Name

Matrix No.

Shahira binti Affandee

:

012013051039

Subj. Code & Course :

DMG0094 INTRODUCTION
TO STRATEGIC
MANAGEMENT
Prepared For

1. Vision & Mission of the AirAsia Berhad

a. Vision
i. 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.
b. Mission
i. To be the best company to work for whereby employees are
treated as part of a big family.
ii. Create a globally recognized ASEAN brand.
iii. To attain the lowest cost so that everyone can fly with Air Asia.
iv. Maintain the highest quality product, embracing technology to
reduce cost and enhance service levels.
2. Objective of AirAsia
a. To achieve bigger cost advantages than the adversary by continuously
looking for cost reduction along the value chain.
3. Goals of AirAsia
a. AirAsia goal is to establish itself as a leading low-cost carrier in Asia by
offering guests a safe, reliable and enjoyable flying experience at an
affordable price.

4. Scenario/Case Study
AirAsia has been named as World's Best Low-Cost Airline 5 years running.
The Skytrax World Airline Awards is the global benchmark of airline
excellence and one of the most prestigious accolades for the airline industry.
This annual global survey is conducted over a 10-month period, covering over
200 airlines from the largest international airlines to smaller domestic carriers

and travelers from over 160 countries took part in ranking quality standards
across more than 40 areas of airline front-line products and services.
It seems that AirAsia has shown its strength clearly to the eye of the
world. But it cant be done without various strategies used and made by
AirAsia team. Why AirAsia can offer such low fare and what are the strategies
used by AirAsia to survie?
The strategies of Air Asia focus more on the management and access
of information rather the creation of irrelevant airline services. For this reason,
Air Asia has developed a unique set of guiding principles - simplicity, costefficiency and effectiveness. Total commitment to these principles makes the
airline services of Air Asia very user-friendly to its customers. AirAsia is fully
determined to exploit these opportunities and convert more threats into
opportunities for success.
AirAsia Planes land at smaller uncongested airports, which incur a
lower landing fee. They also do direct sales of tickets, to avoid fees and
commissions charged by travel agents while all passengers sit in the same
class so there is no division in the plane that require more cost than the
standard plane.
AirAsia also have an aggressive fuel hedging programs and uses one
type of aeroplane only (A320), thus reduces training and maintenance costs.
As in the plane, minimal set of optional equipment on the aeroplane are
provided, eliminating luxury and optional equipment to reduce costs.

Another way to earn their profit, instead of including the food price in
the ticket price, they earn profit from in-flight sales/services such as ala carte
food sales, and commission based products like AirAsia t-shirts and
souvenirs. Not only will this allow customers to make their own choices, but
also in saving their dosh.
Employees working multiple roles; flight attendants are also in charge
of cleaning the aircraft and work as gate agents, hence personnel costs are
reduced. The number or workers needed will be lessen, therefore less
advantages for workers, less free tickets, medical support for workers, etc.
AirAsia do not charge Fuel Surcharge which is an added advantage to
the give low fare. It departs from LCCT (which shares the same runway like
KLIA) which only charge RM25 airport tax per passenger. However LCCT has
not been coping well with the rapid expansion of passenger turn over hence
the limitation of check-in counter. The airport is ideal for 15millions passenger
turn over, but AirAsia has recorded close to 26millions in 2010.
90% of AirAsia sale are generated from www.airasia.com which
eliminates traditional distribution commission and discount. This helps to lift
up the bottom line to offer lower price to the end user. Of course, the low fare
are not refundable or transferable to avoid abuse on reselling the low fare
ticket. Other SSR items such as Luggage, pick a seat, meals and etc are
ancillary income for the carrier but it is optional.
While in the technology part, AirAsia provides the online service which
can combines the air ticketing with hotel bookings, car hire and travel
insurance. AirAsia had pushed the internet booking services in order to keep

costs in check. Besides, AirAsia also introducing the GO holiday, the online
programmed where consumers can book the holiday package online in real
time. With the airbus A320, there will be better performance and reliability as
help in proving the fuel efficiency and extra capacity.

5. Alternative Scenario/Strategy
AirAsia as the most profitable Airlines. There are various ways in which can make
the Airline rating be at the highest while making better profit. Apart from the current
scenario AirAsia have right now, which is as the Worlds best low cost airlines,

AirAsia also is working to be as the most gainful Airlines in the field. They need to be
cost-effective in order to achieve this mission of theirs.
As they are already implementing, AirAsia use direct selling for ticket selling
as this will reduce the cost of service charges. For instant, if AirAsia use travel agent
to market their ticket, the travel agent applies a commission and this will increase the
cost of the ticket itself, in which it wont be the same price if the customer obtain the
ticket directly from AirAsia. Even if the tickets price stays the same, AirAsia might
still have to pay for their commission, the least of 10% per ticket price. Rather than
just online ticket selling or at the Airport, AirAsia can start selling tickets on small
booths, such as at the Mall, fiesta, or anywhere that is more accessible for the
people to come because not everyone is the internet geek and not everyone is
willing to drive long journey to the airport.
AirAsia can also improve the number of Aircraft they have. The more plane
they have, the more choices the customer can have in which, the date they want, or
the time that is suitable for them. Despite for the customer conveniences, this can
also increase the capacities of passengers daily in which will help in gaining more
profit than before. The more passengers they have, more services they can provide,
therefore more profitable income they can make. With more planes, they can also
give a better frequencies of the flight schedule.
Other than that, as on the plane, AirAsia needs to provide a happy work force
for the employees, especially the flight attendance. The staffs need to be paid with a
higher salary, probably the highest salary in the field, but 30% less employees than
the normal airlines usually have. Its not the quantity that matters, but the quality of
their services. They need to provide better services in order to create

acknowledgement in a wider range (on time service, and friendliness).The choices of

food and merchandises on board can also be increased as this will give the
customer more choices and they probably can be interested in more than one item!
This will also act as a side income to AirAsia.
As at the airport, instead of having external organization to provide services,
AirAsia can create their own amenities, for example, before this the coffee house
was handled by outsiders in which anyone can sign up to sell their product there, but
instead, now AirAsia can have their own restaurant, their own rest area, their own
hotel, their own cab, their own VIP services, their own cleaners etc. This will allow all
the profit to go straight for AirAsia. This might need a little bit more of management
expertise, but it is definitely beneficial.
AirAsia is already known worldwide, with the help of their website, they can
actually reduce the cost of advertisement in which requires a higher cost. A normal
billboard itself will cost beneficial.
AirAsia is already known worldwide, with the help of their website, they can
actually reduce the cost of advertisement in which requires a higher cost. A normal
billboard itself will cost beneficial.
AirAsia is already known worldwide, with the help of their website, they can
actually reduce the cost of advertisement in which requires a higher cost. A normal
billboard itself will cost almost RM41 000. Therefore, a mouth to mouth publicity is
actually the most effective and cost-friendly. People nowadays are exposed to the
use of internet and actually most of the frequent flyers use internet as their source for
ticketing and information. AirAsia can use this opportunity to do more of online

advertisement and publicity for free, instead of paying for a billboard or a 4 pages
column on the newspaper.

6. Best course of action

With all the strategies that AirAsia is capable of doing, AirAsia can start molding
step to be a better known and recognized airline in the world. In addition, by
providing the best service, AirAsia will be more recommended by various sectors.

For example, the government fly students or employees on work or studies

purposes all the time. Of course they will prefer to cut the cost of flying these
people, therefore with AirAsia, the government will be able to choose a costfriendly airline. True, the government have their own airline company (MAS) but it
doesnt mean they can give those services for free and they still charge as almost
the same as they charge the everyday customer. With very affordable rate from
Airasia, many would consider AirAsia as their ideal airline. Not only the high
income, but low and middle income earners are also now able to experience
flying, of course with AirAsia.
When AirAsia is commonly talked and suggested about, indirectly, this will
change the perception of the world where low cost airlines are cheap because of
their lousy services while Airasia is nothing like that. AirAsia is also able to gather
loyal customers and will ensure the position and profit of AirAsia.
In the challenge to be the Most Profitable Airlines, using the scenario I
suggested, may be able to help AirAsia. I am not just a student doing research on
AirAsia, but I propose opinions based on myself as a customer, and as a member
of the community and what we see on AirAsia.
AirAsia has a chance on growing worldwide, and that chance should be taken
seriously because the potential that AirAsia already have and will eventuallygrow
better, is absolutely big.
7. Recommendation for AirAsia
For the recommendation, AirAsia may use the position to further the strength
its dominance. This dominance can be done by providing additional service counter

to serve the path. They can also increase the sponsorship in order to promote
AiirAsia like how they have sponsored Manchaster United team to fly them. Airasia
can offer the excellent service and best deals to the passengers. To fascinate new
passengers, AirAsia can increase the baggage limits and Give extra luggage
allowance.
Other than that, AirAsia can use the available resources and capital to
increase the frequency of this route. This can be the huge potential to return higher
profitability. In order to compete with airlines that are more experienced, AirAsia just
need to focus on the core services for ensuring theres no flight delay or other
collision. Investment for promotion should be reducing as people nowadays had
recognized the brand of AirAsia. The failure of internet system should also be
avoided as this will create outrage in customers as most of the process is now done
online, and AirAsia profit is 90% depending from their online services. Give
convenience to passengers
Airasia needs leverage competency in creating cost advantage across
multiple value chain. They can have ticket sales during peak season, or when
demand is high maybe the price is possible to be increased. Airasia should also
emphasis on more effective safety & security to avoid accidents.

(Eg.

demonstrations and procedures for passengers, avoid crash landings). Punctuality

should be their main concern especially AA wants to penetrate into the business
travelers market. This can also improve local responsiveness and be more cautious
on Flight and routes (avoiding flight delayed)

They could also improve on advertisement. Not necessarily mouth to mouth

but also online. Maybe on Facebook, Twitter or other most visited websites. This can
also create a guerilla marketing and promotion.