Marketing Research On AirasiaSubmitted by Aizhanok on January 30, 2011

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Table of Contents

      Executive summary

  1. Introduction………………………………………………………………

  1. Positioning on market……………………………………………………

  2. Environmental analysis

  1. External factors using PEST ………………………………………………

  1. Political factors

  2. Economic factors

  3. Social factors

  4. Technological factors

  2. Internal factors using SWOT ………………………………………………

  3. Stakeholder analysis………………………………………………………

  3. Strategic assessment

  1. Observing Airasia’s goals, visions and values

  2. Strategic Action Programs

  4. Recommendations ……………………………………………………..

  5. Conclusion ………………………………………………………………..

      References

      Appendix

Executive summary

This report is prepared with objective to audit and assess the impact of external and internal factors on the company, and recommend areas for improvement in response for the company.

The scope of the report includes a few environmental tools, such as SWOT, PEST and Stakeholder analysis. SWOT analysis enables to see the strong positions in the market, to detect weaknesses for further converting into strong ones and Stakeholder analysis helps to determine the most important stakeholders and their influences to the company’s performance. (Marketing Intelligence & Planning, 2010)

1. INTRODUCTION

        Everything started with a simple goal:   How to free air travel from the clutches of the elite and make it so affordable that “Now Everyone Can Fly”. Together with partners Dato' Tony Fernandes set up Tune Air Sdn Bhd (Tune Air), an airline holding company then bought over AirAsia. Now, AirAsia has become one of the most successful airlines in the Southeast Asian region and the pioneer of low cost and no frills travel in Malaysia. AirAsia is engaged in providing air transportation service and now airline flies to over 60 destinations from hubs in Malaysia, Thailand, and Indonesia, Singapore, Hong Kong, Macau, China, India, Philippines, Brunei, Cambodia, Laos, Vietnam and Myanmar. AirAsia operates more than 3500 flights a week, the group employs close to 7500 staff and its short history AirAsia owns 90 aircraft and has carried more than 90 million guests. (Annual report 2009)

1. Positioning on the airline market

        AirAsia is a name synonymous with low fares flights, quality service and dependability. (Economist, 2009) With over 132 routes linking three continents (shown on picture 1), AirAsia is now proud to be truly ASEAN (Association of South East Asian Nations) carrier, linking communities, cultures and cities. (ASEAN Affairs, 2009)

[pic]

Picture1. Airasia routesSource: google pictures

Serving the underserved has helped make Airasia popular with masses. Airasia’s success has taken flight through the continued confidence of our guests who prefer a no-frills, hassle free, low fare and convenient option in air travel. (Annual report 2009)

2. ENVIRONMENTAL ANAYSIS

1. External factors using a PEST analysis

      In PEST analysis we investigate macro external factors for company, which is very important for identity of its strategies, for making plan, adapt and react to those factors. There are 4 core elements of PEST analysis: political, economical, social and technological. We can examine these factors in the airline industry to realize Airasia’s future external threats and opportunities.2.1.1 Political factors

On 65th IATA annual general meeting Prime Minister Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak (08.06.2009) informed that country's economy has a stable political environment and flexible economic policies. And government keeps policy to support aviation industry as a key sector of business by helping airlines to reduce fuel consumption and carbon. The trial currently involves Malaysia Airlines, AirAsia.Aviation   authorities   have   started   to   pressure   AirAsia   to discontinue   the   practice   of   unassigned   seats   for   security   reasons. We   expect contributions   from assigned   seating   to   be   diminished   outside Malaysia   because competing   LCCs   will   be   offering   both   low   fares   and   free   assigned   seats.   The increase in costs to assign seats is assumed to be negligible.2.1.2. Economical factors

        Malaysia is a rapidly developing economy and relatively open-state market economy. One of the major export partners of country is US -20%, Singapore, Japan -14%. (www.miti.gov.my) The Gross Domestic Product (GDP) in Malaysia contracted at an annual rate of 2.60 percent of growth in the last reported quarter.   The benchmark interest rate in Malaysia was at 2.75 percent. Last reported inflation rate was at 1.90 percent in July of 2010. (www.tradingeconomics.com)2.1.3. Socio-cultural factors        In SE Asia, the main social issue will be the urbanization of the populations of some key countries within Asia’s market and demographic. Countries like India, China and Bangladesh are booming at the moment and are creating large middle-classes within their respective countries. The more people are employed in cities over 15 million people, the more need there will be journeys to homes and in the countryside. Working force of Malaysia consisted from three races as Malay, Chinese and Indian are concentrated in capital city Kuala Lumpur, during the holiday times they are willing travel to hometowns and abroad. These markets are potential opportunities for Airasia in future, with the right cultural and nationalistic approaches are made.2.1.4. Technological factors

        Information and communications technology (ICT) has allowed AirAsia to reduce operating costs and provide fast, efficient service in areas including: check flight schedules, book seats, electronic check-in, and pre-order meals.AirAsia’s CRS (Open Skies by Navitaire) has helped it to grow at a dramatic pace in the past couple of years "Navitaire's Open Skies technology has truly enabled Airasia's growth from 2 million passengers to 7.7 million passengers in less than two years. Open Skies scaled easily to accommodate our growth."

2. Internal factors using SWOT analysis

        One tool that marketers use to assess an organization’s strengths, weaknesses, opportunities and threats is the SWOT analysis. (Journal of Marketing Education, 2010) Let’s look at the Airasia’s strength points. (table1)

Table1. SWOT

|Strengths                                                         |Weaknesses                                                   ||• Strong management team consists of industry experts and ex-top |• Large numbers of customer complaints.                           ||government officials.                                             |• Service resource is limited by lower costs                     ||• Very strong brand recognition; strong marketing reach,         |• Government interference and regulation on airport               ||distribution and awareness.                                       |deals and passenger compensation     ||• Strategically located in heart of SE Asia.                     |• Non-central location of secondary airports                     ||• Simple proven business model that consistently delivers         |• Brand is vital for market position and developing it is         ||that lowest fares                                                 |always a challenge                                     ||• Single type fleet minimize maintenance fee and easy for         |• Heavy reliance on outsourcing                                   ||pilot dispatch                                                   |                                                                 ||                                                                 |                                                                 ||Opportunities                                                     |Threats                                                       ||• AirAsiaX, new long-haul routes, to Europe, Australia, US.       |• Full service airlines start cut costs to compete               ||• Scrapping of Fiscal tax in Indonesia will encourage more       |• Entrance of other LCCs ||overseas travel.                                                 |• High fuel price decreases yield                 ||• Internet development and 3G coverage allows bookings to be done|• Accident, terrorist attack, and disaster and affect             ||on-line.                                                         |customer confidence                                       ||• Frequent flyer program; similar to those used by major         |• Aviation regulation and government policy                       ||carriers.                                                         |• Increase in operation cost in producing value-added             ||• Ongoing industry consolidation has opened up prospects         |services                           |

|for new routes and airport deals                                 |• System disruption due to heavily reliance on online             ||• High fuel prices will squeeze out unprofitable competitors     |sales                                   |

Source: www.airasia.com.my

3. Stakeholder analysis

This analysis helps to identify the organization’s stakeholders and evaluate the importance and influence of them on organization’s performance. Stakeholder matrix of Airasia is given below.

Table2. Stakeholder matrix

|           |                 |Importance of Stakeholder                                             ||           |                 |Unknown         |Little/No       |Some importance   |Significant       ||           |                 |                 |importance       |                 |importance         ||Influence |Significance     |Tourists, Government of ASEAN   |Shareholders, Senior         ||of         |influence         |countries, IATA, Creditors,     |management(Board of directors),   ||stakeholde|                 |Auditors, Competitors, Oakland   |suppliers/contractors, customers,   ||r         |                 |Raiders                         |Paypall, Malaysian   government       ||           |Somewhat         |                                 |                                     ||           |influence         |                                 |                                     ||           |Little/No         |Trade associations, Solicitors, |Mass media business partners         ||           |influence         |Fans, other business partners   |                                     ||           |Unknown           |                                 |                                     |

Source: www.airasia.com

Undoubtedly, as shown on table2 major shareholders of company are Tune Air Sdn Bhd, Employees Provident Fund Board, Genesis, Nomad Investment Partnership, Lembaga Tabung Haji have a high degree of influence to the company, and Board of Directors which handle the business have same degree of influence on company as shareholders who also of high importance for its success. As in every business customers and suppliers have high influence to company’s performance and airline industry is not an exception.The main stakeholder in face of Government had granted Investment Tax Allowance (ITA) for 160% capital allowance on qualifying Capex.Increasing number of travelling tourists will affect the airline companies’ revenue including Airasia, which also provides hotel and tour bookings.Obviously creditors highly influence the business, and AirAsia had secured aircraft financing for 60 A320 aircraft by taking 12 years financing at 5.30%-5.50% interested

rate (Kuwait Finance House Malaysia Berhad). Furthermore, Air Bus 320’s cost economics far superior if it is compared with Boeing 737-300 which help to save up to RM300million on Hard ware expenditure.

3. STRATEGY ASSESSMENT

1. Observing Airasia’s goals, visions and values

AirAsia creates values through the following vision and mission (table3):

Table3. Airasia values

|AirAsia Values:                                                                                                                     ||Vision                 |To be the largest low cost airline in Asia and serving the 3 billion people who are currently                     ||                       |underserved with poor connectivity and   high fares.                                   ||Mission               |• To be the best company to work for whereby employees are treated as part of a big family                         ||                       |• Create a globally recognized ASEAN brand                                               ||                       |• To attain the lowest cost so that everyone can fly with AirAsia                 ||                       |• Maintain the highest quality product, embracing technology to reduce cost and enhance                           ||                       |service levels                                                                                                 |

Source: www.airasia.com.my

AirAsia makes the low fare model possible and create values through the implementation of the following key strategies, shown below on table4:

Table4. Airasia key strategies

|AirAsia Key Strategies                                                                                                           ||Safety First             |Partnering with the world’s most renowned maintenance providers and complying with the                         ||                         |world airline operations.                                                                               ||High Aircraft Utilization|Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs                       ||                         |and higher productivity.                                                                               |

|Low Fare, No Frills       |Providing guests with the choice of customizing services without compromising on quality and services.         ||Streamline Operations     |Making sure that processes are as simple as possible.                 ||Lean Distribution System |Offering a wide and innovative range of distribution channels to make booking and traveling easier.             ||Point to Point Network   |Applying the point-to-point network keeps operation simple and lower costs.                                     |

Source: www.airasia.com.my

2. Strategic Action Programs

According to analyzed information following strategic action plans are recommended for consideration:

Group CEO, Deputy of CEO – create new vision for company to be world’s best low fare airline and prepare the comprehensive business plan for 5 years within 7-9 months.

COO together with Regional Head (RH) of Finance and RH of Strategy, Airport and Planning – prepare the comprehensive report (includes cost calculation, profit opportunities) for new long-haul routes to US, Japan, Germany, Maldives and Japan within 4-5 months. (Wall Street Journal, 27.05.2010)

HR Commercial and HR Business Development – create new products and promotions based on customer needs and wants within 6 months.

HR Communication – find new ways of improving communication with guests of company and staff, also look for new ways of improving quality services for decreasing the customers complaints within 3 months.

4. Recommendations

In SE Asia, the main social issue will be the urbanization of the populations of some of the key countries within AirAsia’s market and demographic. Countries like India, China and Bangladesh are booming at the moment and are creating large middle-classes within their respective countries. The more people are employed in cities over 15 million people, the more need there will be for journeys to homes in the countryside. This market is a potential opportunity for AirAsia in the future, with the right cultural and nationalistic approaches made.Based on overall company strategies, SWOT, PEST, Stakeholder analysis summary of directions for Airasia given to take into the consideration in the future:Price – as price is company’s competitive advantage, look for ancillary services as cargo, internet shopping to keep that level of price. (Accidental Travel Writer, 2010)Product – US is one major trading partner of country, which gives opportunity to create long haul route to US and some other EU countries by analyzing the demand of airline

service in particular area.Promotion – multi-nationality of country gives great opportunity to increase the sales during holidays, like making promotions for Chinese New Year, Deepavali of Indians and Hari Raya for Malays and others.Process – according to large number of complains on service delay and cancellation, operational process of company needs improvement through training pilots and front office staff for time management, correct allocating of resources (airplanes), and get outside consultation on improving process overall. (Emerald journal, 2010)Packaging – appearance is important on service market, recommended to make the LCC building more structured and use clear route directions, quick check-in for convenience of flow of guests, which may help to save time as well for customers as for staff.Also membership cards can be suggested to increase sales, which follow the idea of collecting points to buy tickets or use other services of company. One of the privileges of card will be content, which will include age, monthly income, occupation of guests; this information will be helpful for marketing department for market segmentation and selection of future target market.

Conclusion        The aim of this report was to carry out marketing audit of Airasia Asia’s largest low-cost no-frills airline. From this it became evident that the organization operates in a complex environment with fast changing influences that affect its business both beneficially and unfavorably. It also enabled identification of some of the sources of Airasia's competitive advantage: core competences, unique resources, key linkages and the superior cost performance. In general Airasia’s marketing strategies are on high level comparing with others, concentrated on low fare flights, serving guests who prefer a no-frills, hassle free and convenient option in air travel, providing promotions and special packages. However, it also became clear that the organization still has a lot to learn from best practice.

LIST OF REFERENCES

Airasia’s official website, viewed in period of 10.09.2010 – 30.09.2010, available at < http://www.airasia.com/my/en/home.html>.

Airasia’s annual report for 2009 for 17th General Meeting, 24 June 2010, AirAsia Berhad, viewed 14 September 2010, available at < http://www.airasia.com/my/en/home.html >.

“Airasia X partners with Paypal”, 10 June 2008, ASIATravelstips.com, viewed on 16.09.2010, available at .

Anders Gustafsson, Fredrik Ekdahl & Bo Edvordson, “Customer focused service development in practice”, 2010, Emerald Journals, viewed on 28 September 2010, available at

Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak, “Speech at the 65the IATA annual

General meeting by Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak Perdana Menteri Malaysia”, 08.06.2009, Office of Prime Minister of Malaysia, viewed on 16 September 2010, available at .

“Cheap, but not nasty”, 19 March 2009, Business, The Economist, viewed on 19 September 2010, available at < http://www.economist.com >.Hamdan Mohamad, “Airasia celebrates trainee graduation”, 27 March 2009, ASEAN Affairs, The voice of Southeast Asia, viewed 12 September 2010, available at < http://www.aseanaffairs.com/airasia_celebrates_trainee_graduation>.Malaysia, Asia-Pacific region, Encyclopedia of nations, viewed on 15.09.2010, available at .

Malaysia country profile, Asia-Pacific region, BBC News, viewed on 16.09.2010, available at .

Malaysia International Trade and Industry Report, 21 June 2010, Ministry of International Trade and Industry, viewed 09 September 2010, available at < http://www.miti.gov.my >.

Michael Taylor, “AirAsia launches online Megastore”, 24 July 2010, Accidental Travel Writer, viewed 16.09.2010, available at .Michele D. Steward & Bruce R. Lewis, “A Comprehensive Analysis of Marketing”, April 2010, Journal of Marketing Education, viewed on 17 September 2010, available at < http://jmd.sagepub.com/content/32/1/75.full.pdf.tml >.Nigel Piercy, William Giles, “Making SWOT Analysis work”, 2010, Marketing Intelligence & Planning, viewed 12 September 2010, available at < http://www.emeraldinsight.com/ >.Phisanu Phrom Chanya, “Airasia Plans Thai Listing by 2011”, 27 May 2010, Business, Wall Street Journal, viewed on 26 September 2010, available at < http://online.wsj.com/article/SB10001424052748704717004575268301017532796.html>.Official site of Kuwait Finance House, viewed on 21 September 2010, available at < http://www.kfhonline.com.my/kfhmb/ >.

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