The budget carrier in AirAsia

Abstraction

AirAsia was the first successful low cost air hose in the Southeast Asiatic part. This instance survey discusses the factors that contributed to AirAsia ‘s success. It surveies the influence of civilization and leading at AirAsia, the factors lending to its operational efficiency and the strategic orientation of the air hose. It besides discusses the menaces to the long-run success of the air hose with mention to increasing competition in the part and the demand to get the better of certain service defects. The instance concludes with an appraisal of AirAsia ‘s future programs.

• To analyze the growing of the innovator of low cost air hoses in the Southeast Asiatic part
• To analyse the grounds for the success of a low cost air hose in Southeast Asia, a part where analysts felt there was no market for low cost services
• To understand the operational theoretical account followed by the air hose and how it contributed to its success
• To analyze the relationship between leading and civilization and the demand for a strong and dynamic leader in a startup organisation
• To understand the menaces to the air hose ‘s long-run success and how these may be overcome
• To analyse the turning low cost tendency in the Southeast Asiatic part and the market potency for the same

AirAsia was non the first budget bearer in Asia ( although it was the first in the Southeast Asiatic part ) . The low cost tendency really started in Asia in the 1990s, when two budget air hoses – Air Do and Skymark Airlines were launched in Japan. However, neither of the air hoses succeeded as their operational theoretical account was weak and they were shortly ‘out discounted ‘ by Japan ‘s major air hoses – Japan Airlines, All Nippon Airways and Japan Air System. Another budget air hose, Cebu Pacific Air, operated flights between Hong Kong and Seoul to the Cebu Islands in the Philippines, but its operations were limited. Otherwise, it was the national flag bearers that dominated the part…

Harmonizing to analysts, AirAsia ‘s chief entreaty was its low menus. By offering menus that were a fraction of what major air hoses charged, AirAsia created a new market in the Southeast Asiatic part. Peoples who could otherwise non hold afforded air travel began to wing AirAsia… Analysts by and large agreed that AirAsia ‘s success had significantly changed the kineticss of the Southeast Asiatic air power industry. However, they said it would be premature to name the air hose an unqualified success. AirAsia was set up in 2001, which was a bad clip for the planetary air power industry. Despite this, it managed to develop a successful concern theoretical account. However, the air hose industry had witnessed a figure of instances where air hoses started off good but subsequently experienced a downswing…

In early 2005, AirAsia Sdn Berhad ( AirAsia ) announced that it would give off 10,000 free seats on its flights to choose Southeast Asiatic destinations.The air hose said that was its manner of observing the completion of three old ages of successful winging and of stating thank you to the people for their support. “ AirAsia ‘s achievements and success today is a contemplation of the populace ‘s trust and religion in the company, ” said Tony Fernandes ( Fernandes ) , CEO of AirAsia. The air hose besides wanted to thank the populace for doing its late-2004 portions publish a immense success. One of the most successful air hoses in the Southeast Asiatic part and the innovator of low cost, no frills travel in Malaysia, AirAsia was frequently in the intelligence for its low menus and fast turning operations Until AirAsia proved them incorrect, air hose analysts believed that budget bearers would non happen a market in Asia. They said the Asiatic air hose industry was different from the industries of the US and Europe – air hose riders in Asia looked on air travel as a luxury, and expected to be pampered by the air hoses. For this ground, no-frills travel would non appeal to them. In add-on, Asiatic states had a great sum of ruddy tapism, which made it hard to get down any new venture, non least of all, an air hose. Major national air hoses in most of the states besides enjoyed authorities backup and were excessively powerful to let competition to boom. Therefore, when AirAsia was set up in 2001, it was greeted by a big sum of incredulity.

The air hose industry was non a good topographic point to be in at that clip, staggering as it was from the combined effects of the September 11 terrorist onslaughts, Severe Acute Respiratory Syndrome ( SARS ) , and economic downswing. However, within three old ages of operation, AirAsia changed the kineticss of the Asiatic air hose industry. It non merely managed to vie with major bearers like Malaysian Airlines ( MAS ) and Singapore International Airlines ( SIA ) , but it besides became the benchmark for several other low-priced air hoses in that market. So great was AirAsia ‘s impact that analysts said the air hose, with its minimum menus, was populating up to its ticket line which said ‘Now Everyone can Fly ‘ .

Against All Odds

In 2001, Dato ‘ Sri Tony Fernandes Fernandes started his calling as a music industry executive, working at Virgin Records and Time Warner Music It was his childhood dream to run an air hose, but he did non see the thought earnestly until he saw easyJet, a London-based low cost air hose, on telecasting. Fernandes was impressed with what he saw of easyJet and decided that he wanted to research its operations further. He spent two yearss at easyJet ‘s central office in Luton airdrome, speaking to staff and riders and larning how the air hose was run. Fernandes had ever believed that a low cost air hose would be successful in the Southeast Asiatic part, and his experience at easyJet convinced him of the potency of his thought. He resigned from his occupation at Time Warner Music and returned place to Malaysia. Fernandes had no anterior experience in running an air hose, nor did he hold adequate money to get down one. He raised money by mortgaging his house and utilizing up his nest eggs. He besides roped in three of his associates – Datuk Pahamin A. Rajab, Abdul Aziz Abu Bakar and Kamarudin Meranun – who believed in his vision for a low cost operator in Malaysia. Geting an air hose licence was non easy in Malaysia. The spouses set up a meeting with the Malayan Prime Minister, Dr. Mahathir Mohamed ( Mahathir ) , and presented to him the major characteristics of their concern theoretical account…

along with Dato ‘ Pahamin Ab. Rajab ( Former Chairman, AirAsia ) , Dato ‘ Kamarudin bin Meranun ( Deputy Group Chief Executive Offi conditioned emotional response, AirAsia ) and Dato ‘ Abdul Aziz bin Abu Bakar ( Current Chairman, AirAsia ) formed a partnership to put up Tune Air Sdn Bhd and bought AirAsia for a nominal amount of RM1.00. With the aid of Conor Mc Carthy ( Director, AirAsia ; former Director of Tune Air Sdn Bhd and former Director of Group Operations, Ryanair ) , AirAsia was remodeled into a low cost bearer and by January 2002, their vision to do air travel more aff ordable for Malaysians took fl ight.

Valued at RM2.3 billion, AirAsia is today an award winning and the largest low cost bearer in Asia. From a two aircraft operation of Boeing 737-300, AirAsia presently boasts a fl eet of 78 aircraft that fl Internet Explorers to over 60 domestic and international finishs and operates over 500 domestic and international Florida ights daily from six hubs located at Low Cost Carrier Terminal ( KLIA ) , Johor Bahru, Kota Kinabalu, Bangkok ( Thailand ) , Jakarta ( Indonesia ) and Bali ( Indonesia ) .

AirAsia is fast distributing its wings to make a bigger and more extended path web through its associate companies, Thai AirAsia and Indonesia AirAsia. The air hose has carried, therefore far, over 61 million invitees since its fi rst twenty-four hours of operation.

At AirAsia, we are conveying people nearer by bridging boundaries through our doctrine of off ering low menus. It has sparked a revolution in travel, as more and more people from all walks of life are now able to fl Y for the first clip, while many others have made air travel with AirAsia their preferable pick of conveyance. We are systematically adding new paths, which include metropolis braces that ne’er existed before, in our relentless eff orts to make a seamless span of integrity across Asia. It is something really near to our Black Marias as we continuously strive to advance air travel and make exhilaration amongst our invitees with our scope of advanced merchandises and personalised services.

Corporate Vision, Mission and Values Vision-To be the largest low cost air hose in Asia and functioning the 3 billion people who are presently underserved with hapless connectivity and high menus.

Mission

• To be the best company to work for whereby employees are treated as portion of a large household
• Make a globally recognized ASEAN trade name
• To achieve the lowest cost so that everyone can fl Y with AirAsia
• Keep the highest quality merchandise, encompassing engineering to cut down cost and enhance service degree

Valuess

Safety Adopting a zero tolerance to insecure patterns and strive for nothing accidents through proper preparation, work patterns, hazard direction and attachment to safety ordinances at all times. Valuing Our Peoples Perpetrating to our people ‘s development and wellbeing and handling them with regard, self-respect and equity. Customer Focused We care and treat everyone in the same mode that we want to be treated. Integrity Practicing highest criterions of ethical behavior and demonstrate honestness in all our lines of work in order to command trust and common regard. Excellence in Performance Setting ends beyond the best and reenforcing high quality public presentation criterions and accomplishing excellence through implementing best patterns.

Committedness To Excellence

AirAsia is committed to excellence. We intend to stand out in everything we do by accomplishing exceeding consequences. We have set high criterions, but no higher than our clients ‘ outlooks. Day after twenty-four hours, our people do their best so that we meet these outlooks. In all our eff orts, there are five cardinal values: Safety, Passion, Integrity, Caring and Fun. They provide a frame of mention for the AirAsia experience and a corporate civilization in which we live and present peak public presentation.

The concern theoretical accounts

AirAsia ‘s success has taken flight through the continued confi dence of our invitees who prefer a no-frills, hasslefree, low menu and convenient option in air travel. The key to presenting low menus is to systematically maintain cost low. Achieving low cost requires high effi ciency in every portion of the concern and keeping simpleness. Therefore every system procedure must integrate best industry patterns. We make this possible through the execution of the undermentioned cardinal schemes:

• Safety First – Safety is the individual most of import standards in every facet of the operations, an country that AirAsia will ne’er compromise on. AirAsia complies with the conditions set by regulators in all the states where the air hose operates. In add-on, AirAsia spouses with the universe ‘s most celebrated care suppliers to guarantee that its fleet is ever in the best status. AirAsia has committed itself to a plan of cut downing hazards and jeopardies usually associated with our industry through a Safety Management System. This committedness is extended to guarantee the full integrating of a safety civilization, safety policy and safety aims in a proactive attack to aviation safety. In short, our Safety Management System is non merely an add-on but a core portion of our concern procedure. It is the manner we do concern. The critical safety maps of senior direction are in the countries of scheme and leading. Senior direction will supply a vision for safety direction and supply equal resources to accomplish this degree of safety
• High Aircraft Utilisation – AirAsia ‘s high frequence flights have made it more convenient for invitees to go as the air hose implements a speedy turnaround of 25 proceedingss, which is the fastest in the part. This has resulted in high aircraft use, lower costs and greater air hose and staff productiveness. Efficient Fleet, AirAsia continues to put in new aircraft. As of the terminal of 2008, the Group received a sum of 56 Airbus A320 aircraft and the deployment is as follows. Malayan operations has received 46 and is now a to the full Airbus A320 aircraft pess. Thailand operations has received six and Indonesian operation, four. Our fl eet is among the youngest in Asia and we will acquire even younger as we take bringing of 14 Airbus A320 aircraft and retire nine older Boeing 737-300 “ Classicss ” aircraft in 2009. These Airbus A320 are extremist modern, more fuel effi cient and environmentally friendly aircraft with alone degrees of rider comfort, serviceableness and dependability. We have received positive feedback that our riders love this aircraft. These aircraft have reduced operational cost signifi cantly and helped to present strong profi T.
• Low Fare, No Frills – AirAsia marks invitees who are prepared to make away with frills such as repasts, frequent circular stat mis or airdrome sofas in exchange for menus lower than those presently off ered without consisting on quality and service. Guests have the pick of purchasing entirely prepared repasts, bites and drinks from our in-fl ight service at an aff ordable monetary value. While onboard AirAsia the best thing to make, of class, is to eat and imbibe. We will assist you make that by off ering a huge choice of nutrient and drinks without pluging a hole in your billfold. And our merriment and friendly crew will guarantee the merriment portion of your travel experience.
• Streamline Operations – Making the procedure every bit simple as possible is the key to AirAsia ‘s success. We are working towards a individual aircraft fl eet ; this greatly reduces doubling manpower demands every bit good as stocking of care parts. There is merely one category seating, i.e. fi rst category, and riders are free to sit where they choose.
• Thin Distribution System – AirAsia off Ers a broad and advanced scope of distribution channels to do engagement and going easier for its invitees. AirAsia ‘s ticketless service provides a low cost option to publishing printed tickets. Simple Distribution System Simple is good, simple is what we want and simple is what we all need. Bearing this in head, we have worked really hard through infinite hours of research and development to guarantee that our distribution system is, simple. It is dry that so much work is required to be ‘simple ‘ but bear in head that ‘simple ‘ is a comparative word when you are providing to the demands of 1000000s of people across the universe. We have developed a comprehensive, yet simple distribution system. One that is capable of managing the most technologically savvy client to the most technologically deprived. Our website www.airasia.com is available in seven linguistic communications and our call Centre is familiar in the major spoken Asiatic linguistic communications. For those ever on the spell, you can book a Florida ight utilizing your nomadic phone at www.mobile.airasia.com We have late upgraded our self check-in machines with a simpler and more powerful version. The dealing takes non more than two proceedingss to finish. This new machine besides has an advanced security characteristic which eff ectively cuts the hazard of fraud. We have besides expanded our web check-in installation to all Stationss and finishs. You can now utilize the web check-in installation even if you have baggage ( antecedently web check-in was merely for riders without luggage ) . Simply stroll over to the luggage bead off counter – every station has one – and so continue to the going hall for your Florida ight. If you have non tried any of these convenient services, I recommend you do so the following clip you fl y with AirAsia. Not merely will it salvage you valuable clip and extinguish the emphasis of line uping up, it will besides honor AirAsia in the signifier of lower cost – and therefore lower my emphasis. It ‘s amutually healthy proposition!
• Point to indicate web – The LCC theoretical account shuns the hub-andspoke system and adopts the simple pointto-point web. All AirAsia Florida ights are shorthaul ( four hr Florida ight or less ) . The implicit in concern is to acquire a individual from point A to B. On Time Performance, Nothing irks air hose riders more than a hold. Often, these holds are caused by factors beyond our control – when Mother Nature throws a fi T, for case – but we can seek to extenuate these happenings by guaranting that we take actions within our control to make so. One of the benefi T of a immature Florida eet is dependability. AirAsa ‘s On Time Performance ( OTP ) has improved by nine per centum points since the fi rst Airbus A320 aircraft was inducted into our fl eet. The graph below indicates OTP will lift with more Airbus A320 aircraft in the fl eet. We will endorse trial this decision and purpose for 92 % OTP in 2009. If we win, it will do us the most punctual air hose in the universe. In line with our confi dence in accomplishing this end, we have launched a radical run called On Time Guarantee ( OTG ) . In a snapshot, this run compensates a rider inconvenienced by a significant hold due to our mistake – at no extra cost. We believe this pioneering and alone run will assist to hike the keeping rate and raise our trade name equity.

AirAsia Today

AirAsia flies over 100 paths across 12 states in Asia. The aggressive air hose has become Asia ‘s eigth-largest air hose in six old ages, and is now the largest low-priced bearer in Asia, with the lowest cost base of any air hose in the universe. Harmonizing to AirAsia, the key to presenting low menus is to systematically maintain costs low – which requires high efficiency in every portion of the concern, with every system procedure integrating best industry patterns.

How they do it

Ultimately, it is our invitees who have made us what we are today. A passion for transcending our invitees ‘ outlooks is what spurs us to relentlessly prosecute advanced ways to heighten the service we provide. Changeless invention is the tool we use to spread out our invitees ‘ freedom to go so that Now Everyone Can Fly.

In 2008, a entire committedness to invention enabled us to remain in front of the game and one time once more win an array of esteemed awards. In the old ages to come, the same committedness will see us successfully navigate the ongoing planetary economic turbulency, broaden our skylines and non merely survive but prosper.

In 2009 we will unwind a series of enterprises designed to hike client service while maintaining menus down. So it is disposed that this twelvemonth ‘s Annual Report focuses on inventions which will enable AirAsia Berhad ( “ AirAsia ” ) to retain its pole place as the universe ‘s preferable low menu air hose. Above all, it is appropriate for us to admit the support our invitees give us by doing Thankss to YOU the cardinal message of this study.

The Asia-Pacific air power industry is basking strong rider demand. Harmonizing to the International Civil Aviation Association, rider Numberss in the part grew more than 12 per centum in 2007, supported by lifting economic systems, increasing concern travel, and turning disposable incomes.

Making Innovations – Just for You

Why is AirAsia executing so good? The reply could n’t be any simpler: AirAsia grows because it saves money for people. Cipher wants to portion with their money whenever possible, but I am certain that about everyone likes to go. So, sanely, people look for the lowest cost option with fi rst category service. Supplying fi rst category service is imperative for any service oriented company, clients merely wo n’t hold it any other manner. We realise this importance and have systematically upgraded our service degree, and succeeded in making so without any via media to effi ciency and cost. I will explicate in the undermentioned pages our enterprises – nowadays and future – to heighten client service bringing. Some are advanced thoughts inspired by the gifted people of AirAsia and some are simple but functional moves that came from other beginnings.

Expanding the Route Network

In 2008, we achieved many mileposts. The one closest to my bosom is our entry into Singapore. For excessively long, riders on the Malaysia to Singapore path were burdened with high menus extracted by the monopolistic nature of the path operators. This is no longer the instance – AirAsia introduced unheard-of low menus on a path that has proven to be high-yielding and is expected to present sustained profi T. We have six finishs associating to Singapore at the terminal of 2008 and this figure will duplicate by the terminal of 2009. For old ages, we have gazed upon India and waited for an chance. That twenty-four hours fi nally came and our inaugural path, Kuala Lumpur to Tiruchirappalli, has been a resonant success. There is enough more to come, we presently have on our radio detection and ranging screen to get down services to Coimbatore, Kochi and Kolkata. India presents a antic chance for AirAsia and I envisage it as one of our biggest markets in old ages to come.of growing with 39 % more riders carried than the twelvemonth earlier. This signifi cantly outpaced the domestic Malaysia rider Numberss that grew by 13 % . While we continue to see and capitalize on chances in Malaysia, we expect the higher rate of growing in international sectors to go on.

With the launch of AirAsia X, AirAsia ‘s path web has evolved from being Asia-centric to include Australia and Europe. The impact of this connectivity – for case, linking Australia and London by supplying an alternate, aff ordable version of the alleged Kangaroo Route – is being felt non merely by AirAsia but by Malaysia. Our path connectivity and the frequence of our fl ights is now turning Kuala Lumpur into the prime regional hub for low-priced travel. Our services in hiking touristry in Malaysia are assisting to relieve some of the hurting infl icted by the planetary economic downswing. Our investings in these new paths and in hiking the Malayan economic system show our unwavering committedness to the state and its people.

The Chanllenge

• Implement low cost publicities with high efficiency and best industry patterns
• Create and implement print and web runs on a really tight bringing agenda
• Integrate and implement internationally across multiple linguistic communications and media

Benefits

• Accelerated creative activity to bringing theoretical account
• High quality execution at a low cost
• 50 per centum increased productiveness in originative turnaround and end product

Industry Overview and Challenges

The Asia-Pacifi hundred air power industry is confronting one of the most ambitious period since the 1997 Asiatic fiscal crisis. Harmonizing to the International Air Transport Association ( IATA ) , rider Numberss in the Asia Pacifi hundred part shrunk by 1.5 % in 2008 and is expected to contract by a farther 0.6 % in 2009. Fiscal loss projections paint an even more blue scenario – Asia-Pacifi degree Celsius air hoses posted a US $ 500 million loss in 2008, with the loss prognosis to balloon up to US $ 1.5 billion in 2009.

The competitory environment has gone amiss amid confusion. Many air hoses have terminated underperforming services, deferred scheduled aircraft bringings and frozen surplus capacity in an effort to cut down their cost base. Bequest bearers are besides cut downing menus on chief paths, frequently seting themselves in direct competition with low-priced air hoses such as AirAsia. I am confi dent, nevertheless, that we will more than keep our ain. AirAsia is non merely approximately low menus. Our path connectivity, the frequence of our Florida ights, Industry taking promptness, the 5-Star quality of our service and our finding to stand out in everything we do provides our clients and invitees unparalleled value

We welcome just competition conducted on a degree playing fi old age because we are confi dent we can prevail over all comers. In fact, we are detecting an rush of involvement in fl ying AirAsia by the corporate sector as it seeks to cut travel costs for its executives by exchanging to us alternatively of utilizing bequest bearers. This is merely one illustration of how the current economic downswing has benefi ted us and we have good ground to believe there are many more.

Our market portion will probably turn in 2009, partially because much of the remainder of the industry is in acute hurt.

Traveling frontward

The critical qualities needed to voyage through the current economic turbulency are a focal point on invention, keeping tight subject in line with the low-priced theoretical account, originative selling and an firm ego belief. As many of you are cognizant, I am an incorrigible optimist. I look for Ag liner in any state of affairs and I am confi dent that the economic system will bounce. I am besides a individual who fi rmly believes in illuming a taper instead than cussing the darkness. Which is why we made the painful determinations we made and hold put in topographic point schemes that will see us through this unsure period and go on to present long-run value to our clients, stockholders and all our other stakeholders. Unit of measurement cost is expected to cut down well stemming from our determination to buy fuel on the topographic point market, the benefi T of a younger fl eet and economic systems of graduated table. The current monetary value of fuel is well lower than the US $ 128 per barrel that we paid in 2008. The benefi T of the lower fuel monetary value goes directly to the bottom line. With these additions in manus, 2009 will be a strong twelvemonth for the Group. It ‘s been an highly eventful and exciting twelvemonth. The Board of Directors and I are pleased and proud to be taking our gifted and committed employees as we begin this new chapter in the history of AirAsia. We have every confi dence that the hereafter will be both successful and full of chances.