on a customer market that comprises of

youthful grown-ups, working grown-ups and also middle income groups. The distributions of

AirAsia's administration service for Malaysia and as well as for different nations are through

its official site, www.airasia.com and travel organizations which are scattered around

Malaysia. Through an analysis of the inside and outside condition of AirAsia, it shows that

AirAsia appreciates critical qualities in its ease benefits, its successful and centred

administration and its basic plan of action. Meanwhile their weaknesses are restricted

administration assets because of ease, constrained HR and in addition its overwhelming

reliance on outsourcing. AirAsia faces a solid outer condition highlighted with the minimal

effort tickets that could be purchased by all levels of society.

 Table of Content

Executive Summary.................................................................................................
Introduction of Air Asia.........................................................................................
Company Background................................................................................................
Internal Environment
Mission Statement.......................................................................................................
Organizational Structure............................................................................................
Corporate Culture.....................................................................................................
External Environment
Competitive Environment.........................................................................................
Economic Environment............................................................................................
Technological Environment.....................................................................................
Political and Legal Environment.............................................................................
Sociocultural Environment demographics...............................................................
SWOT Analysis
Strengths..................................................................................................................
Weakness................................................................................................................
Opportunities..........................................................................................................
Threats......................................................................................................................
Marketing Objectives
Marketing Strategies...................................................................................................
Demographics.......................................................................................................
Media Habits..............................................................................................................
Organizational Markets...............................................................................................
Positioning Strategy....................................................................................................
Marketing Mix
Product Strategies........................................................................................................
Efficiency........................................................................................................
Light frequency........................................................................................................
Mobile centre.........................................................................................................
Easy payments.........................................................................................................
Pricing Strategies:
Penetration............................................................................................ ..................
Pricing....................................................................................................................
Promotion Strategies..............................................................................................
Supply Chain Strategies...........................................................................................
Appendix
Company Background

Air Asia Berhad is an established in 1993 with commenced operations in 1996. In

2001, Tune Air Sdn Bhd Tony Fernandes’s company purchased this airline from DRB-Hicom.
Air Asia never look back after that. Air Asia’s first and main base is the Low Cost Carrier
Terminal (LCCT) at Kuala Lumpur International Airport, while its secondary hubs are at
Kota Kinabalu International Airport, Senai International Airport and Penang International
Airport.

Air Asia is well known as Malaysian low cost airline and even Asia’s largest low fare,
no frills airline. The airlines claims ‘No Admin Fee’, but has some fees for services which are
free on other airlines. Air Asia slogan is ‘Now Everyone Can Fly’. Being the home of Air
Asia, the LCCT is the budget terminal in KLIA, opened on 23 March 2006. LCCT is said to
be carried about 10 million passengers a year.

The Air Asia subsidiaries are the likes of Thai Air Asia, Indonesia Air Asia, Viet Jet
Air Asia and Air Asia Red Tax. Meanwhile, Air Asia associate companies are Air Asia X,
Tune Hotel and Tune Money. To be the largest low cost airline in Asia and serving the 3
billion people who are currently underserved with poor connectivity and high fares.

AirAsia Berhad is an airlines organization that gives aircrafts benefits locally as well
as globally. Inside Malaysia, AirAsia has focused on a customer market that comprises of
youthful grown-ups, working grown-ups and also middle income groups.

The distributions of AirAsia's administration service for Malaysia and as well as for
different nations are through its official site, www.airasia.com and travel organizations which
are scattered around Malaysia. Through an analysis of the inside and outside condition of
AirAsia, it shows that AirAsia appreciates critical qualities in its ease benefits, its successful
and centred administration and its basic plan of action.

Meanwhile their weaknesses are restricted administration assets because of ease,

constrained HR and in addition its overwhelming reliance on outsourcing. AirAsia faces a
solid outer condition highlighted with the minimal effort tickets that could be purchased by
all levels of society.
 Marketing Objectives

The AirAsia marketing objectives are, “to be the lowest cost short haul airline in
every market that they serve, to continuously launch new routes under AirAsia a. One of the
objectives of AirAsia is carry 70 million passengers a year within 6 years starting from 2014.
They also plans to introduce more routes, add frequencies and develop the existing ones.
AirAsia turn their low-cost carrier terminal at KL International Airport (KLIA2) into the
regional hug for budget travel to achieve their philosophy of “Now Everyone Can Fly”.

Marketing Strategy

In order to accomplish its goals, AirAsia will lead its marketing activities toward the
following strategies:

Target Market Strategy: AirAsia will continue to target its existing customer’s while
expanding its routes to more developing and developed countries.

Positioning Strategy: AirAsia will continue to position its brand as the lowest cost
airline by giving away incentives in order to attract customers from other airlines services.

Product Strategy: AirAsia will maintain its efficiency in providing services which
are convenient to customers as well as increasing its flight frequency to maximize its profits.

Pricing Strategy: AirAsia maintains its fares to be as low as possible and exercises
its ‘pay only for what you want’ philosophy amongst its customers.

Promotion Strategy: AirAsia aims at generating positive customer feedback by

giving away tickets for free as well as venturing into hotel lines and endless promotional
fares and holiday packages to gain constant attention from its customers.

Place Strategy: AirAsia moves away from the traditional way of services placement.
It launches mobile facilities, call centres and much more to facilitate customers.
 Internal Environment

Mission Statement

The mission statement of AirAsia is to: “Be the Asia’s leading low fare no frills
airline and first to introduce “ticketless" travelling, Air Asia will be unveiling more
incentives in the future to encourage more air travel among Malaysians.” (Now Everyone
Can Fly, 2007)

Organizational Structure

The organization structure of AirAsia is quite a large one since it includes AirAsia
Indonesia as well as AirAsia Thailand. (AirAsia Berhad Annual Report, 2009) However, the
main personnel are as below:

CEO of AirAsia, Dato’ Sri Dr. Tony Fernandes leads AirAsia. He is responsible
forover looking the entire operations of AirAsia.

Deputy CEO and co-founder of AirAsia, Dato’ Kamarudin Meranun helps by

beinginvolved in the development of the company and its other ventures.

Thai AirAsia’s CEO, Tassapon Bij leveld, heads the operations in Thai. His duty is to
oversee all the aspects of Thai AirAsia as well as to boost the growth in Thailand.

Indonesia AirAsia’s CEO, heads the operations in Indonesia. He administers the

business in Indonesia as well as tries to enhance the growth of Indonesia AirAsia.

Corporate Culture

AirAsia has developed a brand that is accessible to everyone. The driving force
underneath their brand is the unique and friendly AirAsia experience. This
conducive AirAsia culture is everywhere in their operations including the management,
guests services, ground and flight operations. To fulfil their mission by providing the lowest
cost flights to customers in order to be the leading low-cost carrier, their positive, warm and
welcoming service has in turn won many long term customers for AirAsia.
 External Environment

Competitive Environment

AirAsia faces a few different levels of competition. Among its direct competitions are
companies that also provide airline services in Malaysia as well as other country’s low cost
carriers, such as:

 MAS (Malaysian Airlines)

 Firefly (Subsidiary of Malaysian Airlines)
 Malindo airlines
 Rejent airways

AirAsia faces trouble with the Indonesian culture of as they do not prefer to fly with
light and minimum baggage. This opens up opportunities for other airlines that are able to
provide value added extras although at a relatively higher cost.

AirAsia faces problems with its cheap flights as fuel prices are on the rise.

Economic Environment

AirAsia was set up in Malaysia, a developing country, where the industries, standards
of living as well as the utilization of technology are inclining. Like many other developing
countries, Malaysia is made up of more practical middle class society who usually works
very hard to raise the standards of their lives. Parallel to the society in Malaysia, Air Asia’s
low cost concept is well accepted since the society is always searching for cheaper
alternatives when it comes to travelling via air.

AirAsia also therefore sets up its main hubs at other developing neighbouring
countries such as Thailand and Indonesia. Starting off and setting up AirAsia in developing
countries has helped AirAsia as it is their target market as well as obtaining skilled labour
forces are much easier and cheaper. The economic environment of AirAsia also includes its
recent introduction to AirAsia X, which flies long haul routes. Amongst its routes are the
developing countries such as United Kingdom, Japan and many more. (AirAsia-Flight
routes,2007) Developing countries have given AirAsia the opportunity of gaining more
market potential for its services. It also helps AirAsia to be internationally recognized.
Apart from these,AirAsia’s economic environment also involves a good economic
infrastructure to its growth .AirAsia‘s rapid growth sees the government of Malaysia building
a new hub to house its aircrafts. The Low Cost Carrier Terminal (LCCT) which handles
almost 22 million passengers a year has provided AirAsia with a better opportunity of
growth. (LCCT to Get Bigger and Better, 2016).

Technological Environment

AirAsia relies heavily on technology in conducting their business. The technology

usage by AirAsia has enhanced its business greatly because all of their ticket bookings are
done online as they are well known for the ‘ticketless’ service that they offer. It also enables
customers to check flight information, allows them to do online shopping as well as gives
opportunity to customers to book hotel rooms in their Tune Hotel services and so on. Apart
from their main website,AirAsia also has created a blog in which it gives valuable insights
about their company, their cultures and much more. The blog also enables customers to give
their feedback, regardless of whether it’s positive or negative. Through the blog, customers
not only get more information on AirAsia but also help AirAsia improve its quality of
services. The use of technology in AirAsiais also utilized maximally as it also serves as a
portal that carries AirAsia’s brand name.

Political and Legal Environment

Safety measures in an airline company are the most important element. Hence, even
to start the airlines, AirAsia has obtained an AOC which is the Air Operator Certificate issued
by the Civil Aviation Authorities. Their pilots too, have all obtained flying license from the
Civil Aviation Authority. As for their main hub in Kuala Lumpur, the Low Cost Carrier
Terminal (LCCT), the Malaysian Airport Holdings Berhad regularly inspects the
management, operation as well as maintenance of it. They also ensure that the operations are
carried out efficiently as well as the safety and security of passengers is heeded. The political
and legal environment at AirAsia also sees it successfully obtaining open skies agreement
with neighbouring countries such as Thailand, Singapore and Indonesia.

Sociocultural Environment demographics

The sociocultural environment of AirAsia sees it taking many things into account
while serving its customers. The demographics of AirAsia sees it appealing to a wide
selection of income groups. AirAsia not only targets the medium income groups but also the
low ones. It is designed in such a way that customers can customize their flying experience
matching to their income. Customers who can afford paying extra can opt for variety add-ons
such as food and beverages, sleeping kit and so on. However, those who can’t can disregard
these add-ons and continue flying with AirAsia. AirAsia also pays much attention to the
mores of people in Malaysia as well as its neighbouring countries. Since the majorities are
Muslims, AirAsia avoids all its food on air from pork products as well as other ‘non halal’
items such as alcohol and so on. In order to cater its international customers, AirAsia
provides alcoholic beverages on air which is only restricted under the AirAsia X service.
Apart from that, AirAsia also overcomes the barriers of language almost efficiently in its
website. AirAsia’s official website that handles all the booking and sales of tickets provides
customers with a range of languages to choose from. At the moment, Air Asia’s website can
be visited under languages such as Thai, Mandarin, Japanese, Indonesian Language, Tieng
Viet (Vietnam language) as well as Bahasa Malaysia and English. (Now Everyone Can Fly,
2007) By offering its website in many languages, AirAsia not only makes it website user-
friendly but also is able to advertise its services effectively.

SWOT Analysis

The SWOT analysis provides a summary of the strengths, weakness, opportunities,

and threats identified by Air Asia through of its internal and external environments.
(Analyzing AirAsia in Business Competition Era, 2009)

Strengths

The following are the strengths identified by Air Asia:

 Low cost operation

 Less management level, effective, focused and aggressive management
 Simple proven business model that consistently delivers the lowest fares
 Penetrate and stimulate to potential markets
 Multi-skilled employee’s means competent and inducement workforce.

Weakness

The following are the weakness identified by Air Asia:

 Service resource is limited by lower costs

 Limited human resources could not handle irregular situation
 Government interference and regulation on airport deals and passenger compensation

Non-central location of secondary airports

 Brand is essential for market position and developing it is always a challenge

 Heavy dependency on outsourcing.
  Constant competition with other low cost carriers as well as traditional full service
airlines.

Opportunities

The following are the opportunities identified by Air Asia:

 Growing middle class population creates a larger market for AirAsia.

 Optional addition of services allows passengers to obtain full service airline with low
fare
 Opportunity to partner with other low cost airlines
 Being low cost gives an upper hand despite the high fuel prices and eliminates
competitors

Threats

The following are the threats identified by Air Asia:

 Full service airlines start cut costs to compete

 Entrance of other (low cost carrier)LCCs
 Users perception that budget airline may compromise their safety features to keep the
costs low
 Accident, terrorist attack, and disaster and affect customer confidence. More
traditional airline services create subsidiaries which consists of low cost carriers
 Enhance in operation cost in constructing value-added services.
 System disturbance due to heavily dependence on online sales.

Marketing Objectives

Following are the marketing objectives set by AirAsia Berhad (AirAsia Berhad
Annual Report):

 To be the lowest cost short haul airline in every market

 To continuously launch new routes under AirAsia.
  To own more than 400 Airbus A320 by next 6 years from 2014.

Marketing Strategies

Target Markets AirAsia will continue targeting its existing target markets. AirAsia’s
primary consumer target market is as follows:

Demographics

 Male and female young adults, working adults and middle income group
 Age: 20-50 Household income: MYR 45 000
 Education of Head of Household: Diploma and above Psychographics
 Travel via air for holidays at a cheaper rate
 Fly to domestic and international routes for business purposes under a small budget
 Alternative means of transportation to travel during festive season in a short period of
time convenient travelling for students who travel from the West Coast to the East
Coast of Malaysia.

Media Habits

 Individuals on the target market are most likely to receive news and updates regarding
AirAsia via Internet or SMS compared to newspapers or the television.
 The consumers are mostly technology savvy and thus are always connected to social
networks such as Facebook, Twitter and MySpace.
 They are most likely to listen to radio in their automobiles as well as in their hand
phones.

Organizational Markets

In order to increase distribution and sales of its services, AirAsia will target the
following in the future:

 Media organizations that travel abroad for advertising shooting.

 Companies that hire international citizens as their staffs.
 Travel agencies that offer holiday packages.

Media organizations often have to conduct advertising shooting for their clients at

international locations. Thus, a large group of people involved in those tasks need to travel

via air to get to their location. AirAsia targets these organizations as they can profit through

group travels. AirAsia can also benefit via group travel by targeting companies that

outsources for staffs and experts from other countries to work in Malaysia. They also benefit
greatly by targeting travel agencies as it indirectly increases its frequency; from individual

travellers to travelling with family and friends as well as tour groups

Positioning Strategy

AirAsia’s positioning strategy involves two levels of positions. Primarily the strategy
revolves around Re-positioning AirAsia as a brand itself and De-positioning its competitors
in the airlines industry .In its Re-positioning strategy, AirAsia targeted to involve itself in the
airlines industry as a low-cost carrier, affordable, efficient and without the frills of full service
cost flights. In their branding, they use the slogan ”Now everyone can fly”, pointing
customers towards the fact that under their flagship, flying is now a very feasible and
affordable option in travelling. Giving away free seats during certain celebrations, events and
so on is AirAsia’s way of pushing more attention towards the airlines rather than allowing
people to focus on other options. The incentive behind these strategies generates tremendous
amounts of competitive interest for the seats, hence, raising up the fact that: “Now everyone
can fly”.

The other half of their positioning strategy is to De-position competitors in the airlines
industry. By pushing AirAsia out as a budget airline, they mark out a plan to communicate to
the masses the idea that AirAsia is indeed the cheapest, most affordable, and economical low-
cost carrier there is in South East Asia. On top of that, they also communicate the idea that
AirAsia is efficient, dynamic and provides quality service as part of their operations. The
goal in this section of the De-positioning strategy is to increase the demand of low-cost
flights. With that, they will be able “reposition” their competitors as alternatives that are more
expensive in nature. As of late, AirAsia has also adopted a new positioning strategy which is
more holistic in nature by not only providing flights, but also optional hotel bookings,
packages, and other options that are customizable to the consumer’s budget.

The goal is to generate a feel of ease and efficiency as consumers only need to rely on
one direct source to sort out all their travel arrangements. They’ve also packaged with their
flights their own hotel chain, Tune Hotel, to go with the positioning strategy. Air Asia’s
expansion into most of South East Asia also shows that they are determined to compete with
the other fleets as part of their route strategy. In order to profit from the routes, they will need
to be competitive in terms of two way routes rather than just one way routes.
 Marketing Mix

Product Strategies:

AirAsia’s philosophy is girded by the fact that they have been seen as a small airline
competitor for many years. Therefore, in order to win more customers and return customers,
they need to ensure that their primary products and services are up to par and meet the
defining needs of customers.

Efficiency: AirAsia is all about convenience and efficiency. Their aim is to allow
customers to travel for as low as possible without losing profit for the airlines. Hence, the
buzz is to create as many products and services that are circled around efficiency and
convenience, such as, online bookings, check-ins, pre-ordered food, kiosks, mobile detailing.
And alongside, their strategy, they’ve also created convenience in the form of holiday
packages and tours.

Light frequency: In order to maximize profits, the airlines must be able to transport
passengers. The more they transport, they more they profit. Therefore, AirAsia practices
higher frequency in certain “high traffic” routes. This also serves the convenience of
customers who fly frequently in and out of certain areas.

Mobile centre: AirAsia has launched booking services via mobile phone or landlines
in order to provide customer efficiency when it comes to ticket booking and check-ins. The
less steps and troubles a customer’s goes through, the faster profit is generated and consumers
are satisfied.

Easy payments: With the huge structural change in banking dynamics, AirAsia
became the first airlines to launch services that enable customers to pay for tickets via
Credit Cards over the telephone or cash at Alliance Bank outlets. This is also on top of their
online transactions which only require a few steps and verifications.

Pricing Strategies:

Penetration pricing:

AirAsia’s pricing is designed to penetrate the market in order to capture volume.

Hence, with lots of cost cutting exercises, they are able to bring the fares for as low as
possible with the knowledge that consumers will be getting what they want for what they are
paying for. The “low fare, no frills” concept is designed to basically just transport customers.
Of course, with that in mind, AirAsia has also diversified its in-flight products by providing
services that are “on-site” for the customers’ conveniences.

Promotion Strategies:

Positive consumer benefits: AirAsia’s promotional strategy is deployed in such a

manner in order to generate positive consumer feedback via its efficient and cost-effective
options. Even in the instance of giving away free seats and tickets, the promotional strategy is
aimed at generating attention rather than purely sales. Once the set numbers of free tickets are
given away, there is still much buzz about the remaining packages and other alternative
offers.

Publicity: AirAsia pushes its strategy in terms of generating tremendous amounts of

publicity with their endless strings of promotional offers. And with the generous amount of
diversification in their hotel chain, alternative cost-reduction options, and publicity stunts,
consumers were more than willing to give AirAsia the attention it wanted. And being a low-
cost carrier alternative, AirAsia was able to capture a fair share of the current local market.

Supply Chain Strategies:

Place: Air Asia has designed its strategy in such a way that enables itself to move
away from traditional placement of services. The strategy being deployed is in order to bring
placement services to the customer, rather than inconvenience the customer. Hence, the
primary designs of mobility and telephony services that empower the customer to retrieve
services wherever they are and for whatever it may be when it comes to the airlines.

FINDINGS

In general, the findings indicated that Air Asia is a very successful airline in Malaysia.
It is well known as low-cost airline. From our findings we can see that only 19% customer
believe that Airasia is not provides outstanding services but more than 60% customer choose
AirAsia at a first glance and 50% of them currently using this because of low pricing Over
the years, Air Asia had received more than 50 awards for their excellence start. For example,
it has been given the World's Best Low Cost Airline awards by Skytrax for the year 2010. Air
Asia is famous not only because of the low cost. While it also because of other business
strategy of Air Asia. Thus, business strategy of Air Asia is the important key for the
successful of Air Asia.
 Recommendation

The recommendation that we give to Air Asia is they should join venture with Virgin
Group. First, Air Asia need to put more effort to set up a pan-Asian low cost airline with
Virgin Blue, which is a low cost carrier of Virgin Group serving Australia and New Zealand
mainly. Virgin Blue has suggested it may extend services to south-east Asia. Therefore,
setting up a joint venture with Virgin Blue can help Air Asia to grow in Asia even further. In
the same time, it also can help Virgin Blue to extend services to south-east Asia.

Besides that, Air Asia should also introduce smart card which is compatible with the
existing ticketless booking. It can offer two kinds of smart cards to their customer. The first
kind of smart card is for ordinary travellers. It will be offer instant rewards when topped up
and offering greater value than its purchase price. For example, a customer buys RM1, 000
cards may be worth of RM1, 500. This card can also be used by other people with the same
family name as the cardholder. And, the second kind of smart card will be offer to unlimited
travel for frequent flyers. When priced provisionally at RM1, 000, cardholders will be
allowed make as many trips as they want within a specified period.

In additional, Air Asia should cut down the additional charge that customer need to
pay. Customers need to pay by themselves when they need anything in the plane. Although
the ticket fee is low, others such as the food and beverages in the plane are expensive. Thus,
Air Asia needs to reconsider to cut it down to attract more customers.

Conclusion

"Now Everyone Can Fly", it is Air Asia slogan. Many customers first choice almost
will be Air Asia. Air Asia believes in the no-frills, hassle-free, low fare business concept and
feels that keeping costs low requires high efficiency in every part of the business. It gives
everyone a mind-set that Air Asia is a very low fare airline and becomes a good choice for
everyone. Besides that, Air Asia does their advertising through mass media such as television
and newspaper. Air Asia had expanded its company to global and well-known in global
nowadays. In additional, Air Asia also trains their staff to give a friendly service to customer,
it provided an in-flight magazine to customer so that their customer would not feel bored. The
good service is an important business strategy to make Air Asia become very successful. And,
Air Asia also free seats promotion for flight to some place. In conclusion, Air Asia is one of
the award winning and largest low fare airlines, so it is the most successful cheap airfare
airline in Malaysia.

Appendix

Diagram- AirAsia BCG Matrix

 Table – Competitors
Comparison

Particul Airlines
ars

AIR MALAYSIA TIGER FIR

AISIA AILINES AIRWAYS EFLY
Year of 1993 1937 2004 2007
establishment
Product LCC Full fledge LCC LCC
carrier
Price strategy Penetration Price Price Penetration
Strategy Differentiation Differentiation Strategy
strategy strategy
Place Malaysia Malaysia Singapore Malaysia
Certain amounts Low fare promotion Low fare Zero fare
of free airline offerings to different promotions promotions
Promoti tickets are offered locations during offerings to during
on to consumers. different travelling different locations shoulder
period. during different travelling
travelling period. period.

Diagram- Air Asia Product Strategy

 Table -Price Comparison

Airlines Price

Air Asia From RM30 to RM 700

Malaysia Airlines From RM 60 to RM

5000
Tiger Airways From RM30 to RM 400

Firefly Airlines From RM50 to RM 500

References

AirAsia Berhad Annual Report (2009). Our Commitment. Retrieved

fromhttp://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AirAsia_AR09.pdf
 AirAsia Berhad Annual Report (2009). Senior Management. Retrieved
fromhttp://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AirAsia_AR09.pdf

AirAsia-Flight Routes (2007) RouteMap. Retrieved from

http://www.airasia.com/id/en/travelinformation/routemap.htmlAnalyzing

AirAsia in Business Competition Era (2009) SWOT Analysis. Retrieved

fromhttp://elearning.lib.fcu.edu.tw/bitstream/2377/28913/1/M980005798101.pdf

Metro Star (2008, April 28) LCCT To Get Bigger and Better. TheStar Online.
Retrieved fromhttp://thestar.com.my/metro/ Now Everyone Can Fly (2007) Country
and Language. Retrieved
fromhttp://www.airasia.com/my/en/aboutus/irstrategy.htmlstory.asp?
file=/2008/4/1/central/20795047&sec=central

Now Everyone Can Fly (2007) Mission Statement. Retrieved

fromhttp://www.airasia.com/my/en/aboutus/irstrategy.html