5.

1 Extraordinary Entrepreneurial Foresight

This section first explains what entrepreneurial foresight is. Thaler (2000) defined entrepreneurial

foresight as behaviour of a particular individual who thinks rationally. An entrepreneur with a

foresight is someone with anticipation, interpretations and visions which may affect the

achievement and events of the future. The main aim of entrepreneurial foresight is to generate

profit maximisation in any business operations. Objective analysis and rational evaluation are

important traits in entrepreneurial foresight as the future of market profitability or success are

unpredictable and only open to imagination.

The virtue of AirAsia being the first LCA in Malaysia is its first critical success factors according

to Ionides (2004) in his study of the rise of AirAsia. The literature stated one of the sources of

first-mover advantages derived from organisational foresight and elements of luck. First-movers

in a particular industry setting had competitive advantage and unique positions in customer's mind.

Once positive perceptions and preferences were formed, these were difficult to alter (Thomas,

2009). Malaysia did not have a proper LCA prior to 2002 – so AirAsia was quick to capitalise on

that advantage. The main person who came out with this idea was none other than Anthony

Fernandes the CEO of AirAsia:

From a young age I have wanted to own an airline, but it is something you never think you are going to do…On the way back to London

from New York, my second home, I saw easyJet on television. I thought this looked interesting, so I went up to Luton Airport and spent

two days there, watching easyJet in action. I talked to staff and the passengers, and thought right…this is something I want to do (Hahn,

2004).
5.1.1 Firm belief and vision

Aviation regulation was tightly controlled by the Malaysian government. In general, Asian

passengers are more demanding as those who fly expect more attention and service. There was

little demand for low cost air travel yet Fernandes firmly believed it would work in Malaysia citing

Southwest Airlines as a success story. He preferred to target the low income market segment:

Southwest Airlines, when they started 35-40 years ago, couldn’t fly out of Texas. So regulations are there to be broken and it needs

people like ourselves to out there and change regulations and to show the benefits of a free market. Airlines are one of the la st things to

be liberalised. People want to be pampered? Yes, I think Asian airlines have done a phenomenal job pampering people. But I was not

after that market. I was after the guys who had never had a chance to fly before, and in Asia there’s a lot of them. And comfort wise I’m

substituting a nine hour bus ride with a half hour flight. So I think I provide a comfort to most of these people (Stevens, 2007, p.1).

When Fernandes purchased the ailing AirAsia back in 2001, it was millions of dollars in debts. It

was the way he restructured the business model which aided in repaying off the debt:

No, I wasn’t, and everyone thinks there was some invincible man behind this. We purchased the airline for a ringgit. In fact, we took

over a lot of debt with three major suppliers that were owed money: Petronas, Malaysian Airlines, and Malaysia Airports…We

restructured the business model and we were cash positive from day one and that was able to pay the debt off – we paid it off in

full…(Hahn, 2004).

Fernandes admitted he was not that rich, but it was his vision which propelled him to start a LCA.

He was not put off by debt, fear or failure. Instead, he was driven by his passion:
 Yes, but when you do not have a lot of money, maybe it is easier to go out and take risks….I did not have a lot to lose, I have passion,

I just went after it…Never be afraid of failure. You got to take risk and go for it. If you are afraid of failure, you aren’t ever going to

start. And I think that’s what is wrong with too many people; they are too scared to try something out because they are afraid of failure.

It was the same for us, you know but I never thought we would fail. I am not an arrogant person or someone over confident, because it’s

a big whole obstacle challenge out there (Hahn, 2004).

Fernandes had such a strong belief in his foresight to the extent of leaving the comfort of an

executive position in the music industry, re-mortgaged his house and put all his savings into

AirAsia. The airline industry is a very competitive industry and in Malaysia, it is protected by rules

and regulations favouring the national airline Malaysia Airlines. It was a risky move for Fernandes.

Summarising from a research into the untapped opportunities for low cost air travel amongst

Malaysian, he thought:

I didn’t have a lot to lose. And I thought I was young enough. I got tired of the corporate life, I got tired of corporate politics. And I saw

a business opportunity. Everyone likes to fly. And I think the key number that got me going was only 6 percent of Malaysians flown. I

started looking at the prices of tickets and to travel from one part of Malaysia to another- it was almost someone’s one-month salary. So

that drove me (Stevens, 2007, p.3).

Moreover, Fernandes bought AirAsia just three days before 9/11. At that time, airlines were going

into bankruptcy, oil prices skyrocketed and people were skeptical about flying globally. Yet,

Fernandes never took a back step because his view on low cost air travel was idyllic:

Well, I mean, I think I was committed. And I was going to do it, whatever was thrown at me. 9/11 was far, far away. I still felt that

people had to travel…I just felt so good about this, because I knew people wanted it..The whole principle of flying generally is a happy
 thing. Generally people go on holiday, reunited with their family so I’ve always liked that concept. Airports are generally happy places

(Stevens, 2007)

Other challenges cropped up, for example the SARS outbreak and global economic downturn.

Fernandes could have pulled out but chose to remain in the game:

It has certainly been two and half years of rock and roll, that is for sure. We have had SARS, we’ve had a price war, we had airlines

trying to obliterate us. We had no real financial support from any banking industries. Up to this point, we have got zero debt. In the

beginning, no bank would even give us a cup of coffee. So yes, it was tough (Hahn, 2004, p. 2).

After all these obstacles, which would make most business people would think twice, Fernandes

was unfazed:

Yes, when I look back at it, it does sound kind of unbelievable. I came back to Malaysia. I did say maybe I was on drugs or I was

possessed or something like that. But I just felt that it was the right thing to do and nothing is going to stop me (Hahn, 2004, p.1).

He simply refused to give up and this can be attributed to his belief and foresight. Even his wife

thought his idea was crazy yet Fernandes sticked strongly to his belief that Malaysians would

respond to low fares:

If Brits could fly to Barcelona for £9, why couldn’t I reproduce the same model back in Malaysia? So I rang my wife and told her I was

going to start an airline. She thought I was a lunatic. So did Connor McCarthy…But I knew Malaysians well enough. Put a fare low

enough and they’ll risk their lives (Clarke, 2009).

5.1.2 Managed to acquire support by Malaysian government

To implement his plan of starting a LCA, Fernandes started preparing a business plan. He was then

introduced by a contact at GE Capital Aviation to Connor McCarthy, former Director of Group

Operations at Ryanair and both of them agreed to cooperate (Ionides, 2004). They believed they

needed to link up someone in the Malaysian government:

First of all, I had the idea. I wrote to my music guys, one had merchant banking experience, the other was a pure music man- he came

from BMG records. We were sitting around and they all have blind faith in me. And because I put my money in, they decided to chip

in. We sat around and said: guys, we know no one in the government, no political master. You have got to have some political muscle

to get an airline license (Hahn, 2004, p.2).

There is yet another challenge: to obtain an airline license. Fernandes described how he managed

to arrange a meeting with former Prime Minister Dr. Mahathir Mohamed because he understood

the importance of political backing:

The only guy we knew was the guy who used to help us fight piracy. He was in the Ministry of Domestic Trade. So we went to see him,

he was retiring. We expected him to throw us out of his office. And he said yes, you guys are honest and hardworking. Sure, h e said, I

am retiring with nothing else to do, what am I supposed to do? We said could you get us an appointment with the Prime Minister? He

did. We went to see the Prime Minister in May 2001. I was a nervous wreck. The opposition were the first people to see the Prime

Minister so we thought he was going to be in a great mood! (Hahn, 2004, p.2).

Mahathir nodded but said no new airline license would be issued. This was because Mahathir saw

an opportunity for the government to offload the failing AirAsia, which the government was trying

to do so for two years. Fernandes also had interest in a company called Tune Air in May 2001.
Instead of issuing a new license, Mahathir suggested that Tune Air could acquire an airline license

by taking over AirAsia. Fernandes recalled the reaction of Mahathir:

At that stage I was preparing my resume to re-enter the corporate world and we were going in to say that we would cut airfares by half.

So we walked in and did our presentation. The Prime Minister did not say much. But towards the end, he was very learned on the low

fare business – he really knew what it was all about. At the end he gave us no indication what he thought. Right at the end, he said, I

like your idea, you have my blessings, but you have to buy an existing airline (Hahn, 2004, p.2).

Subsequently, takeover negotiations began and a deal was reached for Tune Air to purchase

AirAsia which had a fleet of just two Boeing 737-300s together with 50% of its net liabilities

estimated at RM 40 million. Fernandes reflected back on Mahathir’s decision:

Yes, he said I like the passion and the drive even though you do not seem to have any experience. He said you have to buy an existing

airline, There were only two options around. We walked out of that meeting; I knew the guys were a bit depressed- now we have to buy

an airline. But I must have been on something; I kept thinking nothing is going to stop us. We went to see the owners of AirAsia; who

were more than happy to let the airline go (Hahn, 2004, p.2-3).

Once the deal was concluded, Tune Air officially acquired 99.25 percent equity of 51.68 million

shares from DRB-HICOM the parent company of AirAsia. AirAsia was remodelled as a LCA and

its resurgence started. Here, the second theme entered the equation where AirAsia’s LCA model

resembled the highly successful Ryanair LCA model (Li, 2003) and is labelled the skillful

application of LCA model.

5.2 Skillful Application Of Low-Cost Airline Model

The skillful application of LCA model is identified as the second critical internal success factors

of AirAsia. The cornerstone of this model was cost minimisation concept which is critical to

maximise profits. Among major cost control measures applied are flying out of secondary airports,

no free meals on board (Doganis, 2001) and utilising one type of aircraft (Percy, 2004). Based on

the directed content analysis, two subthemes were identified as the two most important

components of AirAsia’s skillful application of LCA model. These are its efficient yield

management system, as well as fast turnaround time.

5.2.1 Yield Management System (YMS)

As determined by Kho,Aruan, Tjirahardja and Narayanaswamy (2005), Yield Management

System (YMS) assisted AirAsia in anticipating and reacting to the purchasing behaviour of

customer to maximise revenue. Operating costs were taken into account to aid AirAsia in

optimising fares and allocating capacity to increase expected revenues. Every seat is considered

an opportunity to maximise revenue. Seats were available at various prices in different points of

time. As shown in Figure 5.1, there were a total of 12 fare tiers, each tier is priced according to its

specifications. A simple fare structure is adopted by Airasia in its yield management. Early

bookings were encouraged with heavily-discounted fares:

AirAsia adopted a simple fare structure based on time-value relationships for seats. Pricing of airline tickets was generally 80% lower

than the equivalent full service airlines for early bookings while late bookings were generally 20% below the full service price (Ricart

& Wang, 2005, p.4).

Figure 5.1: AirAsia's 12-tier pricing structure (Source: AirAsia.com, 2010)

The first few lower tiers were targeted to value conscious passengers if they book well ahead of

time. Fernandes enticed passengers with cheaper fare incentive for booking early. It was all about

changes in consumer behaviour:

My whole life has been about changing consumer behaviour..Malaysians did not book early or online when AirAsia launched in 20 01.

Why should a passenger book early if there is no incentive. Now 85% of Malaysians book online. The cheap ticket bait to book early

and online has worked..(Manju, 2010).

The mid-tier targeted the captive market. Once the revenue collected was sufficient to cover all

the operational costs of the flight, the system would then move on to top tier. This is when prices

increased dramatically and the profit grew- this was yield management from the perspective of

AirAsia LCA model as in Fernandes’s own philosophy:

 Business is all about innovation and this blue ocean strategy. I know the market wants it. And if I can get the price right, we’ll be

successful (Steven, 2007).

Fernandes was still old-fashioned in terms of his revenue management philosophy. His main

concern was if a plane takes off with many empty seats which for him meant lost revenue. He

added that the asset must be cash-positive:

We don’t think about yields, we think about revenues. A full plane with low yield is better than a half-empty plane with high yield. I

think that when a plane takes off and one seat is empty, it’s revenue lost forever..I’m an old-fashioned businessman. Every asset must

be cash-positive. Unless I believe the asset can be cash-positive at various sensitive levels, I don’t buy it (Manju, 2000, p.1).

AirAsia revenue optimisation was further enhanced through making price adjustment for popular

routes. This was made so the fares would not look overly expensive by:

..adjusting prices for routes/destinations that have a higher demand when compared to others. The effective method however is to

combine these two levels for all flights, all routes so that both the seat and the route are effectively priced for all the flights (Kho, et al.,

2005).

The YMS brought a tremendous benefit to AirAsia in offering higher discounts to customers and

stimulating travel demands during off-peak travel period:

AirAsia has realised increased revenue (3-4%) for the same number of aircrafts by taking advantage of the forecast of the high/low

demand patterns, effectively shifting the demand from low period to high period and by charging a premium for late bookings. Over the

past couple of years, AirAsia have actually lowered prices (essential for LCA) as the YMS has given them the window to increase their
 revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peak times (Kho,

et al., 2005, p.10)

Apart from YMS, AirAsia utilised Computer Reservation System as its integrated web-based

reservation and inventory system. The name of the system used is called Open Skies which is

developed by a Navitaire:

It is a direct sales engine that effectively eliminates travel agents and the sales commissions that need to be paid to them. Centralised

customer data is also maintained by Open Skies and this helps AirAsia to track booking and schedule flight activities with real-time, on-

demand reporting feature. The vast booking information that is provided online to the customers acts as a force that brings more

customers to use the website thus reducing the customer support costs (Kho, et al., 2005, p.10).

5.2.2 Fast Turnaround Time

AirAsia followed the standard LCA model of seeking high capital utilisation rate through the rapid

turnaround of aircraft. High aircraft utilisation meant:

Aircraft is kept flying as much as possible, the first flight starts as early in the morning commercially possible and the final flight

typically ends at midnight. A fast turnaround is critical to ensure time spent of the ground is minimal – an airline makes money when

the aircraft is flying, not when the aircraft is parked. AirAsia’s turnaround time is 25 minutes; compare that against 1 hour for full service

airlines. On average, AirAsia’s utilisation per aircraft is 12 block hours per day, a full service airline might do about 8 block hours per

day (AirAsia.com, 2010).

A 25-minute turnaround time is calculated from the moment the plane parked at the bay until it

was ready for taxi to the runway. Elaborating further on how this actually worked, one of AirAsia’s

Flight Operations Manager disclosed:

As the aeroplane curves into the parking bay..the clock starts ticking for the 25 minutes turnaround. 25 minutes turnaround means, it

takes 25 minutes for an aircraft from the moment of arrival to depart to the next destination. What actually happen in the 25 minutes

turnaround time? First, boarding announcement is being made. As people queue for boarding, arriving passengers disembark from the

plane…Cargo which has just arrived is offloaded and luggage lifted onto the cargo hold. Special Snack Attack orders (meals-on board)

are then lifted into the aircraft. And boarding begins… All these actions and activities happen in the first 15 minutes of the 25 minutes

turnaround. At 10 minutes before departure, the gates are closed for boarding. Pilot finalises the load sheet as airplane doors are closed

(Abdul Rahman, 2008).

To enable faster turnaround, multitasking was assigned to each staff. Part of AirAsia’s cabin crew

responsibilities were to clean up the aircraft cabin. Fernandes credited this to

keeping the costs as low as possible supported by co-operation of crew, openness to new ways of

doing things and innovation:

..you’ll see the crew, in 15 minutes, cleaned up the plane, got all the belts ready...I think they’ve kind of gotten used to it. I think when

I first took over the airline, they were just like a normal crew, but I said look, we’ve got to do things a little different if we want to

survive, and then we’ll survive as a family, and it’s sort of built in to the culture. And I can tell you that the number of applications we

get from Malaysian Airlines, Singapore Airlines and other full service airlines show that they don’t mind doing it at all (Stevens, 2007).

Fernandes commented it was not easy to turnaround a plane like Airbus A320, clean it, refuel it,

load the bags and passengers on:

 Well, it’s not easy, we work hard at it, because Asians generally bring more bags. In Europe they travel a lot lighter. I always joke that

my Indonesian passengers bring their house and their neighbour’s house. Having actually done the loading and the unloading, you know

what it’s like. So uh, it’s not easy, but we’ve got it to an art now (Stevens, 2007, p.2).

In short, the underlying concept behind simple fare structure was the earlier the customer booked,

the cheaper the fares would be (Ricart & Wang, 2005). To achieve quick turnaround time in LCAs,

significant functional flexibility and cooperative teamwork are needed to be effective (Gittell

2003). AirAsia’s third success factor is a result of employing a ‘guerrilla marketing’ strategy

which is presented next.

5.3 Unconventional Marketing Approach

The third critical success factors of AirAsia is its aggressive marketing via unconventional

channels such as sports sponsorship, media publicity stunts involving its CEO and portraying its

cabin crew as marketing icons. This marketing strategy is a tactic used by organisations which

intended to maximise marketing impact using minimum budget (Levinson & McLaughlin, 2007).

5.3.1 Brand marketing

As stated by Damuri and Anas (2005) in section 3.4.4, LCAs in Southeast Asia often use

innovative marketing ideas to compensate lack of Internet accessibility in this region. Despite these

shortfalls, AirAsia had developed strong brand through aggressive brand marketing and clever use

of the media:
 In Southeast Asia, AirAsia has become a significant and widely recognised brand thanks to extensive marketing and a charismatic leader

– both of which demonstrate the influence of Ryanair, and to a lesser extent, easyJet. AirAsia’s chilli red livery and slogan ‘Now

everyone can fly’ have become successful marketing icons in Southeast Asia (Poon & Waring, 2010, p. 206).

According to Fernandes, building the AirAsia brand was a long term objective and immediate

returns were not expected. He was willing to invest on branding in order to attract partnerships:

…this is why Asian companies don’t spend enough on branding, because they want to see an immediate return. There are a lot more

companies that are successful, but I think the aura of our brand has attracted a lot of partnerships. Citibank credit card, tie ups with Royal

Bank of Scotland, etc. etc., so the intangible value of the brand is huge (Stevens, 2007)

Fernandes once admitted the branding return on investment was difficult to measure. Over the last

six years, it had paid off and not wanting to be carried away, AirAsia kept its complacency and

continued to look for extra revenues sources:

The value of a brand is hard to quantify and investment in a brand is always hard to justify, but the last few weeks showed me how

important it is and how our investment over the last six years has paid off handsomely…When we need to make new contacts, look for

finances and build new relationships, it’s much easier because everyone knows AirAsia. So, the extra revenue, time and cost savings

can arise by promoting your brand (The Malaysian Insider, 2009)

Fernandes also considered brand building such as new markets and new routes as the most

important aspect of AirAsia marketing. The key strategy here was to focus and invest money on

branding by emulating closely on Emirates’ branding success:

 I think it’s the most important thing. And I think airlines don’t really spend enough on it. They take it for granted. They don’t go and

develop new routes. I think the most expensive airline I’ve ever seen is Emirates. All airlines like to run them down and say they get

free money, they do this and that – but they go out and build new markets, they build new routes, and they branded themselves. You see

it on rugby referees, on cricket referees, you see them on the America’s Cup. They spent money on building a brand, and that’ s how

they became successful (Stevens, 2007, p.3).

Associating its brand with popular football club such as Manchester United helped to boost

AirAsia’s brand. This could be done from its entry into the international market with the best

global brands, according to AirAsia’s Head of Commerce:

Tie-ups with some of the biggest global organisations – such as Manchester United Football Club – allow AirAsia to be associated with

other brands which add personality and ups the airline’s cool factor…We’re building our brand into the international market and brand

association with the best global names help us. Such a branding strategy will install trust and confidence in AirAsia as a leading player

in the industry (The Malaysian Insider, 2009).

Nevertheless, AirAsia’s aggressive branding were not so well-received by its board of directors.

Fernandes had to convince them about this pathway to growth by venturing into sports branding.

He changed the brand perception that most people had: that AirAsia as a LCA is low quality:

Yeah,we’ve been aggressive on branding. We aggressively do PR. We’ve also put a lot of money into sports branding, such as

Manchester United and motor racing team Williams…It’s something that even I have to explain to my board time and time again, that

the fruits of branding are over five years..it’s been very key in our growth and we’ll continue to invest in it. As a low-cost carrier, we

constantly battle he image that we are low quality..We show that low-cost does not mean low-class…We won’t be able to carry 24

million passengers without marketing (Govindasamy, 2009)

Marketing enabled AirAsia to be more creative and think outside the box. New ideas were received

with open arms and not by criticism. Its Head of Commerce explained the reason behind this is:

Marketing reflects brand attitude and personality. We’re bold, inspired and we encourage out-of-the-box thinking. We do things

differently and do not submit to mediocrity…When somebody comes up with a pioneering idea, we don’t shoot it and say: ‘Oh, that’s

unconventional.’ Instead, we play with the idea and find the best way to employ it to advance our brand or introduce new products and

services (Tan, 2009)

5.3.2 Media publicity stunts

Another key marketing ploy was employing its own CEO-Tony Fernandes as a cheap form of

publicity. Unlike top corporate figures that often appear unapproachable, Fernandes appeared in

the media as often as he could – portraying himself as a ‘walking advertisement’ with his trademark

red AirAsia cap:

It started off as, again, a cheap form of publicity. Um, if I wore the cap when I was being interviewed, I got AirAsia on there. You know,

we had to be creative because we had no money (Stevens, 2007, p.4)

Other publicity stunts included the much publicised car racing bet between Fernandes and Richard

Branson, the CEO of Virgin Group where the loser would have to wear female cabin crew uniform

and serve on the winner’s airline. This showed his competitiveness with an icon who he was

increasingly being compared to. Like Richard Branson who was good at media manipulation and

stepping out of limelight, Fernandes responded in a jovial manner:

 He’s quite serious about it..so am I. If we don’t mess it up, he should be donning our uniform… He’ll have to work the whole flight.

He’ll have to serve, he’ll have to clean the toilets…He has to shave his legs, we don’t allow any hairy stewardess…maybe I’ll have to

check out how matching his stewardess outfit are.. our guests will be delighted to be served by a Knight of the Realm . But k nowing

Richard, the real challenge will be to prevent him from asking our guests ‘’coffee, tea or me?’’…We’ll be applying soon to the

Department of Civil Aviation to gain clearance for him (Reuters, as cited in The Star Online, 2010).

Wide media publicity followed when British-based newspaper The Daily Telegraph reported

Fernandes as the clear person to take over West Ham football club. This media publicity globally

made AirAsia and Fernandes received worldwide attention as British football news was known to

have received wide global coverage:

Malaysian entrepreneur Tony Fernandes appears poised to launch a takeover bid for West Ham United. Fernandes, the founder and

driving force behind the highly successful AirAsia airline, is a lifelong West Ham supporter and has been in sporadic talks about taking

a stake in the Premier League club for several months. Telegraph Sport disclosed in November that Fernandes had met West Ham

chairman Andrew Bernhardt in Kuala Lumpur…Talks have continued with, it is believed, Fernandes finally deciding that he wants to

invest in the club (Burt, 2010)

5.3.3 Female cabin crew as marketing icon

Additionally, there was an element of aesthetic advertising of female cabin crew in AirAsia’s

marketing. AirAsia’s cabin crew are predominantly female, attractive and of a similar body type.

This particular appearance has become distinctive icon of the AirAsia brand which has been:

…mobilised and marketed purposefully to support the organisational aesthetic…the deployment of aesthetic labour is most visible

through the carrier’s advertising material . For instance, a regularly used advertisement for AirAsia in Singapore features four smiling,
 attractive flight attendants in a whimsical pose that would not be out of place in a fashion magazine, with the caption ‘Ther e’s a new

girl in town. She’s twice the fun and half the price’ (Spiess & Waring, 2005).

Cabin crews also played an important part in AirAsia’s branding as they were the imperative face

of any airline as passengers interact with them the most. Fernandes used cabin crews as part of his

marketing strategy during corporate events and press conferences. For instance, when AirAsia

announced its sponsorship of Manchester United football team, Fernandes made sure the presence

of female cabin crews as they portrayed the most positive image of AirAsia:

Not by accident is AirAsia becoming known for our girls. If you walk into KL International Airport, they stand out. They are in red.

They look great. They smile. They are becoming an icon. Everyone I meet mentions our cabin crew. It is the most positive image of

the airline. It shows that we are world class. We also have good-looking guys as well. But definitely we feature the girls more (The Star,

2005).

While most companies demanded immediate marketing returns, AirAsia’s unconventional

marketing was geared toward long term investment return. It focused a lot on its long-term brand

marketing. Free media publicity and sports sponsorship were fully utilised by AirAsia’s CEO to

increase AirAsia’s brand awareness. Additionally, cabin crews have become distinct marketing

icon in AirAsia’s marketing. From within the organisation, AirAsia work culture is its fourth

success factors. AirAsia employees are commonly known as ‘AirAsia All Stars’ and its work

culture is known as ‘Culture All Stars’. The ensuing section provided an insight into AirAsia’s

corporate culture.
5.4 Culture All Stars

The fourth and final critical success factor of AirAsia lied in its corporate culture. AirAsia work

atmosphere is highly collaborative with no top-down hierarchy. Its corporate culture pointed to

delegation where individual employees are encouraged to speak their mind. Employees also had

autonomy but within the control of single unifying philosophy (Wright, 2009). AirAsia’s work

practices are different in a way as:

Much of the success stems from AirAsia’s work culture, which stresses innovation, openness, and a never -say-die attitude. Its offices

have few physical barriers between desks, there are no titles on name cards and everyone is encouraged to use first names. Cabin crews

are pushed to develop their own personality, instead of conforming to preconceived notions about their role, resulting in a r elaxed

onboard environment. The CEO sets the tone. Anyone can walk up to ‘’Tony’’, exchange a high-five, and offer a suggestion or just

grumble about football. Talk to almost any of the 6000 - strong AirAsia staff, and a strong sense of ownership is evident (Govindasamy,

2009, p. 2).

Fernandes himself preferred an open relationship with his staffs. One way he kept his employees’

ego in check was by making pilots cook breakfast for engineers each quarter to thank them for

looking after their aircraft:

I’m very close to our staff. It’s not staged, it’s what we are. I find airlines are so compartmentalised. You have engineers who think

they’re one thing, pilots who think they’re demigods, and nobody talks to each other. Airlines are full of prima donnas. There are massive

egos in this business. We don’t have that. We know that you are only as good as tomorrow (Ionides, 2004)
AirAsia’s corporate culture is crucial to the company. Fernandes reminded himself and his

employees to remember their roots. In his opinion, too many companies forgot their beginnings

and that was where it all went wrong:

..what we got us here is an open culture, no hierarchy: a family environment. We can’t ever change that. As soon as we change that, we

lose our focus. We put everyone together. I even go down to the fact that we go through one door – all in one office. It means effective

communication. You open the door – you see our planes. If people need help, we go out there to carry bags. My secretary will go out

and help clean the planes if we are running into a delay (Hahn, 2004)

Instilling a humble and open organisational culture proved to be a great benefit to AirAsia.

Fernandes gave an example:

There is a tremendous camaraderie here, you know. The other day we had a flight that needed a couple of pilots and the pilots were

stuck in a traffic jam. The Chief Pilot came to me and said: ‘If you don’t mind, I will fly in jeans if it’s okay with you,’ I said, go ahead

– better than delaying the flight. So that’s a great camaraderie, and I believe one of the key success factors is we are all together and we

respect each other’s jobs. No one thinks they are more important than the other (Hahn, 2004, p.3).

Fernandes attributed the main reason behind this open culture in AirAsia to his own similar

experience while working with Warner Music:

No.1, it’s me. It’s kind of my background, the way we are and I don’t think I can be formal. It was weird when I first came to the airline,

the pilots freaked out because they suddenly saw their CEO pushing the ladder. They stood to attention, they called me sir – they still

do. They couldn’t get over the fact that I have a cup of coffee with the guys who carry bags. It’s me and I believe it’s bett er for our

culture. I really believe we have been very successful (Hahn, 2004, p.3).
Not only that, Fernandes criticised the hierarchy barriers in many organisations throughout Asia.

He preferred to be reachable by his own employees, it is part:

…of our corporate culture and I think it’s very different to many Asian companies. There’s not a lot of hierarchy – people are allowed

to think. I believe a thousand brains are better than just ten. And feedback: people aren’t afraid to speak up, our staff are not afraid to

send me an email and you get a much better functioning company that way (Hahn, 2004).

5.4.1 Casual work atmosphere

Evidence of the casual work atmosphere was visible when a senior cabin crew recalled working

for AirAsia could be fun because it did not have a bullying culture:

…when Tony took over, he told us he did not want bullying. In other airlines, if you do not hold a tray properly, your senior will order

you to stand and hold a tray full of glasses for an hour. In AirAsia, there is no hierarchy. Even though I am the senior flight attendant I

don’t boss my cabin crew around (Hoh, 2005).

Bureaucracy is best avoided according to Fernandes. This is because bureaucracy slowed things

down. Innovation also played an important role:

If there is a good idea, it can be implemented very fast as there is little bureaucracy. If there is a bad idea, we can kill it really fast too.

That is how we do things that others may not try. We are always innovating and we never stand still, and that has helped us

(Govindasamy, 2009, p.2).

Employees at AirAsia were encouraged to express and develop their positive traits. Taking cabin

crew as an example, AirAsia’s interview selection focused a lot on self-personality development.

According to two of its senior cabin crews:

Potray the feminine you…There will be three stages, and the focus will be on how you talk, how you interact, and how spontaneous you

can get. The last bit will be the one-on-one interview, where our panel will be talking to you on a little more in-depth basis (Hoh, 2010).

We can be ourselves. They employ us because of us. Not because we are robotic. Anyone can provide service but what is important is

our personality – how you provide that service (Liew, 2005)

An ex-Singapore Airlines cabin crew who joined AirAsia gave a comparison on the difference

between the two airlines’ work culture:

AirAsia’s work culture is more relaxed compared with SIA. Probably because there are so many rules in SIA. You have to look a certain

way and behave a certain way. I had regular passengers who could never recognise me because they say we all look the same. At

AirAsia, we all look different. We can even wear coloured contact lens (Quek, 2005)

Even though the work culture is relaxed, there is still a customary standard to follow in order not

to be too extreme. Its Cabin Crew Manager revealed a few fascinating insight into life as an

AirAsia cabin crew:

The airline encourages its cabin crew to let their hair down – literally AirAsia cabin crews are allowed to colour their hair. As long as it

is not too drastic. Stewardess can keep their nails long, as long as they look nice. Many people think that AirAsia is a fun place to work
 because we do let our hair down. We are different. We create a culture where whatever we do, we must have fun…Tony practices an

open door policy. If you have anything you want to say, you just walk in (Low, 2005).

Even when hiring, Fernandes looked for individuality because he knew every single employees

meant a lot in AirAsia:

I don’t want a company of only 10 people doing everything and the other 2000 implementing directives. We gave them the ability to be

themselves which is what AirAsia is about – individuality…personality is more important at AirAsia (The Star, 2005).

This was exactly how Fernandes described the serious fun work environment he implemented at

AirAsia:

..Ryanair is known for not being exactly friendly, and I told my guys hey, it doesn’t cost anything to smile. And so we practice, we train

people to smile, from the guys who carry the bags to the cabin crew. But no, I don’t think I would’ve dreamt up this all by myself. And

I would be kidding myself if I thought I did ..What keep us different is the people, it’s the culture..everyone plays a part. Everyone is

valuable (Stevens, 2007)

Many of AirAsia’s work culture practices were significantly different from other airlines in

Southeast Asia. Fernandes, unlike other Asian corporate culture which emphasized seniority and

hierarchy, adopted a more-Westernised and open approach in managing AirAsia work culture.
6.1 Recapitulation Of The Study

The rationale for this study looks at how sustainable the LCA business model is in Southeast Asia

using AirAsia as a representation. In reference to the internal perspective of RBV, the first

objective of this study was to identify the critical internal success factors of AirAsia. The second

objective was to determine the sustainability of AirAsia’s low cost business model from a RBV

perspective. Directed content analysis was applied as the method in this study. The main findings

of this study focused on the strategic choices behind the four key themes as displayed in Table 6.1.

By being the first LCA in Malaysia, AirAsia enjoyed success through its first-mover advantage

labelled ‘Extraordinary Entrepreneurial Foresight’ in section 5.1 earlier. AirAsia’s skillful

application of the LCA model is its second success factor, as a result from its Knowledge

Management strategy. Next, AirAsia’s success comes from its unconventional marketing approach

of ‘Guerrilla Marketing’. Finally, AirAsia’s positive corporate culture also contributes to its

success.
Table 6.1: AirAsia’s critical internal success factors and its strategic choices linkage

AirAsia’s critical internal success AirAsia’s strategic choices

factors (findings from Directed
Content Analysis in Chapter 5)

1. Extraordinary entrepreneurial
First-mover advantages
foresight

2. Skillful application of the LCA

Knowledge Management
model

3. Unconventional marketing
Guerrilla marketing
approach

4. Culture All Stars Corporate culture