Essay About Operations Of Airasia And Lowest Cost

Report Air Asia
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PART 1: CURRENT SITUATIONCurrent PerformanceAir Asia continued to expand in terms of networks and capacity.Revenue for the year of 2013 is RM5.11 billion, which marked an impressive 3.4% increase from RM4.95 billion achieved in 2012. Unfortunately the impact of a stronger US Dollar against Asean currencies impacted their profit margins, leading to a dip in operating profit, which stood at RM1.01 billionStrategic PostureMissionTo be the best company to work for whereby employees are treated as part of a big familyCreate a globally recognized ASEAN brandTo attain the lowest cost so that everyone can fly with AirAsiaMaintain the highest quality product, embracing technology to reduce cost and enhance service levelsObjectivesAims to carry 70 million passengers a year, within six years starting from 2014. Turn the low-cost carrier terminal at the KL International Airport into the regional hub for budget travel. • Plans to introduce more routes add frequencies and develop the existing ones.StrategiesPlaying the cost reduction game in order to maximize the lowest operation cost.Relocating the operations of AirAsia from the Low-Cost Carrier Terminal in Sepang to the new KLIA2, this has more space and infrastructure to offer better and more exciting service.Open a new bird nest in different countries.PART 2: STRATEGIC MANAGERSBoard of DirectorThe board of director consists of eight people which are 2 Non-independent non-executive directors, 4 independent non-executive directors, 1 executive director CEO and 1 non-independent executive Director GCEO.Top ManagementTop management are promoted from outside AirAsia by their respective skill and experienced in the industries.The teams are very experienced in the industry.PART 3: EXTERNAL ENVIRONMENTEFAS tableExternal FactorWeightRatingWeighted ScoreCommentsOpportunitiesA first Choice flight alternative during economic turmoil.154.00.60First choice in the alternative of travelling since this company offers low-cost airfares.Promote Malaysian tourism.103.00.31In return will increase the company’s revenue.        AirAsia can tap on a lot of opportunities within the South-East region..052.00.10Huge potential for customers that consist of foreign workers from neighboring countries such as Indonesia, Myanmar and Vietnam.Relocating AirAsia from LCCT to the new KLIA2..154.00.60More space and infrastructure to offer better operations and more exciting service.Online Market.052.50.13AirAsia can market to a much wider audience for relatively little expenseThreatsEconomic recession .103.50.35Reduces the urge for people to travel by air as it is the most costly alternative for travelling.Emergence of new- entrance in the low-cost carrier sector.051.50.08Firefly and Jetstar making the market share smallerInconsistent oil prices .154.00.60adversely affect the fuel surchargeRivalry among the competing firms- High.153.00.45Compete with other senior airlines such as MASThreats of substitute products or services- High.051.00.05Car or any private vehicle as an alternative for inside travelTotal Score1.003.27PART 4: INTERNAL ENVIRONMENTIFAS TableInternal FactorWeightRatingWeighted ScoreCommentsStrenghtA low cost airlines which offers five-star service where everybody can fly..155.00.75All categories of customer able to enjoy an affordable ride.In-flight services that promote Malaysian hospitality .052.00.10Promote faster travel inside the country.Utilization of Information Technology (IT).053.00.15Saved on the cost of issuing physical ticket and make check-in and booking easier.Strong branding and marketing.154.50.68Well established brandWell established LCC operating out of South East Asia.103.00.30Important for company operationWeaknessesHigh switching costs.203.00.60Current aircraft model are Airbus models, it will put a high cost to switch when Airasia want to change to other modelHigh amount of the operating cost and investments.052.00.10In acquiring airplanes and executing the latest technologiesNo Frill or complimentary services.052.00.10No complimentary drinks or food and etc.Not on too many routes as compared to market leaders.152.50.38Lack of airlines routes offered compare to market leaders.Strong competition.052.00.10MAS and other airlines is more senior and cover lot of routes.Total Score1.003.26PART 5: ANALYSIS OF STRATEGIC FACTORSFAS MatrixInternal FactorWeightRatingWeighted ScoreSILComments[S1] A low cost airlines which offers five-star service where everybody can fly..205.01.00/[S4] Strong branding and marketing.104.50.45//[W4] Not on too many routes as compared to market leaders.102.50.25//[W1] High switching costs.103.00.30/[O1] A first Choice flight alternative during economic turmoil.104.00.40//[O4] Relocating AirAsia from LCCT to the new KLIA2..104.00.40/[T3] Inconsistent oil prices .204.00.80/[T4] Rivalry among the competing firms- High.103.00.30/Total Score1.003.90PART 6: STRATEGIC ALTERNATIVES and RECOMMENDED STRATEGYStrategic AlternativeIn time of economic turmoil, AirAsia can make extensive and high-impact marketing activities. As AirAsia is Airlines Company that offers a low price with a five star service they will be the first choice of a middle and low income customer in using airlines services.By relocating the operation in LCCT to the new KLIA2, AirAsia can use their well established brand in order to be more competitive with MAS and other competitor. This is by offering more efficient service and better operations.Using the strong brand images accumulated from customer experienced, AirAsia could be competitive with the competitor. Thus by increasing brand images of the company AirAsia can cater more the market share in Malaysia as well in the industry. To increase the brand image, AirAsia should focus in increasing the efficiency of their services as well the customer service.By playing the cost reduction strategy, AirAsia able to reduce their cost per available seat per kilometer (CASK) make it possible for AirAsia to offer lower price for customer. Thus the company can compete with other competitor in price game and cater more customers in future.Providing a better operation and enhanced service able to reduce the switching cost of AirAsia aircraft model, its true better technologies of aircraft increase the safety matters. But in a mean time to be more efficient in handling the company operation is most priories. This matter in a long term will bring profit to the companies.Opening a new hub or making a new nest in different countries is a smart moves for AirAsia in competing with other competitor as well offering an expansion routes to the customer.Customer Relationship Management (CRM) application will be one of the area of strategic IT implementation that AirAsia can focus to achieve high values to both shareholders and customers. CRM initiative development – to differentiate from other competitors, AirAsia should not adopt the “fast follower” approach to CRM initiative development, i.e. learning from other competitors’ approach (e.g. installing kiosks for fast check-in). AirAsia should implement CRM program in favour of investing in initiatives with a high return, which respond to the needs and desires of their own customersRecommended StrategyRecommend the reallocation of AirAsia operation center in LCCT to KLIA2, this is as AirAsia has become bigger and expand more in airlines route a bigger operation center is necessary to occupy the operation. This reallocation also a long term planning in serving more efficient services to the customer.By further cost reduction but at the same quality service is a good strategy that AirAsia should maintain off. In order to do this AirAsia should focus on their R&D in developing a better way of cost reduction in airlines industry.A strong branding and marketing activities are one of the key in success. Thus by developing AirAsia brand through the marketing effort more customer will recognize AirAsia. Thus in near future AirAsia able to cater more market share than competitor as well increased their profit.Expanding the airlines routes means more destinations the customer can go. Thus more people will choose AirAsia as their Airlines services to travel. This will lead to more income to the AirAsiaAirAsia should 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 AirAsia to grow in Asia even further, and help Virgin Blue to extend services to south-east Asia.  PART 7: IMPLEMENTATIONTo maintain the high level of profitability, AirAsia should implement planning below:Diversification such as acquire new know-how in a view to offer more service to the consumer.For example to take over an online travel agency.Invest in joint ventures such as Maintain international development across Asia in association with local budget airlines and It would increase the airline’s offer.Fund- rising such as fresh money could be used to finance strategic projects.Act on the prices such as Expensive tickets to be distributed when the demand is high (week-end) and prices increasing according to the demand. R&D needs to be improved, as does marketing activitiesPART 8: EVALUATION and CONTROLThe strategies of AirAsia focus more on the management and access of information rather the creation of irrelevant airline services.For this reason, AirAsia has developed a unique set of guiding principles such as simplicity, cost- effectiveness.Total commitment to these principles makes the airline services of AirAsia very user-friendly to its customers.SWOT analysis of AirAsia with reference to sustainability and future growth shows more opportunities than threats.AirAsia is fully determined to exploit these opportunities and convert more threats into opportunities for success.