Air Asia Blue Ocean Strategy: Assignment

Contents
1. EXCEUTIVE SUMMARY...............................................................................................................2
2. INTRODUCTION............................................................................................................................3
3. GROWTH, DEVELOPMENT AND OPERATIONS....................................................................4
4. OTHER SUPPLY DETAILS..........................................................................................................5
5. DEMAND CHARACTERISTICS...................................................................................................6
6. SWOT ANALYSIS..........................................................................................................................7
7. COMPETITORS AND EFFECT ON SCHEDULED AND CHARTER CARRIERS................9
8. IMPACT ON HUB AIRPORT AND DESTINATIONS.................................................................9
9. FUTURE PREDICTIONS..............................................................................................................9
10. CONCLUSION AND RECOMMENDATIONS........................................................................10
11. REFERENCES...........................................................................................................................11
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1. EXCEUTIVE SUMMARY
The development review of key elements related to the development of this airline is
detailed in this article: growth; Characteristics of supply and demand; strengths,
weaknesses, opportunities, Threats (SWOT); competitive environment; home-based
impact; (hub) Airport and destination; future expected. With AirAsia it has succeeded
in expanding its operations to another ten nations. Furthermore, by AsiaX, its affiliate
company launched low-cost, lengthy Malaysia air carriers to the United Kingdom and
Australia. The paper reports AirAsia's Business model and addresses its 'market
growth' approach and its 'approach 'Developing goods'. The Blue Ocean Strategy
theory was being used as a tool for investigating the bold decisions of AirAsia.
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2. INTRODUCTION
Air transport markets are being gradually privatized, giving airlines new opportunities
and providing a chance for more demand. The emergence of the low cost carrier
(LCC) market, which has revolutionized the airline industry and put new and
demanding demands on the airlines industry, has become one of the most
noticeable impacts of this. Multiple airports serving LCCs have witnessed extensive
customer growth rates, but now have to react and adapt to the unpredictable
characteristics of these airlines around the same time (CAPA Centre for Aviation,
2012).
AirAsia is Asia Pacific's comprehensive strategic and financial network, offering
airline services, hospitality and leisure services, and also financial services. AirAsia
began as a low-cost carrier with operations in Malaysia, Indonesia, Thailand, the
Philippines and India, and has taken over than 600 million travellers to its system of
more than 160 locations across Asia, Australia, Middle East and US (Ahmad and
Neal, 2006). Recognized for its world-class service, the airline was named 11 years
in a row by Skytrax World's Best LC Airline from 2009 to 2019 and Global Travel
Awards Nation's top LC Airline from 2013 to 2020 for 8 years.
This report describing about AirAsia growth and development it’s operations in the
destination and other supply details, SWOT analysis. Effects on scheduled and
charter carriers and destination effects. Predictions for the future; suggestions for
future management.
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3. GROWTH, DEVELOPMENT AND OPERATIONS
Tune Air purchased the airline for a token amount of one ringgit (0.26 US cents) to a
low-cost or budget airline profile table which managed to attract from its initial public
offering in October, US$ 200 million in new capital in 2004. The credit was granted to
AirAsia Berhad or Malaysia AirAsia (also referred to as AirAsia). In order to allow
Malaysians to fly by air to their destination in Southeast Asia.
AirAsia as a process involving AirAsia and AsiaX, will each located in Malaysia, Thai
AirAsia, centred in Thailand, and PT Indonesia AirAsia, centred in Indonesia, carried
over 60 international tourists as a LC airline from January 2002 to December 2008.
79 aircraft flown (Airbus 340, Airbus 340, Airbus 3) A330s, 56 Airbus A320s and 19
Boeing 737-300s), and 56 Boeing 737-300s for 110 routes 62 locations in 15
countries (Rizal Ahmad, 2010).
AirAsia has grown in step wise, as there first step by introducing its basic or key
service (passenger seats available) as a single class, Air travel, no-frills. For extra
amenities or frills, travellers had to spend. For the second step they utilized aircraft
rate and few 12 hours a day. AirAsia has continued its efforts to achieve a high
degree of performance. 2007 and 2008 were difficult operating periods because oil
accounted for approximately 50%of the budget of supplying ASK to the airline. After
all, AirAsia's costs were much less at 2.95 US cents per ASK than 6.35 US cents
reported by other regression analysis carriers in 2007. For the 4th step by attempting
to support management strategies, AirAsia held its operating expenses down
(Ahmad and Neal, 2006). As a central technique they treated some fixed costs as
variable costs, the crew was paying a proportion of its income as commissions
related to the actual selling of in-flight goods or performance bonuses based on the
productivity of employees. AirAsia took its ground mechanic on board its flights while
serving a minor road, such as Kuala Lumpur to Chiang Mai in northern Thailand,
rather than stationing him at Chiang Mai airport, and outsourced all other ground
aviation operations at the airport (Rizal Ahmad, 2010). For the next step thy kept the
material delivery cost minimum by introducing internet to customers, innovative
methods to book the seats. They use single aircraft type as the fifth step. The latest
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and increasing Airbus 320 fleet added to the comparatively low control condition and
operating expenses of the aircraft.
4. OTHER SUPPLY DETAILS
The AirAsia Group ended 2017 with a total of 204 aircraft composed of 22 A320neos
with 186 seats and 182 A320neos with 180 seats. These aircraft consist of 202
aircraft currently operated by 6 airlines belonging to the group and two A320ceos
which have been subcontracted to Pakistan International Airlines since 2015.
A fleet of 176 aircraft, consisting of five A320neos and 171 A320ceos, started in
2017 with the AirAsia Company. Therefore, the fleet increased by 28 aircraft in 2017
time (CAPA Centre for Aviation, 2018).
In addition, AirAsia offered catering service inside the aircraft. The flight attendant
will go to their passenger seat while the flight is flying to ask them to require some
drink or food, so that they stop their customers from being hungry and thirsty while
inside the airplane.
Business improvement comes from regular clients (W. Edwards Deming, 1950),
which is a definitive issue for all airlines. This leading factor has led to many studies
linking customer experience with concrete service quality features such as schedule,
air hostess air service, ground crew food and pre-flight facilities, online services and
passenger services.
Both crew and workers are concerned at all times for the lives of the people in hand
and are obliged to protect the responsibility while ensuring a good service. Tony
emphasized 6 core values with a 13 Allstar value as well as being an Air Asia
employee who is safety conscious, loving, enthusiastic, full of honesty, hard-working
and fun to support their goal of being the best company to work for as a low-cost and
high-quality global ASEAN brand. With strong work ethics, governance and morality.
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5. DEMAND CHARACTERISTICS
High air travel demand, backed by the widening of the destinations and schedules of
the AirAsia Group, led the LCC to record a better total capacity of 88% in the second
quarter ended June 30, 2017. The aviation group reported that its leverage ratio was
up by 3 % compared to the previous year for the quarter under review.
On a yearly basis, the overall passenger numbers carried by its operations in
Malaysia, Thailand, India, Indonesia and the Philippines grew by around 14% to
15.81 million. The increase in overall passengers reflected an increase in production
of more than 11% (The Star, 2017).
Growing demand for air transport helped expand the proportion of passengers
transported by 10% year-on-year to 9.61 million, more than an increase in efficiency
of 8%
A load factor of 86% y-o-y was reported by Thai AirAsia (TAA), up by 3 percentage
point’s year before. .Also during quarter, the passenger numbers transported was
4.69 million, a rise of 13% y-o-y, which was greater than the 9% increase in seat
capacity (The Star, 2017).
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6. SWOT ANALYSIS
SWOT analysis of AirAsia analyses strengths, weaknesses, opportunities and
threats. For strengths of AirAsia can be discussed of efficient promoter. In this new
world of travel, AirAsia Group maintains assured of emerging bigger, more stable
and quicker than most other competitors. This is the well-established low cost carrier
in south East Asia. This airline is named as the best low cost carrier in the world for
consecutive 11 years (Goopti). It has services in more than 25 countries and more
than 400 worldwide destinations. And also strength of this airline we can discuss
about the subsidiaries in AirAsia group. They owned subsidiaries in Thai, Philippines,
japan and Indonesia. And got large air fleet size for around 300 aircrafts. AirAsia
provides innovative technologies for creativity; Air Asia has used splitting technology.
Checking and even e-check-in for internet booking reservations have some of their
service advances. The air carrier also optimizes prices by substituting human work
for technology through internet services (Rizal Ahmad, 2010).
As well as the strengths AirAsia have some weaknesses in there industries. Such as
there are many routes compared with the market leaders AirAsia is an LCC, so
keeping its operating costs low is essential for airlines. It is exceptionally hard for
airline companies to keep their prices low, with rises in fuel prices and increased
operating costs. (Marketing91, 2020). In order to sustain its status as a low-cost
carrier, Air Asia maintains its prices low and therefore relied entirely on volumes
because of its profits, which in switch has resulted in lower profits and lowered stable
income imports. (Marketing91, 2020). The USP of Air Asia is the low-cost image of
the airline it carries. Customers, however, because although they start charging little
and loyalty depends on the quality of services, are not prepared to agree on
reliability. The airline consequently finds it hard to reconcile efficiency with prices and
the quality negotiation has been asserted. (Marketing91, 2020).
In SWOT analysis we discuss about the threats too. Threats are those external
factors that can be dangerous to the growth of companies. In this LCC got some
threats such as a lot of competition is facing the business from companies such as
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Virgin Airlines Air India, Singapore Airlines etc. It is incredibly hard for Air Asia to
handle the variability in fuel prices and also to sustain its large number of aircraft.
Cost control over time is the carrier's most important problem (Skool Team, 2011).
Opportunities apply to the environmental avenues affecting the organization from
which it can leverage to maximize its profits. AirAsia also got some opportunities in
there industry such as Air Asia is centred on a boom in business trips. In the world
tourism map, locations such as Singapore, Bangkok and Malaysia, and are
prominent and holiday periods also see an increase in tourism. There are
opportunities which can be capitalized on by the carrier (Goopti).
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7. COMPETITORS AND EFFECT ON SCHEDULED AND CHARTER
CARRIERS
In the rising demand for air travel, due to the varying amounts of competitors offering
air transport, there is strong competition in the aviation industry. In addition, in
contrast to AirAsia, there is also a rivalry among competition for the pathways about
which they serve (Doganis, 2010). AirAsia has also extended its services, such
as tour packages and online travel services, with the growing number of providers
offered by different rivals, to help the business maintain itself in the sector. With the
numerous existing low fare airlines including JAL Express, Tiger Airways, Air Arabia
and Jet Star Airways, AirAsia has been competing directly. Malaysia Airlines and Jet
Star Airways and are the two nearest rivals to AirAsia (AirAsia, 2018).
8. IMPACT ON HUB AIRPORT AND DESTINATIONS
AirAsia does have effects on home airports and locations, such as low rates and
longer stints for loans are negotiated by AirAsia. Assistance and finance help are
needed to reduce the Covid-19 pandemic by airline companies impacted by
Malaysia's Movement Control Order implementation (MCO). Inclusion plan between
18 and 31 March 2020, the MCO requires non-essential companies to stop
operational activities, while the community was purchased to remain at home to curb
Covid's pandemic (Rafidah Aziz, 2020).
AirAsia intends to make it easier to fly to Lombok by turning the island's airport into a
mini-hub. AirAsia's decision to create a Lombok hub, the airline fifth in Indonesia,
follows in the footsteps of the country's Ministry of Tourism (ttrweekly, 2019).
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9. FUTURE PREDICTIONS
It was forecast that this downturn would proceed until 2009 and 2010, according to
AirAsia26. There was still a huge market getting ready for AirAsia to be drilled in both
Malaysia outside the Malaysia. Indonesia, China and India have been highly
potential routes for new Blue Oceans to be built. Malaysia is, economically, a
developing nation. Unfortunately, becoming an export-oriented nation, it had to take
the burden of the world financial crisis or the financial collapse. The monthly GDP
growth rate in Malaysia dropped sharply in 2008. (Rizal Ahmad, 2010).
10. CONCLUSION AND RECOMMENDATIONS
The damage wrought by AirAsia was identified by Malaysian Airlines and a new low-
cost airline named 'Firefly' was initiated, which began its service providers in April
2007. Under in the aviation industry may lead to higher prices wars, although
primarily among airline companies. In the medium term (2009-11), they believe, the
biggest challenge will come from the anxiety of individuals to waste their cash on
recreation. AirAsia is an Asia Pacific leader in travel and economic platforms,
supplying air transport, take trips and lifestyle service providers. More than 600
million customers have been transported to over 160 locations across Asia,
Australia, the Middle East and the US by AirAsia. The airline has been embarking on
a new venture since 2018 in becoming much more than an airline.
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11. REFERENCES
A closer look at air Asia's growth. (2018, July 13). Retrieved from
https://simpleflying.com/airasia-growth/
About AirAsia. (2017, September 18). Retrieved from
https://www.lcct.com.my/transportation/budget-airlines/airasia/about-airasia/
About us — AirAsia newsroom. (n.d.). Retrieved from
https://newsroom.airasia.com/about-us
Ahmad, R. and M. Neal. 2006. ‘AirAsia: The Sky’s the Limit’, Asian Journal of
Management
Air Asia commits to Lombok hub. (2019, May 7). Retrieved from
https://www.ttrweekly.com/site/2019/05/air-asia-commits-to-lombok-hub/
AirAsia flights to have multiplier effect on Malaysia economy — Rafidah Aziz. (2020,
August 6). Retrieved from https://www.theedgemarkets.com/article/airasia-flights-
have-multiplier-effect-malaysia-economy-%E2%80%94-rafidah-aziz
AirAsia group 2017 fleet analysis: Fleet reaches 200 aircraft, expansion
reaccelerates. (2018, January 11). Retrieved from
https://centreforaviation.com/analysis/reports/airasia-group-2017-fleet-analysis-fleet-
reaches-200-aircraft-expansion-reaccelerates-392568
AirAsia. 2009. AirAsia Annual Report 2008.
Anne Graham, 2013, Understanding the low cost carrier and airport relationship: A
critical analysis of the salient issues, Tourism Management, Volume 36
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CAPA Centre for Aviation, 2012CAPA Centre for AviationLow cost carriersAvailable
from(2012)http://centreforaviation.com/profiles/hot-issues/low-cost-carriers-lccs
Doganis, 2010 Flying off course: Airline economics and marketing, (4th ed.),
Routledge, London (2010)
Investor relations: Corporate profile. (n.d.). Retrieved from
https://ir.airasia.com/corporate_profile.html
Investor relations: Corporate profile. (n.d.). Retrieved from
https://ir.airasia.com/misc/AAGB-Investor-Deck-2020-03.pdf
Marketing91 (2020, October 31). Retrieved from https://www.marketing91.com
MBA Skool Team. (2011, July 28). Air Asia SWOT analysis | Top air Asia
competitors, STP & USP | Detailed SWOT analysis of brands | MBA skool-
study.learn.share. Retrieved from
https://www.mbaskool.com/brandguide/airlines/531-air-asia.html
Rizal Ahmad 2010, AIRASIA: INDEED THE SKY’S THE LIMIT
The top 10 airlines in the world. (n.d.). Retrieved from
https://www.goopti.com/en/about/goopti_blog/top-10-cheapest-in-the-world-and-10-
best-budget-airlines-in-europe
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