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

Particulars Airlines
 AIR AISIA MALAYSIA TIGER FIREFLY
AILINES AIRWAYS
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 promotions promotions
Promotion tickets are different locations offerings to during shoulder
offered to during different different locations travelling
consumers. travelling period. during different period.
travelling 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_A
R09.pdf

AirAsia Berhad Annual Report (2009). Senior Management. Retrieved

fromhttp://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AirAsia_A
R09.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