AirAsia Case Study-By Nadeem

7/28/2019 AirAsia Case Study-By Nadeem

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By Group 3

Mohamed Sallauddin

Syabanlina Miskam

Teoh Khiam Joo

MARKETING CASE STUDY


2/55

Situation Analysis

SWOT Analysis

WHERE NEXT ?

AIRCRAFT FLEET & FREQUENCY PLAN

MARKETING ACTION PLAN

CONCLUSION

FINANCIAL PLANNING

Agenda


3/55

SITUATION ANALYSIS


4/55

Situation Analysis

General Overview-Airlines Industry- Market Industry for LCC

- Consumer Behavior

Companys Background

- Incorporated in Malaysia as private limited company on

20th Dec 1993

- Commenced their operation as full service airline in 1996

- Hicom Berhad was the largest shareholder - 85%

- Never been profitable ever since their operations as full service

airline.- December 2001, Tune Airacquired majority stake in AirAsia

- Converted to LCC - from Full service to low-cost, no-frills.


5/55

Situation Analysis

To be an affordable air transportationservices, so that everyone can fly.

OUR MISSION


6/55

AirAsias Characteristics- Low Air Fares- The Service (one type aircraft, single class, no frills)

- Ticketless Airlines

- Network ( point-to-point )

Customer Analysis- Small & medium enterprise

- Aiming for new market ( those travel by bus, taxi & train : domestic

market)

Market Analysis- Succeeded in domestic routes

- Strong passenger growth trend since takeover.

Situation Analysis


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Situation Analysis

Air Asia Pa ssenger M ovements

( Domest ic Fl ig ht )

Jan ua ry 2002 - Octo ber 2003

0

50

100

150

200

250

Januar y F eb ruar y M ar ch A pri l M ay June July A ug ust Sep temb er Oct ob er No vemb er Decemb er

( ' 0 0 0 )

M onth

Passenger

2002

2003

AirAsia Passenger Movements


8/55

Situation Analysis

Route / Destinations- After takeover (Dec 2001), start flying to only 8 local destinations- Now AirAsia flies to over 13 domestic destinations.


9/55

Situation Analysis

Pricing

Destination MAS fare

(Lowest)

Train Bus

(Transnational)

AirAsia

(Lowest)

Penang 79 17 - 67 23.50 9.99

Alor Setar 85 18 70 25.50 29.99

Kota Bharu 79 32 51 26.10 29.99

Kuala

Terengganu

79 N.A. 25.10 29.99

Johor Bharu 71 18 126 20.30 19.99

Ipoh 50 10 40 11.30 N.A.

Kuantan 56 21 41 14.30 N.A.


10/55

Situation Analysis

Promotion Strategies


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Situation Analysis

Organization Chart

INFORMATION

TECHNOLOGY

(Chief Inform ation

Off icer)

Board of Directors

(Advisor to CEO) QUALITY

(Snr Dir. Qual i ty)

FINANCE

(Chief Financial Off icer)

GROUND OPERATIONS

(Chief Ground Ops . )

FLIGHT OPERATIONS

(Dir. Fl ight Operat ion s)

ENGINEERING

(Chief Engineer)

BUSINESS

DEVELOPMENT

(Execut ive Director,)

(Chief Execut ive

Off icer)

(COMMUNICATION

Chief Engineer)


12/55

Situation AnalysisFinancial Condition

- 1998, poor performance due to economic downturn & limited numberof routes and frequency

- Recently, struck deal with foreign entity to take up 30% stake in

airline

- Tune Air sold 26% of its stake worth RM98.8 mil , to increase

companys cash flow and strategy to avoid raising funds through

borrowing.

- The capital injection is to finance AirAsias expansion programs

RM50 mil.

Achievements

- 1stairline in Asia to introduce internet booking (45% of business)

- 1stairline to introduce booking and payment by phone in Malaysia

- Highest e-commerce airline site in Asia ( total internet sales of more

than RM90mil )

- First ever Arrangement with a telecommunications company for

aircraft advertising

- 1stairline to have SMS booking


13/55

SWOT ANALYSIS


14/55

SWOT Analysis

STRENGTH WEAKNESS

Industry Recovering from the undergone shake-

up since 9/11, Iraq War, Terrorist Attack

and SARS

Economic, trade & tourism vehicular for

countryLCC is one of economic drivers

Fragile & sensitive

Capital-intensive

industry

Product Price-driven (cater new market)

LCC offers prove to be sustainable &

profitable

Clearly differentiated and positionedFresh & vibrant image

Predominantly price-

driven

Point-to-point traffic

Promotion Utilization of mass media

Embodies & projects a new brand

essence

Highly dependent on internet & ICT

High reliance on internet

STRENGTH & WEAKNESS


15/55

SWOT Analysis

STRENGTH WEAKNESS

Distribution Extensive use of Internet and ICT

Minimum alliance with Travel Agents

Internet penetration still

Low

On-line booking is

difficult for traditional

travelers

Price Offers cheapest fares in domestic

market

Practices an escalated multi-tiered

pricing policy

Low fares that full service airlineunable to match

Limited number

cheapest price

Some travelers perceive

the low price as a

gimmick

STRENGTH & WEAKNESS


16/55

SWOT Analysis

OPPORTUNITY THREAT

Industry Market growth ( from 20% to 50%)

Availability of underutilized

secondary airports

Asian per capita income increase

Strict protective of

regulated regime

Sovereignty of traffic

rights

Product LC market is an untapped &

underserved

AirAsia offers value for money

LCC still new in Malaysia &

surrounding region

Numerous small airports

ASEAN Countries are

protective of their flag

carriers

Liberalization policies,

minimize barriers to entry

Internal competition

MAS

Promotion Unconventional promotional strategy Easy to adopt & emulate

OPPORTUNITY & THREAT


17/55

SWOT Analysis

OPPORTUNITY THREAT

Distribution Reliance on Internet Misleading

Advertisement

Subjects to fraud and

tampering

Pricing Lower cost base made AirAsia offers

most competitive price

Continue to dominate the price-driven

market segment

Ignite price war

OPPORTUNITY & THREAT


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Where Next ???


19/55

Where Next ???

Market outlook

marketing objective

marketing strategy

domestic expansion

regional expansion


20/55

Where Next ???

Market Outlook

- LCC captured almost 8% of global market share and expect to growto 25% by 2015

- Asia GDP growth ( 5% in 2002 and forecasted 5.7% in 2003 )

- LCC can capture 10% on Asian air travel business

- Huge population give the opportunity for LCC to tap into the market

- Internet penetration level rising rapidlySouth East Asia GDPountry 2001 2002 2003

Malaysia 0.4 3.2 5.0

Indonesia 3.5 3.0 4.4

Thailand 1.8 3.8 4.0Vietnam 5.8 5.7 6.2

Singapore 2.0 3.9 5.6

Philippines 3.2 4.0 4.5

All of Asia 3.7 5.0 5.7


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Where Next ???

Internet Usage for South East Asia(Internet Users & Population Statistics for 10 countries and regions in South East Asia)

ASIA Populat ion

(2003 Est.)

Internet Users,

(Year 2000)

Internet Users,

Latest Data

Growth

(2000-2003)

% Populat ion

(Penetrat ion)

Brunei

Darussalam362,700 30,000 35,000 16.7 % 9.6 %

Cambodia 13,382,400 6,000 30,000 400.0 % 0.2 %

Indonesia 217,825,400 2,000,000 4,000,000 100.0 % 1.8 %

Laos 5,559,200 6,000 15,000 150.0 % 0.3 %

Malaysia 24,014,200 3,700,000 7,800,000 110.8 % 32.5 %

Myanmar 51,853,100 1,000 10,000 900.0 % 0.0 %

Philippines 81,636,000 2,000,000 2,000,000 0.0 % 2.4 %

Singapore 4,225,000 1,200,000 2,308,296 92.4 % 54.6 %

Tahiland 63,393,600 2,300,000 4,800,000 108.7 % 7.6 %

Vietnam 81,660,400 200,000 1,500,000 650.0 % 1.8 %

* The most recent usage information comes from data published by Nielson -NetRatings, ITU


22/55

Where Next ???

- To be the MARKET LEADER in Asia

Marketing Objective

0.000

0.050

0.100

0.150

0.200

0.250

0.300

RM

Cost/ASK

Cost/ASK 0.109 0.219 0.281

AirAsia Ryanair EasyJet

(1)

(1) As of FY2003

- Our Cost/Available Seat Kilometer is the lowest in the world.


23/55

Where Next ???

- Adopt expansionary marketing strategy- The expansionary approach includes:

1.Increase penetration of existing domestic market through

additional flight frequencies or introduce new destination.

2. Begin new services to identified regional points that are within

3.5 hours of flying time from Malaysia.

3. Set-up strategic alliances or partnerships in selected

foreign countries void of LCC operations.

4. Maintain price leadership by offering the lowest possible price topassengers

Marketing Strategy


24/55

Where Next ???

- Lags behind MAS : Flight frequency to all domestic points (Pen. Msia)

Domestic Expansion


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Where Next ???

- According to a survey published by Nielson, only 6% of Malaysiantravels by air.

- Significant frequency gap for flights to East Malaysia

Domestic Expansion

SHEDULE COMPARISON BETWEEN MALAYSIA AIRLINES AND AIR ASIA

Domestic Service - East Malaysia

(ex-Kuala Lumpur)

79

14

28

11

96

7 7

21

35

714

0

35

7 7 7

0

20

40

60

80

100

120

Kuching Sibu Miri Bintulu Kota

Kinabalu

Sandakan Taw au Labuan

Destinations

WeeklyFrequency

MAS Air Asia

44

7 14 11

61

14


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Where Next ???

- AirAsia had performed outstandingly well and generated hefty positivegrowth in passenger number to destination that we fly to

Domestic Expansion

MAS and Ai rAsia Domestic Passenger Movement (Al l Airports)

January - August

(2002 -2003)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

January

Febru

ari

March

April

May

June Ju

ly

August

Septembe

r

Octob

er

Novemb

er

Decem

ber

( '000)

Month

P assenger

M AS 2002 M AS 2003 Air Asia 2002 Air Asia 2003

10.2%

-3.5%-2.4% -7%

-19.7%

-3.4% -4.2%

0.5%

171.8%

105.3%

100% 102.5% 102.6% 110.6%115%

116.4%


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Where Next ???

M ark et Tra f f i c Growth & Changes in Average Fare

Year 2001

7 9 %

2 %

7 1 %

8 %

1 3 9 %

3 8 % 3 2 %

3 0 3 %

1 6 % 1 4 %

1 9 3 %

1 4 % 1 2 %

- 2 4 %

8 %

- 2 4 %

2 0 %

- 2 1 %

- 1 % - 3 %

- 2 5 %

1 0 %0 %

- 2 7 %- 1 4 %

- 4 %

-50%

0%

50%

100%

150%

200%

250%

300%

350%

Alb an y Bos to n Buffalo Newark Lo ng Is lan d New Yo rk

John F.

Kennedy

La Guardia Manchester Philedephia Pittsburg Providence Rochester Syracuse

Departing Airport

Traff ic Growth (%) /

Changes in A verage

Fare (%)

Market Traffic Growth

Change in avarage fare

Performance of selected US aviation market where LCC operates


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Where Next ???

1. Add Kuantan as a new destination (Operate twice a day)

2. Top Priority to major domestic town as there is huge

imbalance between MAS & AirAsia

e.g. Penang, K.Kinabalu, Kuching

3. Increase servicesKota Bharu, Johor Bahru, Miri & Bintulu

4. Add service from our secondary hub to various destinations

Beginning 2005, wil l start to strategise to establ ish our thi rd

hub in East Malaysia (Kota Kinabalu)

Domestic Expansion Plan


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Regional Expansion

Where Next ???

- Will stick to its niche and fly to destinations/cities within 3 hour flight range fromMalaysia

Within 3.5 Hours

Flying Are All Of

S.E. Asias Major

Markets


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Where Next ???

Population of Major Market

- Malaysia 24.4 mil - Cambodia 12.3 mil

- Singapore 4.2 mil - Laos 5.5 mil

- Thailand 62.2 mil - Myanmar 49 mil

- Indonesia 217 mil - Brunei 0.4 mil

- Vietnam 79.7 mil - Philippines 80 mil

- Growth in air travel are closely associated with the

countrys GDP.


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Passenger M ovem ent to South East A sia at KLIA

January - Decem ber

0

500

1,000

1,500

2,000

2,500

Singapore Bangkok Phuket Manila Medan Jakarta Denpasar Surabaya B. Seri

Begawan

Ho Chi

M inh City

Hanoi Phnom

Penh

( ' 0 0 0 )

Destination

Passenger M ovement

2001 2002 2003 (e)

Where Next ???

Passenger Movements


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Where Next ???

- The accessibility to SEA countries largely determined by existingbilateral agreements between two countries

- Therefore;

2004/05

Brunei

VietnamI ndonesia

Thailand

- Fully backed by Malaysian Government

- Other countries highly elated over LCC prospect

2006/07MyanmarLaos

2005/06CambodiaPhilippines

Regional Expansion


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Where Next ???

Country Routing MAS PresentOperation

Entitlement Unutilized

Brunei KUL BWN 2x weekly 10x weekly 8x weekly

Indonesia KUL-JKT vv

KUL-DPS vvKUL-SUB vv

KUL-MES vv

MES-PEN vv

7x B734

14x A330

14x B734

11x B734

10x B734

7x B734200 units 123 units

KCH-PNK vv

BKI-TRK vv

KUL-BKI-MDC

KUL-KCH-BPN vv

BKI-BPN vv

KUL-PDG vv

KUL-JOG vv

7x F50

3x F50

2x B734

2x B734

2x B734

3x B734

3x B734 108 units 92.5 units

Regional Expansion Traffic right


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Where Next ???



Cambodia KUL-PNH vv 9x B734 1400 seats Nil

Lao PDR KUL-VTE Nil 3x weekly 3x weekly

Myanmar KU-RGN 3x A330 4x weekly 1x weekly

Philippines KUL-BKI-MNL-KUL

KUL-BKI-MNL-KUL

KUL-MNL-BKI-KUL

KUL-MNL-BKI-KUL

KUL-BKI-MNL vv

KUL-MNL vvKUL-BKI CEB vv

1x A330

1x B734

1x A330

1x B734

1X B734

1x B7342x B734

9x weekly2x weekly

NilNil

Regional Expansion Traffic right


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Where Next ???



Singapore KUL-SIN vv

SIN-LGK vvBKI-KCH-SIN vv

28x A330

28x A332

7x B734

3x B7347x B734

TTL: 73x

Airline Level Dicussion

Thailand KUL-BKK vv

KUL-HKT vv

14x A330

7x B734

Liberal Policy subject to airline

discussion

Vietnam KUL-SGN vv

KUL-HAN vv

9x B734

5X B734

3150 seats Malaysia / Vietnam

Regional Expansion


36/55

Where Next ???

Phase Period Catchments Area Possible Destinations

Wave 1 2004 2005

Thailand

Indonesia

Vietnam

Brunei

Bangkok, Phuket,

Chieng Mai, Pattaya

Jakarta, Padang,

Palembang, Medan

Surabaya,Bali,

Bandung,Solo,Jogjakarta

Ho Chi Minh

Hanoi

Bandar Seri Begawan

Wave 2 2005-2006

Cambodia

Philippines

Phnom Penh

Manila

Wave 3 2006 2007 Lao PDR

Myanmar

Vientiane

Yangon


37/55

Where Next ???

Kick-start LCC operation into selected countries by partnering

with a company in that country.

Circumvent the much protective traffic rights whilst exploit the

abundant local population

Enter & Replicate the business model to China & India

Kota Kinabalu-become launch pad of our expansion to Brunei,Indonesia & Philippines.

Regional Expansion


38/55

Where Next ???

Develop Kota Kinabalu into a hub

BIMP EAGA


39/55

F leet & Frequency Plan


40/55


By June 2004, acquired 21 aircraft. 3 for domestic Thailand (JV)

End 2004, fleet size will leap to 30 with possibly 6 aircraft for domestic

Thailand & 24 for domestic Malaysia & Regional

AirAsia is able to operate this frequencies from Malaysia by these dates :-

June 2004 (18 aircraft) 504 frequencies per week

December 2004 (24 aircraft) 672 frequencies per week

Regional Expansion


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Regional Expansion


AIRASIA FLEET AND FREQUENCY PLAN 2004

As at 01 Jan 04 9 B737

aircraft Estimated frequency

per week = 252

As at 01 Jan 04 9 B737


per week = 252

As at 01 Jan 04 9 B737


per week = 252

A.ex Kuala Lumpur

1.0 Within Pen. Malaysia

Langkawi

Penang

Alor Setar

Kota Bharu

Kuala Terengganu

Kuantan

Johor Bharu

14

21

14

14

14

0

14

21

42

21

21

14

14

21

28

49

21

21

21

21

21

2.0 To East Malaysia

Kuching

Sibu

Miri

Bintulu

Kota Kinabalu

Sandakan

Tawau

Labuan

35

7

14

0

35

7

7

7

49

10

21

7

49

14

14

14

56

14

21

7

56

14

14

14


42/55


As at 01 Jan 04 9 B737


per week = 252

As at 01 Jan 04 9 B737


per week = 252

As at 01 Jan 04 9 B737


per week = 252

A.ex Kuala Lumpur

3.0 To Regional points

Bangkok

Phuket

Chieng Mai

Pattaya

Jakarta

Surabaya

Bali

Medan

Padang

Jogjakarta

Bandung

Ho Chi Minh

Hanoi

Phnom Penh

Manila

Vientiaen

YangonBandar Seri Begawan

0

7

0

0

0

0

0

0

0

0

0

0

0

0

0

0

00

7

14

7

7

7

7

7

7

7

7

0

7

0

0

0

0

07

14

14

7

7

7

7

7

7

7

7

0

14

7

7

7

7

714


Regional Expansion


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As at 01 Jan 04 9 B737


per week = 252

As at 01 Jan 04 9 B737


per week = 252

As at 01 Jan 04 9 B737


per week = 252

B.ex Johor Bahru

1.0 Within Pen. Malaysia

Langkawi

Penang

Alor Setar

Kota Bharu

Kuala Terengganu

Kuantan

7

14

0

0

0

0

14

14

7

7

7

0

21

21

14

14

14

0

2.0 To East Malaysia

Kuching

Sibu

Miri

Bintulu

Kota Kinabalu

Sandakan

Tawau

Labuan

14

0

7

0

7

0

0

0

21

0

7

0

14

0

0

0

21

0

14

0

21

0

0

0


Regional Expansion


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As at 01 Jan 04 9 B737

aircraft Estimated frequencyper week = 252

As at 01 Jan 04 9 B737


As at 01 Jan 04 9 B737


A.ex Johor Bahru

3.0 To Regional points

Bangkok

Phuket

Chieng Mai

Pattaya

Jakarta

Surabaya

Bali

Medan

Padang

Jogjakarta

BandungHo Chi Minh

Hanoi

Phnom Penh

Manila

Vientiaen

Yangon

Bandar Seri Begawan

0

0

0

0

0

0

0

0

0

0

00

0

0

0

0

0

0

7

7

0

0

0

0

0

0

0

0

00

0

0

0

0

0

0

14

14

0

7

0

0

0

0

0

0

00

0

0

0

0

0

0

Total 259 528 700



45/55

Marketing Action Plan


46/55


4Ps

Product

Price Place

Promotion


47/55


Low Fare &

No Fril l s

Ticketless & M inimum Service

Brand Extension

Go Holidays 1. DI Y

2. THEME

PACKAGES

Product

One type aircraft

- Single class


48/55

Promotion


Mass Media

ICT Collaboration

with Ar tistes

Travel Agents

Sponsorship inlocal event

Promotion Events- Public Area


49/55


Place /Distribution

40% Thru Internet

-Internet penetration rate is increasing for developing country

60% Thru Conventional Counter Bookroom

e.g. Thailand, Indonesia and etc

Call Center

Travel

Agency

Airport

Station

Sales Off ice


50/55


Price(Low Cost)

I nnovative Cost

(Optimizing Techniques)

-Quick turnaround times

-Max flight utilization

-One type of Aircraft

-Single Class

Lower Price

Go Holiday Package

I nventory & Revenue

System

-Continually reviews

booking for all future

flight

-Ticketless

-No Frills

-No frequent flyer

program


51/55

F inancial Planning


52/55

F inancial Planning

Year 2004

To float 25% of AirAsia shares. To raise RM600 to RM1 billion

Use of fund

- Purchase aircraft (aimed 30 aircrafts by late 2004)

- Joint Venture with Singapore, Indonesia and India ( possibly China)

To issue bond to raise RM150 million

- Buy 4 used aircraft ( Boeing 737-300)

- Working capital


53/55

Conclusion


54/55

Conclusion

Prove LCC generate multiplier effect to government,airport and traveling public who enjoy the economic benefit

of LCC

Regional Expansion

- Access to traffic rights

- Effective aircraft deployment

- Funding

No stopping for AirAsia, as low pri ce drives volume => PROFIT


55/55

Thank You

AirAsia Case Study-By Nadeem

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