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Individual Assignment – ADC 601AirAsia Marketing Management PracticesA Case Study on AirAsia Marketing Management PracticesByP Palaniandi P-GSM0276/An Individual Project Submitted for ADC 602 Marketing Management In Partial Fulfillment of the Requirements for the Degree of Master of Business Adminis...

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P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

A Case Study on AirAsia Marketing Management Practices By

P.Shankaree Palaniandi P-GSM0276/18

An Individual Project Submitted for ADC 602 Marketing Management In Partial Fulfillment of the Requirements for the Degree of Master of Business Administration

Prepared for Dr. Zurina Mohaidin & Dr. Shaizatulaqma Kamalul Ariffin

UNIVERSITY SAINS MALAYSIA GRADUATE SCHOOL OF BUSINESS April 18, 2019

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

INTRODUCTION & IN- DEPTH EVALUATION OF AIRASIA AirAsia Berhad is a Malaysian low-cost airline based in Malaysia. It was established in 1994, and began its operations in 1996. In 2001, Tony Fernandez bought the company for RM 1 as it was heavily in depth, reportedly RM40mil deep. It is the largest airline in Malaysia by fleet size (435 aircrafts) and destinations. AirAsia Group operates scheduled domestic and international flights to more than 165 destinations over 25 countries. Under the leadership of Tony Fernandes, the airline was doing well some may even say flying high in 2002 and launched its new route that year. In 2003, a second hub was opened in Senai International Airport, Johor Bahru, as well as the airline’s first international flight to Bangkok. After that the only place AirAsia was heading for is up, as the Thai and Indonesian subsidiaries were set up as well as the commencement of flights to Indonesia, Macau, China, Philippines, Vietnam and Cambodia in 2005. AirAsia now flies to all ASEAN countries, a great portion of Asian countries that include India, Iran, Sri Lanka and Bangladesh; as well as to the United Kingdom, France, Japan, Korea and Australia via AirAsiaX. Its affiliate airlines Thai AirAsia, Indonesia AirAsia, Philippines AirAsia, and AirAsia India have hubs in Don Mueang International Airport, Soekarno–Hatta International Airport, Ninoy Aquino International Airport, and Kempegowda International Airport respectively, while its sister airline, AirAsia X, focuses on long-distance routes. AirAsia Groups vision is to be the largest low-cost airline in Asia so that we can provide a lowcost service that will allow the three billion people to fly to more destinations across the region. We aim to be a truly ASEAN airline corporation as we look out for every country’s best interest. Their mission is 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

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

AirAsia and maintain the highest quality product, embracing technology to reduce cost and enhance service levels. AirAsia has consistently been named as the world's best low-cost carrier for 10 years in a row in international travel and airline awards, including the latest award for 2018, by World Travel Awards and various others. The slogan of ‘Now Everyone can fly’ has become their well-known tag line. Keeping their costs and fares low is how they make “Now Everyone Can Fly´ a reality. They monitor and control their inefficiencies, curb wastage, push for the best possible value in their spending and maintaining this throughout the corporation relentlessly is how they have successfully become the most efficient airline in the world AirAsia Group comprises of 12,404 employees from 16 different nationalities. From 2015-2018 they have doubled their number of employees, from 6,636 to 12,404. Among the Malaysian employees, they have a good mix of the different ethnicities that populate our country – with 50% being Malay, 20% Chinese, 16% Indian, and 0.8% non-Malay Bumiputera. At AirAsia, the ‘dare to dream’ credo has been weaved into a culture that encourages their employees to reach for more, and to pursue their dreams. Where they have had office boys become pilots, a call center officer become the head of sales and even a ground handling staff be promoted to business development manager. Air Asia is made up of a influential management team, with strong links within and outside Malaysia as well as the airline industry and bank leaders. The diverse background of AirAsia management team which consists of industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of former Thai Prime Minister - Thaksin Shinawatra) held a 50% stake in Thai AirAsia, when it first launched. Thailand’s local laws require a Thai-registered airline to be majority Thai-owned. This expansion wouldn’t have been possible without solid connections

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

AirAsia makes their low fare model possible and create values through the implementation of the below key strategies (Table 1)

Table 1

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

Profile of Marketing Department CEO

Director of Distribution & Marketing

Corporate Distribution & Marketing

Corporate Communication

Production Planning

Revenue Management

Marketing Manager by Region

Sales Region 1

Sales Region 2

Sales Domestic

Table 2 The marketing department of AirAsia is typically shown in the bellow organizational chart (Table 2). For the entire AirAsia Group and its subsidiaries there is approximately 500 employees working for the respective marketing teams. The department is headed by the Director of Distribution & Marketing, and is supported by eight section heads also known as managers. These Section heads report directly to the director. They supervise, Corporate Distribution & Marketing, Corporate Communication, Production Planning, Revenue Management, Marketing, Sales - Region 1, Sales - Region 2, Sales Domestic. However, based on research and talking to their marketing team it has brought to my attention that AirAsia group and its subsidiaries manage their marketing in house, and keep them separate through all its subsidiaries. AirAsia is seen by the public as an Airline, however they have divided their various departments into individual profit centers – from Investment, Koolred, Big Data, T &Co, Santan, Big pay, travel 3sixty, Think BIG and many others. Each of these are associates, affiliates, subsidiary or jointly owned. Every single offering within the airline industry is made to be a profit center, hence each of them have their own marketing team. A few examples that have their own marketing team include, Investment – this is the part of the company that goes and look at opportunities that are available, like which countries that they fly to and getting joint partnership with local partners to realize the local venture. AA Go Holidays they manages their hotel/airline bookings, T&Co, is their own coffee brand which is available

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

on their flights, Rokki is their Wi-Fi arm, which provides Wi-Fi services on their flights and have expanded to providing Wi-Fi services to other airlines. Big Data – does data mining to push travelers to use AirAsia they also provide the data to other airlines for a fee. All these profit centers have their designated marketing teams where they strategize, plan and market their individual services for AirAsia and other clients. Each of these divisions is headed by the respective managers, consist typically of 3050 employees. This varies depending on the regions and the kind of department, for example AirAsia’s magazine “travel 3sixty” only has 8 people in their marketing team. In a helicopter view of AirAsia Group and its subsidiaries marketing department, it approximately consists of 500 employees. In general, their marketing department’s responsibility includes and not limited to defining and managing AirAsia as a brand, conducting campaign management for marketing initiatives, producing marketing and promotional materials, to define strategic marketing plans, creating content providing search engine optimization for AirAsia’s website, monitoring and managing social media, conducting customer and market research, and tracking trends and monitoring the competition. The Marketing Director is responsible for all aspects of managing AirAsia in the designated market. This includes the development of all AirAsia routes to & from their market, as well as promoting the key hubs such as Kuala Lumpur, Bangkok and Indonesia as the gateway to South East Asia, India, Australia and the entire AirAsia network of over 130 destinations. The Marketing Manager for that region will manage all branding, marketing, partnerships, distribution and market development activities for that region. Creation, development and successful execution, reporting in to Head of Marketing in Taiwan. Work closely with cross functional teams in KUL and key Air Operator’s Certificate (AOC) holders established under AirAsia of a comprehensive marketing and distribution strategy focusing on driving consumer direct channels. Management of relationships with marketing partners. Working with outside business partners including tourism offices, financial Partners and other

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

marketing partners. Using creative channels to maximize promotional opportunities for AirAsia in a cost-efficient manner, building a consistent level of “buzz” around the brand. Acting as a Brand Ambassador for AirAsia – building on the awareness of AirAsia as a global brand in the Low-Cost Carrier space. Achievement of agreed revenue and financial goals. In respect to the Sales Executive position their responsibilities include, to develop and execute annual sales plans identified by the management; Manage and grow current accounts/channels by tracking revenue and product feedback, tracking sales activities, market analysis and improve sales channel performance; Responsible for driving key brand attributes. Constantly review progress and evaluate the effectiveness of programs and activities against set objectives; Gather market intelligence and monitor industry developments and competitor activity in the territory; Work closely within the team to ensure total integration of plans within the entire sales and distribution system.

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

Marketing Management Practices - Benchmark practices in Air Asia A. Online Marketing Platform The Internet has proven to play a critical part in AirAsia’s success in the industry. Since it is marketed as a low-cost carrier they must control the cost of doing business while still providing the best service and air fares. The Internet provides the most cost-effective distribution channel available. AirAsia’s promotions have been very well received by their customer, for example its “Red Hot Seat Sale” and “Mega Sale Promotion”. For AirAsia to maintain its profitability and ensure its stays in line with cost leadership business model, AirAsia has had to offer more routes and products in its portfolio. More routes and fleets mean more customers and in return more income. Air Asia main purchases are via web booking as 83% of its revenue is derives via the internet. AirAsia should continue to carry its promotions and focus even more on online marketing and selling. Since Social media marketing comes with a very small cost attached to it AirAsia should take advantage of these platforms to market their product and use it as a medium to connect with their customers and get feedback. B. Utilization of IT AirAsia has utilized IT in a manner where it has directly contributed towards their promotional activities for example email alerts, boarding passes on their app, online exclusive deals, click bait post with over 3 million hits per post on search engines and social media platforms. This tactic has helped them by keeping their cost low by using a unique selling propositions C. AirAsia BIG Membership AirAsia provides a membership to their loyalty program that is accessible to those who apply. This membership incentivizes by BIG Points that act as a currency of the loyalty program. For every RM2 on AirAsia flights, a customer can earn 1 BIG Point and if booking Premium Flex or Premium Flatbed,

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

RM1 can earn them 3 Big Points. Big Points can be earned by flights on AirAsia.com, booking hotel with their partners like Tune Hotels, Agoda.com, Booking.com. customers can even collect points when they spend at their retail partners (Zalora, Lazada.com). Petron and BPI rewards points can also be converted to BIG Points. With these BIG points customers can use them to redeem AirAsia flights and merchandises. For example, with 500 points one can redeem a one way ticket and 1,000 points for a round trip flight. They also get 24-hour priority access to the biggest sales, before anyone else. This builds customer relationship and a sense of loyalty to their brand. D. Staff Accessibility AirAsia has made an effort to establish them self in customer service as it is a service based industry. As a prospective customer or a current customer any questions or concerns they have can be addressed through their staff. They have staff available online (virtual and customer service representatives), by phone and at their sales counters located at airports and high foot traffic areas. A main part of their marketing department is the frontline sales team, not only this gives customers to experience a person while buying their tickets it also helps AirAsia boost their ancillary revenues through the purchase of their services such as more luggage space, extra legroom seats, upgrading to read seats and food. The way they have promoted these services are by buying them beforehand and they will be given an early bird discount. E. Brand name and recognition AirAsia’s has become a household name over the years and has been well established in Asia Pacific. Besides print media advertising and promotions, AirAsia has capitalized on promotions by being “media friendly” and transparent, from partnership with hotels, car rental companies, Citibank - AirAsia Card peaked travelers interest. Their affiliation with Global Distribution System enables travel agents from

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

around the world to check flight details and make bookings have also contributed to their brand recognition and growth. Air Asia’s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) has successfully allowed the brand to become a regional brand beyond just Malaysia. Their affiliation with UFC (Ultimate Fighting Championship) and AT&T Williams Formula One team have further boosted their image to more regions around the world.

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

Marketing Management Problem or Issues Faced A. Diseases, Natural Disasters and Air Accidents AirAsia has gone through a variety of catastrophes since Fernandes bought the company. Along with 9/11 which disrupted and caused panic in the airline industry worldwide. AirAsia tsunamis, the (SARS) outbreak, bird flu, a 2014 plane crash under their affiliate Indonesia AirAsia. Customers’ perspective on low cost airline on poor safety maintenance that may affect the ticket sales. Accidents, disaster and terrorist attack can affect customer confidence. B. Efficiency AirAsia is notoriously known for their flight delays, customers choose their airlines for cost efficiency and their punctuality. This also causes AirAsia to lose its air borne time, which then starts a waterfall effect of flight delays. Their check in counters can have long waiting lines that can cause flyers to miss a flight. Another efficiency issue that users face is when booking a ticket on their website there is a time limit of 10min before the webpage goes into time out, losing all the booking information. It is the worst when a customer is ready to purchase and fills in all the details and right before the purchase the session times out. This can cause frustration to customers. C. Rivalry among Competitors AirAsia’s main competitors include and are not limited to Jetstar, Firefly, MAS, Lion Air and Malindo. What rivalry does to an industry is that it limits the profitability and growth of an industry, because these competitors use low prices to attract customers. Yes, this strategy to reduce cost may increase profitability, but the airlines should take into account that their competitors are doing the same to attract customers and to boost their profitability and to compete in the market. This can result in an industry that loses its supplier power and allow its consumers to exert their high power by having these airlines

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices

compete aggressively in low prices. Due to these rivalry among its competitor’s airlines can go bankrupt or it can have a negative effect on their market share.

P Shankaree Palaniandi Individual Assignment – ADC 601 AirAsia Marketing Management Practices Recommendations For this case analysis, and based on the identified issues and problems above my first recommendation for dealing with diseases, natural disasters and air accidents, is to be transparent with the steps they take to secure, handle and prevent events like that. For instant AirAsia will not be able to prevent a Tsunami or any natural disaster, but their customers would like to be assured that they have a contingency plan put in place in case something like that happens. Being transparent with their plans for these kinds of events will bring about calmness for their customers, a sense of safety. In a marketing aspect, while most airlines would cut their marketing cost and flights, AirAsia should increase its advertising, and appeal to customers in a more emotional way. The second recommendation that can be implemented by AirAsia Company is their website user friendliness. AirAsia can begin with conducting a market survey of what customers would like to experience differently when visiting their websites. One of the key maintenance aspects is for their webpage to last longer on a page so that the customer don’t need to keep refreshing the webpage before it times out, and loosing that booked price or having to reenter all their information. Another area that needs improving is their inconsistent quality of services, in regard to their flight delays and canceled flights. As a constant customer that flies a minimum of 4 flights every month with Air Asia my recommendation is that they inform their customers ahead of time. As customers, we understand there can be weather issues and mechanical issues but if we are informed earlier, we can arrange another form of travel especially if it is an emergency or we can come to the airport at a later time and use that time productively instead of lounging around the airport. The final recommendation is that AirAsia has to research on what their competitor’s strengths and weaknesses are, and create a competitive edge, giving them a way to differentiate themselves. If they compete solely based on price and promotions it will only saturate the market. Instead if they created an exclusive experience that only if a person flying with AirAsia can experience, that itself will give them a competitive edge. For example, there was a video that went viral about how Qatar airways has a set up SOP and a special way they service their customers on the autistic spectrum. As a customer although I don’t travel with someone with special needs, I know that Qatar airlines ...