AirAsia Berhad is part of the AirAsia Group, is a Malaysian airline, world-famous low cost airline that operates extensive networks both domestically and internationally. AirAsia pioneered low cost airfares in Asia and is now currently the largest low fare, no-frills airline in Asia and one of the largest airlines in all of Asia in terms of passengers carried. The airlines claims ‘No Admin Fee’, but has some fees for services which are free on other airlines. Its slogan “Now Everyone Can Fly” highlights its low cost carrier strategy it employs. In 2009 and 2010, AirAsia has been voted the World’s Best Low Cost Airline. Currently, AirAsia Berhad is based in the Low Cost Carrier Terminal (LCCT), Kuala Lumpur International Airport (KLIA), Sepang. Its associate airline – AirAsiaX, is also located at the LCCT and shares operational facilities with AirAsia Berhad.
AirAsia was established in 1993 and started under one of the subsidiary for government-owned company, DRB Hicom. In 2001 the airlines are deep in debt and Tun Dr. Mahathir took the opportunity to off load debt laden Air Asia to Tony Fernandez. Through Tune Airways Sdn. Bhd, Tony Fernandez bought over AirAsia with a token sum of RM1 and a partial debt of 40million.
Under the leadership of Tony Fernandes, the airline was flying high in 2002 and launched its new route the same year. A second hub was open in 2003 at Senai International Airport, Johor Bahru. Main operations of AirAsia remained in Malaysia but it had shareholding interests in Thailand through Thai AirAsia and in PT AWAir .
The company operated from four hubs, which the first hubs, Kuala Lumpur International Airport (KLIA), Senai, Don Muang Airport (DMA), near Bangkok, Thailand and Soekarno-Hatta International Airport, near Jakarta, Indonesia. After that, the only place AirAsia was heading for is up, as the Thai and Indonesian subsidiaries were set up as well as the commencement of flights to Indonesia, Macau, China, Philippines, Vietnam and Cambodia in 2005. AirAsia now flies to all ASEAN countries, a great portion of Asian countries that include India, Iran, Sri Lanka and Bangladesh; as well as to the United Kingdom, France, Japan, Korea and Australia via AirAsiaX. In 2011, AirAsia are setting up another hub in the Philippines and are well on the way in setting up other similar operations elsewhere in the region soon after.
Low-cost air travel was not a new phenomenon and as the name suggests, it was run on the principle of minimizing the costs of operations and maximizing sales revenues. The product proposition that low-cost carriers offered to customers was ‘value’, by delivering basic product functionality, that is, a cost effective means of transport to keep operating costs low and it may have used high technology and costly equipment. Air Asia also tries to keep the cost low by recruiting only numbers of workers needed and selecting only capable and hard workers, so each worker will have works to do and the company does not have to pay workers who do not work efficiently.
Micro-environment can be the internal environment that contributes to the company’s success. Internal factors are includes the organization’s culture. One of the micro-environment of AirAsia is its employees’ welfares. AirAsia create a diverse, positive, respectful and fun working environment for people of all backgrounds. AirAsia promote and recognise their people based on talent and performance, work hard to create a common vision and sense of purpose amongst all fellow employees of AirAsia.
AirAsia’s mission is to be the best employer, create a globally recognised ASEAN brand, to be the lowest cost budget airline and to maintain the highest quality service by embracing technology. It is the company’s aim to works as a family between employers and employees where they treat each other with trust and respect. Fernandez is a strong believer in leading by example. He is often seen working alongside his team as a crew member or baggage handler. This allows him to get to know his staff better and to listen to customers’ feedback. He insists on a cooperative corporate culture. For example, he encourages pilots to cook breakfast for engineers each quarter to thank them for looking after their aircraft. As CEO, Fernandez ensures that he is accessible to all his staff by giving them his mobile telephone number.
Although it has limited resources, AirAsia has been able to fulfil its customer’s needs by collaborating with partners. For instance, AirAsia appoints authorized travel agents to cater to travellers who are uncomfortable with making their bookings over the internet. Travellers without credit cards can also pay for their tickets by cash at any Alliance bank branch in Malaysia.
Low cost carrier such as AirAsia also forming alliances with other low cost carriers to lower operating costs. For instance, AirAsia and JetStar have been working together since 2010 in areas such as procuring of aircrafts and inventories.
The corporate culture of the company is mainly base upon maximizing the value of shareholders. It also mainly believes in giving safety to the customers and believes in giving maximum satisfaction to the customers with leaders in the cost structure.
Competitors are also one of the micro-environment for AirAsia. AirAsia was the first low-cost carrier in South-east Asia. In Malaysia, MAS (Malaysian Airline System, the national airline of Malaysia) was AirAsia’s main competitor. In 2001, the domestic market was dominated by its rival Malaysia Airline System (MAS), whose high prices created a pent-up demand for low-cost air travel. AirAsia’s offer of 60% savings compared to MAS prices truly reflected the company’s promise to its customers, “Now Everyone Can Fly”.
To survive the intense competition in the airline industry, AirAsia must adopt the latest technology. The use of advanced aircraft technology results in lower fuel consumption. The role of information technology (IT) was another important factor involved with the successful AirAsia. The current objectives and strategies of the corporation regarding IT is to advertise its features and services, add the services and products to the catalog and solve various issues regarding the customer care with direct interaction with them. Many of the value added services are handled by IT by providing the travellers with the interface for online booking, internet check-in service, cancellation, etc. AirAsia also maximize their IT to improve their marketing performance. The company implemented current IT such as yield management system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system.
The macro-environment of the company are includes political, economy, natural factors, and social/demographic environment. For economy, the airline launched during a turbulent period when people were hesitant to travel due to the aftermath of the 2001 terrorist attacks. People concerned about long-distance travel started to look for holidays in nearby countries. The timing worked to the advantage of AirAsia when it started to fly regional routes. Asians were enjoying the benefits of rising incomes and good economic growth and although many could not afford long-distance holidays, they were open to the idea of travelling to nearby countries. Furthermore, the global financial crisis in mid-2008 affected many industries, including the aviation industry. Fewer business and leisure travellers were flying due to the economic recession. This became opportunity for low cost carrier such as AirAsia to grow their market share.
Natural factor such as oil could also influence the marketing strategies. Increasing level of fuel price has presented one of the biggest challenges to Airlines. AirAsia was quick to adapt to this by introducing cost cutting measures in other section and also purchase newer aircrafts which are more fuel efficient. Although, rising fuel prices and landing charges are putting pressure on AirAsia’s ability to keep costs low, therefore threatening the low cost quality flight balance. To combat this, AirAsia are employing fuel hedging and fuel surcharges, and are using fuel-efficient aircrafts. Using secondary airports also helps to reduce landing charges.
The political condition of Malaysia had also been in favour of the corporation as its acquisition was highly welcomed by the Malaysian government and there had no conflict between the corporation and the governance of the nation till now. Over the year, AirAsia has noticeably boosted tourism in Malaysia and has helped transform KLIA into a major air travel hub . Hence, the Malaysian government offers many incentives to AirAsia in term of landing rights, lowering passengers’ service charges, tax benefits and exemptions . This not only allows them to offer lower fares to further boost the country’s revenue, but also helps to increase AirAsia’s net income after tax. Air travel in Asia is heavily regulated, but Tony Fernandez has played a crucial role in lobbying for its deregulation. In mid-2002, Fernandez engaged the support of the fourth prime minister of Malaysia, Tun Dr. Mahathir, to network with neighbouring countries in effort to develop an open-skies agreement. Since then, Indonesia, India, Thailand, and Singapore have granted landing rights to AirAsia.
Demographic factors also play an important role in forecasting demand. The factors match customer expectations in regard to value-add service offerings. The huge population with rise in middle class and a lot of disposable income together with the absence of affordable forms of transportation post a high demand for AirAsia as a low cost airline. It is also anticipated that due to the rapid urbanization trends the air travel market will continue to grow at a fast pace. The geographical structure of Asia which is archipelago will also contribute to the air transport. For instance, between East and West Malaysia there is no other alternative mode of transport other than by air.
Evaluation of micro and macro environment.
AirAsia has succeeded in becoming one of the world’s best low-cost airlines. Which means that the environment surrounds the company plays an important part to success of the company. Like any other business, the airline industry is impacted by changes in its external and internal environment, which includes AirAsia. The current marketing objectives of the corporation are to get maximum number of customers of all types by making such schemes in which everyone can be accommodated.
The micro environment such as corporate culture plays an important role to create good working place which will influence the marketing performance of the company. AirAsia is very much compatible with the employees and their diversities as it is providing satisfaction to all of its employees and shareholders. A good working environment will make the organizations runs smoothly because the employees came to love their works which will affect the way they work.
The technological advancements in the fields of Information Technology and Communications have led the value-added services of the corporation to work effectively. By maximize their IT, AirAsia can reduce the cost and eliminates the middleman and the sales commission to pay them. Furthermore, e-commerce and e-business are increasing most commercial companies’ success rate. For example, AirAsia is increasing the use of IT management in purchasing ticket on-line, select seating and ordering special in-flights menu’s straight from the Internet. Plus, the systems are very customer friendly because the entire customer can buy or make a ticket reservation via online. Meaning, the system can achieved the lowest cost for its effectiveness and efficiency. The technological advancements in the field of IT and communication have led the value-added services of the corporation to work effectively. The corporation can further go ahead with more effective use of IT.
There are some important external factors that AirAsia should consider which are the government policies and the relationships with the government, other macro-environment such as economy, political and society environments plays an important role to the company. The economy of Malaysia is a newly industrialized and state-oriented economy that plays a significant role in the success of AirAsia.
Whereas the socio-cultural where the hospitality of the people with their own diversity in foods, clothes, cultures and diversities with such scenic beauty has always made Malaysia as a tourists spots and attraction for people from all over the world that has again proved to be the benefitting factors for the company. This improves the marketing performance of the company.
Capitalizing on its success, AirAsia has started to introduce other offerings based on the low-cost business model. For example, AirAsia X, an associate company of AirAsia, was launched in 2007 to offer long-haul budget travel to destinations that are between four and eight hours from Kuala Lumpur, AirAsia X complements AirAsia’s current route network.
The competition among airplane industries is very tough. Each of LCCs companies in the world is trying to conduct some strategies to compete with another competitor in their industry. To compete with their competitor in the business environment, a company needs to make a strategy to achieve their long terms objective and can be successful for doing their business, same goes to AirAsia. The business model of AirAsia is well established and fairly ideal for other industries as well. With the perfectly set goals, mission and listed strategy ensures the well function of the corporation. Foundation of the corporation is based upon low cost, efficiency, stimulation of new markets and strong cash flow. Strategies highlight the concepts of simplicity, quality services at low cost, etc. And the vision is to continue to be lowest cost in the market.As the first airline to introduce the budget, no-frills airline concept, AirAsia need to maintain the business and keep the competition under control. With that being said, AirAsia has succeeded in becoming one of the world’s best low-cost airlines. AirAsia achieved all of these because the strong management that is smart in exploiting the micro and macro environment around them. That is why identifying the micro and macro environment that surrounds a business environment are crucial to a company. There a several important micro-environment for AirAsia to focus on which is the corporate culture that central to their employees’ welfares, their partners and alliances, their competitors and the information technology. The proper use of available manpower, avoiding confrontation among them for maximizing the proper functioning capability of the corporation are one the fundamental factors of the corporation along with the efficient use of the resources like Information Technology. Based on the macro-environment of the company which includes economy, political, social/demographic and natural factors, the current mission and objectives of the company can be justified. All of these factors are impacting the company’ marketing performances which quite outstanding in the Asian region. With the right partners and a strong marketing strategy focusing on the promise of low fares and good brand experience, AirAsia has evolved from an ailing company into one that netted a profit of $14.4 million by its third year of operation. The low-cost business model seems to have worked well for AirAsia. The challenge remains for the company to continue to maintain the balance between cost and profitability.