Business strategy

& Recommendation
CHONG HUI WOON 
TAARANIYAAL
LIYANA
ELENA
NGUYEN HOANG ANH
Presentation Outline
Key topics for discussion

Introduction
SWOT Analysis
Porter's 5 Forces Analysis
Recommendation
WHAT IS ? CHONG HUI WOON

Vision Mision

To become the largest low cost Know everyone can fly

airline in Asia

A Low-cost
Malaysian Airline

Is a Malaysian low-cost
airline headquartered near Kuala
Lumpur, Malaysia. It is the
largest airline in Malaysia by fleet
size and destinations
SWOT ANALYSIS
TAARANIYAAL
& LIYANA
 Strength Weakness
Low cost operations Service resource is limited 
Simple proven business model  Limited human resources
Single type fleet 
Multi-skill staffs

Opportunity Threat
Introduction of SMS booking  Increase in competition
Airbus A320 Increase fuel price
Advertising skill Customers confidence affected by
accidents
 NGUYEN HOANG ANH
Porter's 5 forces & ELENA

THREAT OF NEW ENTRANTS POWER OF SUPPLIERS

COMPETITIVE
RIVALRY

THREAT OF SUBSTITUTES POWER OF BUYERS

Competitive Rivalry
The  market is tough!

There  are many low-cost airlines in

Asia and other areas that compete 
directly with AirAsia in terms of price,
quality, flight routines,...
Competitive Rivalry

TOP Asia Pacific Airlines by capacity (market share) - by blueswandaily.com -

Power of Buyers
The customers now are
highly educated, price sensitive
and easily access to information

The power of buyers are HIGH due to low

switching cost, plenty of substitutes with same
price strategy and service quality.
Power of
Suppliers
Moderately High

ONLY 2 MAIN airplane suppliers

T&Co Coffee for in-flight
beverage supply
Threat of new Threat of new

entrants subsidiaries

HIGH ENTER & EXIT BARRIERS CHINA TO INDIA - 4 DAYS by

GOVERNMENT REGULATIONS TRAIN+CAR+TRAIN $200
IN THE INDUSTRY
GREAT INVESTMENTS
HIGH RISKS

PHILIPPINES TO INDIA - 13HRS

W/H 1 STOP by PLANE ONLY
$200
 In 2012

AirAsia ceased flights to Europe

in 2012

Used A330s for long-haul flight

Recommendation but found that the services did

not work out

for Since then,

AirAsia has not operated any

routes to European cities from
CHONG HUI WOON
Southeast Asia
Recommendation
AIRASIA COULD JOIN ONE OF THE AIRLINE
ALLIANCES!     
SKYTEAM      
ONEWORLD       
STAR ALLIANCE

IT CAN CHANGE FROM A330S TO A330-

900NEO   
MORE FUEL
EFFICIENT AND OFFER BETTER
OPERATING ECONOMICS
THIS IS THE END~

Business strategy
& Recommendation
CHONG HUI WOON
TAARANIYAAL
LIYANA
NGUYEN HOANG ANH
ELENA
 AirAsia Business Strategy and Recommendation

Chong Hui Woon

Kamrul Arifin Liyana

D.Thirumurugu Arivanandan Taaraniyaal

Gadaeva Elena

Nguyen Hoang Anh

1.0 INTRODUCTION

AIRASIA is one among the top international brands in the low cost Airline Industry. Airasia
brand came into existence in 1993, and it was a joint public-private sector enterprise. However in
2001 current CEO Mr Tony Fernandes purchased it and it was under him the Airasia brand got
global unimaginable and recognition growth which started right from 2002 and continues until
today. The vision of AirAia is to become the largest low cost airline in Asia. The missions are 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 and maintain the highest quality product and embracing technology to reduce cost and
enhance service level. AirAsia Group operates scheduled international and domestic flights
more than 165 destinations spanning 25 countries. Its main central is Kuala Lumpur International
Airline 2 (KLIA2) and the low-cost carrier terminal at Kuala Lumpur International Airport
(KLIA) in Sepang, Selangor.

2.0 DEVELOPING

In 2007 AirAsia announced the birth of AirAsia X, the long haul budget flight. The first AirAsia
X flight was from Kuala Lumpur International Airport to Gold coast in Australia thus began the
journey from South East Asia to capturing routes in major cities around the world. AirAsia has
four subsidiaries Thai AirAsia, Indonesia AirAsia, Philippines AirAsia, and AirAsia Indian.

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3.0 SWOT

The biggest strength of AirAsia is its low-cost operation among Asia which can provide flights
to many destinations at a low price. ​Air Asia has successfully produced a low cost airline
mentality and image among their working environment and workforce​. ​This low cost leadership
can let all various income customers to have enjoyed the affordable air fees.

Weakness of this low-cost aircraft is that they have a service limited resource is limited by
resources. ​Air Asia is a low-cost airline and thus it is critical that the airlines keep its operating
costs as low as possible. With fluctuations in fuel costs and increase in service costs, the airlines
find it immensely challenging to keep their costs as low as possible.

Opportunity of Airasia is the introduction of SMS Booking allows the customer to book their
flights anywhere and anytime. Next, Airbus A320 encourages greater passenger capacity and
offers comfortable service to the customer. Advertising through radio, television can attract
customers to book their flights with the best price.

One of the bigger threats in Airasia is increase in competition. For instance, Singapore Airlines
planned to launch a budget carrier, after they see Airasia’s success. Furthermore, economic crises
such as increase in fuel price can be a major problem for Airasia as a low-cost airline. Lastly, due
to air crashes in Australia in 2014, the number of customers dropped because they had less
confidence to fly with Airasia.

4.0 FIVE FORCES

The attractiveness of any industry is affected by several forces. In the 21st century, the aviation
industry has kept growing in popularity and demand. Apart from a fast-growing world economy,
there are several forces that have affected its growth. It is a lucrative industry. However, several
forces decide the level of competition and competitiveness in the industry. Porter’s five forces
model is a unique tool that helps understand the level of competition in the industry and how
attractive an industry and market is.

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4.1 The rivalry in the aircraft industry is really tough!

Aircraft service has long become a frequent means of transportation to everybody at different
price levels. Many brands provide low-cost flight with little to no differences in service quality.
Some of the direct competitors to AirAsia include Vietjet Air, Jetstar, Lion Air, JEJU Air,...(in
Asia); Easy Jet, Ryan Air (in Europe). Some even have longer or other flight routines that
AirAsia does not provide.

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4.2 Customers of AirAsia are highly educated, price sensitive and have easy access to
information sources.

Price is indisputably one of the top criteria when choosing a flight; ​Women or men, young or old
are looking for the best price flight tickets in the market at ease with the power of technology and
the internet. Customers can now compare and choose the best flight package that is most suitable
for them.

It is low switching cost and low brand loyalty; ​AirAsia is not the only airline existing on the
market; And since it is so easy to find and use other airlines brands; which might produce the
same flight quality or even offer better prices, AirAsia might lose customers to their rivals at no
time.

4.3 The power of suppliers in this case is moderately high.

There are 2 main sources of supply that AirAsia operates upon other than human resources -
Airplanes supply and Food & Beverage supply.

As for ​aircraft suppliers​, there are only 2 options, Airbus or Boeing, hence higher power of
suppliers. This also leads to high switching cost if AirAsia wants to change between the two
suppliers. The change will lead to huge training cost and time for staff, lots of capital investment
or even fine for breaching long-term contracts.

About the ​Food & Beverage supply​, “​KUALA LUMPUR -- ​AirAsia​, the region's largest
low-cost carrier by aircraft, has taken an 80% stake in its in-flight beverage supplier, T&Co
Coffee, for close to 1 million ringgit ($250,000) (Choo, 2016)”. The acquisition helps keep the
cost low for the AirAsia operating process.

4.4 Threat of new entrants – low or minimized

● Barriers to Entry are extremely high

● High loyalty - 5.5 million passenger turnover ​(AirAsia has been named as the world's
best low-cost carrier for 11 years in a row including the latest award for the year
2019)
● Risk of high losses

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 ● Strong government regulations
● Capital requirement (massive operating cost and investment costs)
● Threat of retaliation from existing competitors

“High barriers to Entry => Low threat of New Entrants => Increased Profit Potential”

The threat of new entrants in the industry is low; which is mainly because of the high entry
and exit barriers. These barriers keep new entrants from entering the industry. Apart from
economic factors there are regulatory factors that make both entry and exit difficult. Entry
requires large capital investment apart from skilled human resources and technical knowhow. All
these factors preserve industry from new players. So, only the determined ones enter the market,
which know they would be forced to bear major losses if they ever decided to exit. Moreover,
aviation companies gain from economies of scale, and so operating on a large level is generally
considered more profitable. Overall, the barriers are too high which keeps the threat from new
layers minimized. Brand loyalty to existing airlines is also a reason that restricts new players.
There is a big investment in marketing and building customer loyalty too.

Existing Competitors of Air Asia: Spice Jet, EasyJet, Jet Star, Garuda Indonesia, Silk Air, Cebu
Pacific, IndiGo, Navitaire, GoAir, Jetstar, Vietjet, Thai Lion Air.

The competitions are depending on the services provided and the suitability of the flight time for
the customer.

4.5 Threat of substitutes – little threat from substitutes method of travel.

● 160 destinations – little or no other options to get there by other methods

● Roads conditions (undeveloped parts) make it impossible to use anything but plane

A ​substitute​, as defined by the Five Forces model, is not a product or service that competes
directly with the company's offerings but acts as a substitute for it. The airline industry is not at
threat from substitutes and complementarities as unlike in the developing world, consumers do
not necessarily take the train or the bus for journeys.

The threat of substitutes is low in most countries where people mainly use airlines for both
short and long-distance travel. In the developing world however, there is some threat from other

5
modes like trains. While trains do not provide the same speed, they are still less costly as
compared to airplanes and therefore the preferred mode of transportation in the developing
world. Flying is a natural phenomenon for the consumers and hence, substitutes in terms of the
train and bus is minimal in its impact. However, airline companies are offering lower prices to
attract passengers in higher numbers in these regions. So, the overall threat is low from substitute
products, especially for AirAsia as the company serves some destinations that are reachable by
plane or ferry/boat only. Until a new technology comes along that supplants air travel as the
fastest and most convenient way to travel long distances, AirAsia faces little threat from
substitute methods of travel.

5.0 RECOMMENDATIONS

AirAsia is one of the most well known low-cost carriers in Asia. According to the Simple Flying,
Airasia ceased flights to Europe. The airline used A330s on these long-haul flights, but found
that the services did not work out for them because AirAsia did not turn a major profit on these
routes. Therefore they ended up dealing with their services. However, that does not seem to be
the end of the line for AirAsia flight to Europe. In our opinion, we think that AirAsia could join
with one of the Airline Alliance. There are currently three big players in the airline alliance
industry which are Star Alliance, OneWorld and SkyTeam. Since Malaysia Airlines became a
member of OneWorld, they do business internationally, such as to London. Therefore, if Airasia
joins Star Alliance or SkyTeam, it will bring Codeshare flights. While codeshare agreements do
exist outside of alliances, the highest density will be found within alliance members. Moreover,
the airline has A330-900neo on order. These are more fuel efficient and offer better operating
economics than older A330s. The A330neos have the capability to operate long-haul flights with
heavy loads. In a nutshell, ​AirAsia return to Europe​ is not just a dream!

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6.0 REFERENCES

Essays, UK. (November 2018). Swot Analysis For Air Asia Strengths Management Essay.
Retrieved from
https://www.ukessays.com/essays/management/swot-analysis-for-air-asia-strengths-mana
gement-essay.php?vref=1

Essays, UK. (November 2018). PEST and SWOT analysis of AirAsias international business
operations. Retrieved from
https://www.ukessays.com/essays/marketing/pest-and-swot-analysis-of-airasias-internatio
nal-business-operations-marketing-essay.php?vref=1

Bhasin, H. (2019). SWOT analysis of Air Asia - Air Asia SWOT analysis. Retrieved 12
December 2019, from https://www.marketing91.com/swot-analysis-of-air-asia/

Boon, T. (2018). Retrieved 13 December 2019, from

https://simpleflying.com/the-3-major-airline-alliances-star-alliance-oneworld-and-skytea
m-why-are-they-good/

Choo, C. (2016). AirAsia buys its inflight beverage supplier. Retrieved 12 December 2019, from
https://asia.nikkei.com/Business/AirAsia-buys-its-inflight-beverage-supplier

Did you know? Top 20 Asia Pacific LCCs by Capacity – Blue Swan Daily. (2019). Retrieved 12
December 2019, from
https://blueswandaily.com/did-you-know-top-20-asia-pacific-lccs-by-capacity/

List of AirAsia Group destinations. (2019). Retrieved 12 December 2019, from

https://en.wikipedia.org/wiki/List_of_AirAsia_Group_destinations

Singh, J. (2019). Will AirAsia Ever Return To Europe? - Simple Flying. Retrieved 12 December
2019, from https://simpleflying.com/air-asia-europe/