Strategic Supply Chain Management in the Airline Industry: AirAsia

This report analyzes the supply chain management of AirAsia, a Malaysian-based low-cost airline. It examines the company's operations, including inbound and outbound logistics, marketing, sales, and service, within the framework of primary and supportive activities. The analysis highlights AirAsia's strengths, such as its cost-effectiveness and innovative service offerings, while also identifying areas for improvement, including engine maintenance and talent management due to labor shortages. The report explores the challenges within the airline industry, such as increasing aircraft numbers and the need for supply chain transparency. It emphasizes the importance of predictive maintenance and proactive supply chain strategies to address future challenges. The report concludes with recommendations for AirAsia to further optimize its supply chain management and maintain its competitive advantage in the global airline industry. The study utilizes information from websites, journals, and books to support its findings.

Running head: SUPPLY CHAIN
Supply Chain
[Airasia]
Name of the student:
Name of the university:
Author note:

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Executive summary
Airline industry like any other industries has many opportunities rising for airline companies. In
addition, the industry faces challenges as well such as in the form of shortages in labour supply.
The main purpose of this study is to analyse the supply chain management in Airasia. The study
finds that the company is good at dealing with a variety of supply management tasks such as
providing excellent service at low prices. AirAsia has no matching for its supply chain
management. It has earned recognition for being the most cost-effective airline brands in the
world. However, it also has areas where improvement is required. These areas include but not
limited to managing the engines and supply of labours.

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Table of Contents
Introduction of the organisation.......................................................................................................3
Body.................................................................................................................................................3
Explanation of the supply chain networks...................................................................................3
Analysis.......................................................................................................................................7
Recommendations............................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction to the organisation
AirAsia is a Malaysian-based airline company, which is headquartered in Kuala Lumpur.
It follows the low-cost business model. It has been recognised as the best airline company in the
world in the low-cost airline model. It holds a pioneer status in Asia in the low-cost airline
sector. The company operates in 78 destinations comprising of 25 countries (Airasia.com, 2019).
Despite being a globally popular name, AirAsia has to face challenges in a variety of
forms. It is a truth that there are both negative and positive trends in every single industry, which
exist in this world. The airline industry is not an exception. Airline industry depends entirely on
the number of customers that includes both existing and new travelers. However, the consumer
base for the Airline industry is still growing and it is still not close to a huge figure (Belobaba,
Odoni & Barnhart, 2015). It is affecting the growth rate. Hence, AirAsia has to ensure so many
things to remain competing in the industry.
The main purpose of this study is to analyse the supply chain management in Airasia.
This includes explaining and illustrating the various forms and elements of a supply chain
network.
Body
This section analyses the supply chain management in Airasia. In doing so, it takes help
of articles from websites, journals and books.
Explanation of the supply chain networks
It is understandable that to be able to deliver value through operations companies must
understand their customers. Companies should know the areas where values can be created or
lost as well. Supply chain management is one very essential element of a business that makes a
difference to the performance. Firms having excellent control over their supply chain will most
probably fulfill the market demands. Supply chain management as a whole has two distinct types
such as mentioned below (Hugos, 2018):
1. Primary Activity
2. Supportive Activity

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1. Primary Activity:
Inbound logistics
In the Airline Industry, it is highly important that firms have a good understanding of
their capability as well as acquainted with strategies adopted by competitors. This helps in
adopting productive strategies. It is important for AirAsia to know the strategy of its competitors
to remain competitive in the long-term. Strategies that should be known include finding the
shortest way, managing well to remain fuel-efficient and cutting off the prices (Airasia.com,
2019). AirAsia adopted various strategies to remain competitive. The company updated the fleet
of Airbus planes. Pricing was brought under control. Fuel management is utterly managed in
Airasia. AirAsia is one of the very few airline companies to have decreased their waste in the
forms of reducing the leftover food and drink (Airasia.com, 2019). However, they can do even
better by tapping on a few identified opportunities. These opportunities include offering in-flight
catering service on the customer demand for an additional fee, market assessment and
monitoring competitors.
Operations
AirAsia invests a significant portion of its operating costs on driving its operations. The
list of operations as managed in Airasia includes ticketing, reservations, on-board service,
aircraft operations, gate operations and check-in (Airasia.com, 2019). AirAsia provides ticketing
and reservation system through its official website. Customers can access to as much information
as they need to make a travel. They can also book hotels and rent commutation in advance.
AirAsia invests a lot on offering excellent onboard services. The seating configuration and
flatbed settings just show their innovating capability. In a low-cost model, it is not easy to
innovate and offer services as offered by AirAsia. Aircraft operations are one area where AirAsia
can face a challenge in the future. In regards to aircraft operations, the company will be going to
face a challenge in managing the engines. It is due to the increasing labour shortage in the
industry (Gill-McLure & Firth, 2016). The increasing labour shortage is manageable if AirAsia
can improve their talent management capability. For this to achieve, improved job advertisement,
good pay packages, and training and development programs should be key factors.
Outbound Logistics

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Ticket booking in Airasia happens through online sources. This makes booking easier.
This also means that customers can book their tickets from being anywhere. Smartphone users
will find it easier as well. Moreover, customers can easily get their boarding card printed.
AirAsia uses simplest routes instead of running with transfer hubs to remain focused on a point
to point network. AirAsia uses an innovative strategy to remain cost-effective as it has low-cost
terminals to facilitate lower landing charges (Airasia.com, 2019). There are rooms still available
for improvements. AirAsia should adopt a new flight connection option. Passengers should have
options like booking tickets beyond their point-to-point network in Kuala Lumpur.
Marketing and Sales
Advertisement and promotion of services have now become essentials to the airline
industry. AirAsia faces stiff competition in this regard. Hence, AirAsia sells all tickets primarily
through its website. However, there are opportunities growing in the form of the company’s
brand image. AirAsia recognised as the best low-cost airline in the world in four consecutive
years starting from 2009. This has greatly influenced the brand image and the reputation of the
company as well (Airasia.com, 2019). AirAsia needs to work upon its strategy for segmenting
their customers to create higher impacts. Apart from segmenting, promotion of services is also
important. Effective promotion of services can help to reach to a wider consumer base. More
importantly, this helps to reach to the target consumer segment. An effective promotion will
communicate ideas that have worked so far for Airasia.
Service
Service standard matters to every single industry. It is equally or perhaps even more
important to the Airline industry. AirAsia provides its customers, opportunities to pre-book the
checked luggage to avail lower rates for it. Moreover, there are options available to book a hotel
or rent taxi through online sources. AirAsia offers vouchers to its customers for a flight delay.
Service customisation is readily available and it does not require doing any compromising on
quality. AirAsia ensures effective complaint handling through its efficient Customer Technical
Support (Hapsari, Clemes & Dean, 2016). It helps to deliver the best service.
2. Supportive Activity:

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Firm Infrastructure
AirAsia constantly works on to improve its service infrastructure. The company focusses
on its goals. Pricing is the lowest in the market. AirAsia believes to expand its service to
different parts of the world. The company gives its utmost efforts in ensuring that the process is
simpler as it can be (Airasia.com, 2019). However, they should work upon their business
strategies such as doing an effective partnership with strategic business entities and managing
competition.
Human Resource Management
Attracting and hiring skilled professionals is a challenging task to conduct. AirAsia is
able to identify the needs of skills and it accordingly hires personnel from across the globe. They
have a policy in place to keep the cost of recruiting low. Despite this, the company is able to
boost the quality and efficiency of its operations team. The company is able to reduce expenses
made over aircraft maintenance, cockpit training and standby crews. It is more due to the Airbus
fleet, which is highly standardised. It also trains its staffs under cross-training format to manage
its aircraft. It has its own training academy to develop a positive culture among employees
(Airasia.com, 2019). AirAsia should essentially work upon its talent management strategy. This
will include but not limited to, designing effective training modules, implementing strategies,
identifying people those who need the training, and so forth.
Technology Development
AirAsia uses various technologies to become a cost-effective company by significantly
reducing the cost. The company has a good tracking of its expenses and revenues. It uses a yield
management system (YMS), which helps AirAsia tracking and maintaining records on the
operating cost and the expected revenues. It offers its customers web-based computer reservation
system (CRS), which makes things a lot easier for customers. They are highly innovating as they
effectively identify what emerging technologies can be beneficial for them. It is evidenced in the
fact that AirAsia uses enterprise resource planning (ERP) to a good effect. They use enterprise
resource planning (ERP) to speed up reporting as well as data retrieval process (Cook & Billig,
2017). They are regularly innovating to manage their relationship with customers as well as
suppliers. They try to remain loyal to their customers by working closely with their business

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partners. They effectively utilise the aircraft seat configuration. They had shown their innovating
capability when they offered a flatbed seat to customers (Cook & Billig, 2017).
Procurement
To remain cost-effective, it is important to have high bargaining power when dealing
with suppliers. AirAsia has very good bargaining capability. This is one of the reasons, why the
company has remained cost-effective for so many years in the past. The company has effective
systems in place and appropriate utilisation of emerging technologies such as ERP to monitor
their suppliers and track the transactions. This is how they make informed decisions and they
bargain effectively every single time while dealing with suppliers (Chao, Chen & Yeh 2015).
Effective relationship with strategic business entities is another reason for being cost-effective.
However, there are areas yet uncovered by the company. These areas include effective branding
of the company, online sales, delivery instructions and raw material specifications.
Analysis
In recent times, the number of aircraft is constantly growing leading to a wide number of
challenges to be faced in managing these aircraft (Saranga & Nagpal, 2016). Collaboration and
transparency will become integral to the supply chains. In managing supply chains effectively,
one of the key factors would be to improve maintenance capability. In regards to maintenance,
all parts should be in appropriate places and be accessible in real-time as well. Industry experts
do largely believe in a fact that key drivers will be the supply chain transparency, predictive
maintenance and regionalization. Sharing information and maintaining transparency between
business partners is very important. There are possibilities that not every part is available at the
nearest airports. However, it can become accessible in shorter-span of time when there is
transparency in communication between business partners (Belobaba, Odoni & Barnhart, 2015).
Forecasting capability is necessary for irrespective of the industry. It helps to know the market
demand and the supply capacity of suppliers appropriately. However, very few firms do only
manage it effectively. Hence, predictive maintenance can be helpful in this regard, as it
considerably improves the forecasting efficiency of a firm. In the airline industry, predictive
maintenance can produce productive results in terms of predicting the failure of certain parts,
knowing several flights in advance and maintaining effective lead-time to influence the supply

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chain. There is a rising need for a proactive supply chain instead of traditional reactive supply
chains.
The future will bring some more challenges to airline companies. Engine maintenance is
one of the challenges due to the expected shortage in labour supply. Engine maintenance has
been creating challenges for a long time in the past. According to industry experts, this will
continue to create pressure on the industry. The industry has a shortage of experts dealing with
the engine of certain types. The role of the HRM, the global governments and the investors will
be of huge importance in this regard. They should play their roles strategically to provide the
best possible support to the industry. Studies conducted by Airbus and Boeing suggest that in
future there will be an approximate need for a close to 0.7 million maintenance engineers in the
future (Wang et al., 2017).
From the discussion on the supply chain management at AirAsia, it is evident that the
company knows exactly how to make things happen. It has done well so far with its supply chain
management; however, current industry circumstances require much more than they do
currently. Some factors will keep increasing competitive advantage for Airasia. However, they
need to work on a few areas to improve their respective competency and enhance their
competitive advantage. These areas are the managerial system, brand image, customer base,
organisational culture, strong focus on the business model and product/service differentiation.
Importantly, AirAsia enjoys a lean firm infrastructure that encourages them to innovate and find
creative solutions for the problems. The innovations in the form of seating configurations and
flatbed arrangements have no matching from its competitors. The brand image of the company
has helped it increase its brand loyalty. All these factors provide AirAsia opportunity to attain a
long sustaining advantage in the airline industry (Airasia.com, 2019). Currently, the strategic
capability of AirAsia meets all the criterion of "VIRUS” criteria. The low-cost model of AirAsia
is valuable to the airline industry. The management capability of the company is less imitable. It
offers a seating configuration, which is distinctive in nature and is an unmatched innovation.
AirAsia does not just offer low-cost service to its customers but its service-level is also
unmatchable under a low-budget model. However, there are areas where they need to have more
focus. These are uncertainties caused due to natural disasters in its operative region, terrorist
attacks, engine maintenance, and so forth (Prajogo, 2016).

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Recommendations
1. There should be benchmarking and planning for supply chain activities. Some of the key
measures will be forecasting the customer demands, analyse the demand patterns,
capacity management, logistics, addressing key bottlenecks, engine maintenance, etc.
2. There should be scheduling and recording of maintenance operations. This will help to
keep track of the costs. This will also help in doing planned and unplanned maintenance.
This will help to keep an account of the costs for components, labour materials, time, etc.
3. AirAsia should work upon tracking aircraft's lifecycle. Predictive alters can be helpful in
managing the components as well as the life of the aircraft. Predictive notifications will
help to know in advance the components, which are due for maintenance. Moreover, the
life of the components is also measurable through predictive alerts. Predictive
maintenance will influence the customer service standard for Airasia.
4. One more important thing, there is a need for a system, which could help in tracking and
measuring things that matter. Dashboards and key performance indicators (KPIs) can be
useful in planning. In addition, this can be helpful in other ways also. Such a system is
helpful in measuring things like consumption history, the life of components,
maintenance expenses, and so forth.
Conclusion
To conclude, it can be said that with the emergence of many other low-cost operators as
well as full-service carriers the sustenance as a cost leader could be challenging for Airasia.
AirAsia should not stop from innovating as this will keep them hitting success. There is a need
for more innovation in advertising and promoting services. While doing this AirAsia should
ensure that they do not lose their control on their culture, business strategy and vision. The low-
cost model may create challenges in the future. Some of the likely challenges will include staff
grievances as well as political interference. Uncertainties around the industry will continue to
rise. Hence, AirAsia should ensure to maintain its customer-oriented approach, which is a rare
practice across the airline industry. They should keep using their approach in the context of
planning and innovation, and in attracting and retaining their customers.

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References
Airasia.com. (2019). Retrieved from https://www.airasia.com/en/gb
Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2015). The global airline industry. John Wiley
& Sons.
Chao, C. C., Chen, H. T., & Yeh, T. L. (2015). A comprehensive relationship marketing model
between airlines and travel agencies: the case of Taiwan. Journal of Air Transport
Management, 47, 20-31.
Cook, G. N., & Billig, B. (2017). Airline operations and management: a management textbook.
Routledge.
Gill-McLure, W., & Firth, J. (2016). Managing people at work: the travel industry. Operations
Management in the Travel Industry, 103.
Hapsari, R., Clemes, M., & Dean, D. (2016). The mediating role of perceived value on the
relationship between service quality and customer satisfaction: Evidence from Indonesian
airline passengers. Procedia Economics and Finance, 35, 388-395.
Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.
Prajogo, D. I. (2016). The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics, 171,
241-249.
Saranga, H., & Nagpal, R. (2016). Drivers of operational efficiency and its impact on market
performance in the Indian Airline industry. Journal of Air Transport Management, 53,
165-176.
Wang, J., Zhang, L., Duan, L., & Gao, R. X. (2017). A new paradigm of cloud-based predictive
maintenance for intelligent manufacturing. Journal of Intelligent Manufacturing, 28(5),
1125-1137.