Company Research on Air Asia Sdn Bhd (MGT 3010)

KULIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

BUSINESS COMMUNICATION

(MGT 3010)

GROUP ASSIGNMENT 2

COMPANY RESEARCH: AIR ASIA

NAME MATRIC NO. AFIFAH NABILAH BT MOHAMAD SAFEI 1321976

BAI JING 1126260 LAN ZHENG YAN 1228762

MARIAM AHAMADA 1030856

Lecturer’s Name : Dr. Noor Hazilah Abd Manaf

Section : 3

Session : Semester 1, 2015/2016

Submission date : 11 December 2015

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TABLE OF CONTENTS

INTRODUCTION ..............................................................................................................................3

ANALYSIS ON THE COMPANY SUCCESS STRATEGIES ............................................................5

THE IMPACT OF AIRASIA ON THE AIRLINE INDUSTRIES........................................................8

AIRASIA‟S LATEST ISSUE AND SOLUTIONS ............................................................................ 11

CONCLUSION ................................................................................................................................ 13

REFERENCES ................................................................................................................................. 14

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INTRODUCTION

AirAsia Berhad is a Malaysian low-cost airline headquartered near Kuala Lumpur,

Malaysia. AirAsia group operates scheduled domestic and international flights to 100

destinations spanning 22 countries. The 13 large shipping based on Kuala Lumpur, Kota

Kinabalu, Kuching, Penang, Bangkok, Chiang Mai, Phuket, Jakarta, Bandung, Medan,

Surabaya, Bali, Manila. The two large virtual air based on Hong Kong and Singapore.

The affiliate airlines of AirAsia have AirAsia India, AirAsia Japan, AirAsia X,

Indonesia AirAsia & AirAsia X, Philippines AirAsia & AirAsia Zest and Thai AirAsia.

AirAsia is taking the first steps towards starting its own frequent-flyer programme. The airline

has signed an agreement to start a joint venture with financial services firm Tune Money to

launch a programme called "BIG". Under this programme it will issue loyalty points to

AirAsia customers and third-party merchants. Points can then be used to redeem AirAsia

flights.

For the awards and recognition is that the 2012 World Airline Awards at the

Farnborough Airshow ranked the airline as the world‟s best low-cost airline. In 2013, it is

estimated the three stars level Airline Company. AirAsia have estimated “best low-cost in

years” from 2009 to 2013 within scope of Asia and around the world by Skytrax. In 2014,

AirAsia is World‟s Best Low Cost Airline for 6 year straight. As of January 2014, AirAsia

Group carried more than two hundred million one million people, is the world's 11,500

employees provide employment opportunities.

The business philosophy of AirAsia is based on the “Now everyone can fly” dream

and the idea that everyone can afford aimed air fares, AirAsia is committed to making travel

becomes cheaper, simple, convenient and fun. AirAsia had making the service personalized

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and the turnaround time only need 25 minutes. It has purposed safety first to saving the cost

and reform innovation. AirAsia is committed to maximizing the profits and provide quality

and cheap services. Back through faster turnaround time, improve the efficiency of aircraft

utilization and service personnel to provide essential services only, using the same type of

aircraft to save training costs. It is to achieve cost optimization.

For the accident, AirAsia have a good flight safety record except the subsidiary of

Indonesia AirAsia flight crash happened No. 8501. March 2, 2015, AirAsia QZ8501 flight on

December 28, 2014, to Singapore from Surabaya, Indonesia crashed, contained 162

passengers and crew were killed, so far only about 103 bodies have been found.

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ANALYSIS ON THE COMPANY SUCCESS STRATEGIES

AirAsia engages with the travel and airlines industry. AirAsia has been named the “World‟s

Best Low Cost Airline” in the annual World Airline Survey by Skytrax for seven consecutive

years from 2009 to 2015. The key strategies that keep AirAsia successful are as follow:

1. Safety first:

As a company involves in travel and transportation industry, AirAsia prioritizes its

customer‟s safety more than anything else. To do that, AirAsia fully complies its airlines

with the highest International Aviation Safety Standards and practices, and is regulated by

the internationally renowned Malaysian Department of Civil Aviation.

AirAsia has been partnering with renowned international partners for aircraft and

engine maintenance, and made significant investment to ensure the safety of their planes.

They also adopt a zero tolerance to unsafe practices and strive for zero accidents through

proper training, work practices, risk management and adherence to safety regulations at all

Source: http://www.airasia.com/my/en/about-us/ir-strategy.page

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times. AirAsia management also keep their operations simple and transparent in order to

ensure the security of their employees and customers.

2. Cost optimization strategy:

AirAsia focuses on lowering the cost but produces the best services to its customers. .

Therefore, they try to implement the efficient and simple point to point operations by

attracting and retaining the hardworking and smart people who have passions for

continuous cost reduction. AirAsia strives to get a faster turnaround time by improving the

aircraft utilization and crew efficiency. They also use one type of aircraft for saving

training cost.

3. Low fare:

Along with its promise “Now Everyone Can Fly”, AirAsia provides airlines services

with the lowest fare to its customers. AirAsia targets for the customers who can do

without the frills of full-service airlines in exchange for low fares. AirAsia implements the

low fare strategy based on the low cost carrier model as follows:

4. Self automation:

The principle is the customers can save more money or pay less when they do things

like check-in on their own. The more the customer use “do-it-yourself (DIY)” services

like self check-in, the more AirAsia can save on the operational costs. Thus, AirAsia can

provide the lowest fare to its customers.

5. No frills:

The principle is “Pay only for what you want”. Customers will only pay for the things

and services that they want. If they want additional inflight comfort and services, they just

need to add-on the services and vice versa.

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6. Cost saving innovations:

AirAsia constantly look for the latest advancement in savings. AirAsia is the first

airline to use the new Airbus A320 aircraft installed with „sharklet wing tips‟ to lower

wind drag and provide better fuel consumption.

7. Customers’ convenience and satisfactions:

AirAsia strives to maintain the simplicity in every application of services. They

recognise the importance of customers‟ satisfaction and its linkage with AirAsia long-

term success. Therefore, AirAsia tries to provide the best services to its customers to gain

the customers‟ trust and loyalty towards AirAsia airline services. Some of the services that

AirAsia provides for the customers‟ convenience are ticketless service, internet booking,

reservations and sales office, nationwide call centers, easy payment channels and

authorized travel agents.

8. Transparency:

In order to gain the trust from both public and potential investors, AirAsia provides an

optimum disclosure, which is higher than the industry norms, to the public and investors.

They optimizes the transparency in decision-making and information sharing.

9. Human capital development:

AirAsia takes serious of its human capital development by investing in both hard and

soft skills of the employees. AirAsia upper management recognises all the employees as

the contributors to its success. AirAsia provides rewards the employees for the excellence

and individual contributions.

Based on an interview by The Philippine Star, Datuk Tony Fernandez, the CEO of

AirAsia hightlight some other factors and strategies contributing to the success of AirAsia

Berhad which are strong finance background, strong determination, strong bond with the

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employees, the power of the brand, strong and creative marketing strategies, support from the

government, use of the digital technology, generosity towards the community, passion in

achieving the goals, bold vision and dynamic corporate culture.

THE IMPACT OF AIRASIA ON THE AIRLINE INDUSTRIES

AirAsia is the biggest winner of the award “World‟s Best Low Cost Airline” in the

annual World Airline Survey by Skytrax for seven consecutive years from 2009 to 2015.

Below are the awards that has been won by AirAsia since 2003:

YEAR AWARDS AND RECOGNITIONS

2003

Developing Airline of the Year 2003 by Airfinance Journal

CEO of the Year (Tony Fernandes) by Business Times and American

Express

CIO Top 100 Honoree for excellence in strategic IT deployment

Obtained Malaysian Superbrands status by Superbrands International

www.airasia.com voted as the most popular website for online shopping

in the 11th Malaysia Internet User Survey conducted by AC Nielsen

Consult

2004

Asia Pacific Low Cost Airline of the Year 2004 by Centre for Asia

Pacific Aviation (CAPA)

Asia Pacific Aviation Executive of the Year 2004 awarded to Tony

Fernandes, Group CEO by Centre for Asia Pacific Aviation (CAPA)

Asia Pacific Low Cost Advertising Award for Best Asia Pacific / Middle

East Low Cost Airline Print Advertisement 2004 by Centre for Asia


Asia's Best Managed Company in the Airlines and Aviation Sector by

Euromoney

Best Newly Listed Company (3rd place) by Euromoney

Triple A Regional Award for Best Airline IPO for 2004 by The Asset

Magazine

Best IPO of the Year by The Edge Singapore

25 Stars of Asia honoree listing (Tony Fernandes) by Business Week

Best Uniform' for Miss Airlines International Contest 2004 5th China

Air Show, Zhuhai

Market Leadership Award, 2005 Airline Achievement Awards by Air

Transport World Magazine

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2005

The CAPA Aviation Executive of the Year 2005 awarded to YBhg.

Dato' Tony Fernandes

Regional/ Low Cost Leadership Award in Airline Business Startegy

Awards 2005 by Airline Business - awarded to YBhg. Dato' Tony

Fernandes

Airline Market Leadership Award by Air Transport World (ATW)

Transport Company of Excellence Award by Ports World Sdn. Bhd

Asia's Top 200 "Best Under A Billion" Companies by Forbes Asia

RHB AirAsia Credit Card by Superbrands

Best Chip Program for MasterCard Marketing Leadership Award 2005

by MasterCard

2006

Malaysia's Ernst & Young Entrepreneur of the Year 2006 awarded to

YBhg. Dato' Tony Fernandes

Low Cost Airline of the Year in KLIA Awards 2006 by Malaysia

Airports Holdings Berhad

Merit Award for CAPA Airline of the Year 2006 by Centre for Asia


Asia's Best Budget Airline under Best In Travel 2006 by

SmartTravelAsia.com

Best Managed Company, Best Corporate Governance, Best Investor

Relations, and Most Committed to Strong Dividend Policy under The

Annual Investor Poll by FinanceAsia.com

2007

Airline Of The Year 2007 by Centre for Asia Pacific Aviation (CAPA)

Asia's Best Budget Airline under Best In Travel Poll 2007 by

SmartTravelAsia.com

Airline Human Capital Development Strategy Award by Frost &

Sullivan

Asia's Best Emerging Companies with regards to Corporate Governance

by The Asset

Best Low Cost Airline in Asia by Skytrax

The Brand Laureate 2006-07 for brand excellence in the Airlines-Low

Cost Carrier Category

2008

The Laureate Award for Best Commercial Airport Transport from

Aviation Week

Tony was awarded the Malaysia Brand Icon Award from Deputy Prime

Minister YAB Dato' Seri Najib Tun Razak at the Global Brand Forum

Malaysia

AirAsia - Malaysia's 30 Most Valuable Brands 2008 By Malaysia's Most

Valuable Brands (MMVB)

PIKOM ICT Organisation Excellence Award 2008 By Association of the

computer and multimedia industry (PIKOM)

AirAsia X - Best New Airline Of The Year By Centre for Asia Pacific

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Aviation (CAPA)

Best Asian Low-Cost Carrier by TTG Travel Awards 2008

Top CEO brand & 3rd Best Corporate Brand in Malaysia by Pulse

Group Survey

World's Best New Airline (AirAsia X) by Budgie World Low Cost

Airline Awards 2008

Friends Of Thailand Award 2008 by Tourism Authority of Thailand

Asia Pacific's Top 1000 Brands 2008 Survey (AirAsia- Top 5 Airline) by

Taylor Nelson Sofres

Asia's Best Budget Airline under Best In Travel Poll 2008 by

SmartTravelAsia.com

AirAsia wins Airline Strategy Award in the Finance Category by Airline

Business

AirAsia recognized as one of the 50 Most Innovative Companies In The

World by FastCompany.com

Airline Market Penetration Leadership of the Year by Frost & Sullivan

Rising Leaders - The Next 10 Years by Singapore Institute of

International Affairs (SIIA) in collaboration with AXN Asia

Commendations of Prestige Award for outstanding contribution in

Macau by Macau Special Administrative Region

2009

Airline Of The Year by Centre for Asia Pacific Aviation (CAPA)

Tony received the 2009 Frost & Sullivan Excellence in Leadership

Award by Frost & Sullivan

Best Asian Low-Cost Carrier by TTG Travel Awards 2009

World's Best Low Cost Airline by Skytrax

2010

Masterclass Global CEO of the Year awarded to YBhg. Dato' Tony

Fernandes


AirAsia voted the Air Cargo Industry Newcomer Award at the ACW

World Air Cargo Awards 2010 by Air Cargo Week

2011

Best Asian Low-Cost Carrier By TTG Travel Awards 2011


Best Low Cost Airline – Asia by Skytrax

Best Company for Investor Relations – Mid Cap

Best Investor Relations Website – Mid Cap by Malaysian Investor

Relations Association's (MIRA)

Asia's Best Low Cost Cargo Carrier Award by Aviation Awards Asia

2011

Fastest Growing Foreign Airline for Cargo by Guangzhou Baiyun

International Airport

2010 Asiamoney's Best Managed Company Award

2012 World's Best Low Cost Airline by Skytrax

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2012 ATW Value Airline of the Year

2013 World's Leading Low Cost Airline by World Travel Awards 2013




Since the strategies, vision and mission of AirAsia Berhad in providing the low cost

airlines are effective and got attention from the customers all over the worlds, other airlines

companies are also trying to follow AirAsia‟s step and provide more low cost airlines with

best qualities and services to the customers. The whole airlines industries are now

concentrating more on providing low cost, optimized safety features and best services

according to the demand of the customers.

AIRASIA’S LATEST ISSUE AND SOLUTIONS

Indonesia AirAsia Flight 8501 (QZ8501/AWQ8501) was a scheduled international

passenger flight, operated by AirAsia Group affiliate Indonesia AirAsia, from Surabaya,

Indonesia, to Singapore. On 28 December 2014, the aircraft operating the route, an Airbus

A320-216, crashed into the Java Sea during bad weather, killing all 155 passengers and seven

crew on board.Two days after the crash, debris from the aircraft and human remains were

found floating in the Java Sea. Searchers located wreckage on the sea floor beginning on 3

January, and the flight data recorder and cockpit voice recorder were recovered by 13

January. The search for bodies ended in March 2015 after recovery of 113 of the 162 bodies.

An abnormal climb rate, possible pre-existing damage to the jet, and questions about

„upset‟ training and pilot standards are all emerging as considerations in the AirAsia disaster

that killed 162 people during the accident. These are all matters openly raised or implicit in

the disclosures made by Indonesian investigators overnight. The hard facts are that the jet at

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one brief stage was climbing at a rate of 1800 metres a minute soon after the pilots began

increasing its cruising altitude from 32,00o feet to 38,000 feet in crowded airspace to avoid

bad weather.

On Wednesday, 17 June 2015, Air Asia Bhd, which owns more than 120 aircraft,

plans to undertake a sale and leaseback (SLB) of up to 20 aircraft in 2015 as it also seeks to

reduce its debt level.It said that there is a huge demand for the SLB on the company‟s aircraft.

Air Asia said there was no increase in operating leverage, adding the management was

confident of bringing net gearing down to around 2.00 times by end of 2015 from 2.47 times

now.

“Air Asia‟s gearing also will continue to decrease over the next two to three years as

the company has cut aircraft acquisition from an average of 25 aircraft per year to an average

net addition of only four aircraft per year over the next three years,” it said. It said its cash

flow continues to strengthen due to capacity reductions taken last year, improved demand

especially with the recovery in Chinese traffic, and a much more rational marketplace in all its

territories especially Malaysia.

Moreover, Air Asia Bhd has issued a business update on Wednesday to assure the

investment community following the recent fall in its share price.It said on Wednesday the

company has a solid footing, strong balance sheet, rich in assets and good business outlook.

Though issues as above keep on-going, the Management believes that 2015 will be a very

good year on the back of a better operating environment with lower fuel price and a much

more rational market, and the Company has shown good progress through its 1Q15

performance.

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CONCLUSION

In conclusion, AirAsia Berhad has been one of the most successful and fastest growing

airline companies in Asia with more than 10 shipping centre around Asia. AirAsia best

strategy as the low cost airlines provider is the biggest factor which contributing to its

success. As the result of the AirAsia success low cost strategy, other airlines companies start

to follow its step in providing the low cost and low fare with best and high quality airline

services to satisfy the demand of the customers.

In this high living cost era of economy, customer strives to cut their expenses and

demands for low cost products and services. This is the main factor why AirAsia low cost

strategy is the most effective strategy that contributes towards its success. We believe that in

the future, more airline companies will follow AirAsia‟s step and provide more low cost

airlines and transportation for the customers.

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REFERENCES

Strategy. (n.d.). Retrieved December 3, 2015, from http://www.airasia.com/my/en/about-us/ir-

strategy.page

The Beginner's Guide to AirAsia : Hi, We're AirAsia! (n.d.). Retrieved December 3, 2015,

from http://www.airasia.com/my/en/about-us/hi-we-are-airasia.page

Achievements. (n.d.). Retrieved December 4, 2015, from

http://www.airasia.com/my/en/about-us/awards.page

The AirAsia Family. (n.d.). Retrieved December 4, 2015, from

http://www.airasia.com/my/en/about-us/corporate-profile.page

Air Asia: Case study on Growth, Diversification and Low cost Strtegy. (2012, November 9).

Retrieved December 5, 2015, from http://www.slideshare.net/partha89mahanta/air-asia-case-

study-on-growth-diversification-and-low-cost-strtegy?related=1

AirAsia Company. (2013, September 28). Retrieved December 5, 2015, from

http://www.slideshare.net/LindaBongsu/airasia-company?related=1