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LEFEBVRE Loris – BUSINESS STRATEGY

AirAsia: The World's Lowest-cost Airline ➢ One of the most profitable airlines ➢ Won the Skytrax award ➢ LCC: low cost carrier (Model created in the south of USA and replicated throughout the world). AirAsia adapted this model to the location and the market in the southeast Asia. They wanted to expend to long-haul flight, but there are few problems: o o

The LCC model depends on short and medium distance flight, Very few LCC had ventured into long-haul; even fewer had made a success of it.

So, for evaluating AirAsia's potential to expand from a regional carrier to an international airline you need: ▪ ▪

A careful analysis of the basis of its existing costs advantage, An evaluation of the transferability of these cost advantages to the long-haul market.

The growth of AirAsia is closely associated to Tony Fernandes the CEO of AirAsia. International expansion was financed by its initial public offering (IPO) in October 2004 which raised RM717 million. They want to enter on the market of long-haul distance flight there are few competitors like Malaysia Airlines. AirAsia X (la filiale long courier de Air-Asia) is owned: ▪ ▪ ▪ ▪

16 % by AirAsia (with an option to increase to 30 %) 48 % by Aero Ventures (co-founded to Tony Fernandes) 16 % by Richard Brandson's Virgin Group The remaining 20 % owned by Bahrain-baised Manara Consortium and Japan-based Orix Corporation.

Strategy of AirAsia: ✓ Safety First ✓ High Aircraft Utilization o Highest productivity and lower costs ✓ Low fare, no frills (prix bas sans fioritures) ✓ Streamline operations o All the processes are as simple as possible ✓ Lean Distribution system o Wide and innovative range of distribution channels to make booking and travelling easier ✓ Point to point network o Keep operations simple and costs low But before going in the long-haul market, Fernandes' idea was to encompass three-and-a-half hours' flying time from its hub, because this area encompasses about 500 million people and only a little proportion of this market regularly travels by air. The slogan "Now everyone can fly" takes all his sense.

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LEFEBVRE Loris – BUSINESS STRATEGY To penetrate its target market, AirAsia advertised a lot: ▪ ▪ ▪ ▪

Create an image of safe, reliable and low-cost Airline, TV, print, internet advertising, Time magazine / Maximise the amount of press coverage that it received, Counter-cyclically advertise (after SARS outbreak and after Bali bombings), Sponsorship: AT&T Williams Formula 1 and Manchester United in Premier League.

AirAsia provides a platform for offering services that met a range of travellers need:  Offers AA shuttle bus connecting airports to city centers,  Fernandes also founded Tune Hotels and Tune Money co-branded with AirAsia. Culture and Management style of AirAsia: ➢ Reflect the personality of Tony Fernandes: Informal, friendly and cheerful (create a distinct identity of AirAsia), ➢ Tony Fernandes works few days in the year like his employees, there is a lack of hierarchy, ➢ Maintaining low costs and productivity, ➢ Awarding bonuses to employees (also decrease turnover and increase loyalty with this strategy), ➢ Create a friendly environment of work (sponsoring numerous social events…), ➢ Strives to be honest and transparent, ➢ Fosters a non-discriminatory, meritocratic environment (regardless of their education, race, gender, religion, nationality or age), ➢ Emphasizes maintaining a constant quality of services in every location.

AirAsia's Operation: ▪

Only one Aircraft (Airbus A320): Economies of purchasing, maintenance, training …

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No-frills flights: Minimal customers services and higher number of seats (148 vs 132),

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Sales and Marketing: Direct sales through website and call center only (no commission),

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Outsourcing: Aircraft maintenance and information technologies were outsourced,

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Information Technology: Reduce cost in logistics and inbound activities, ERP,

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Human Resource Management: Mutli-skilled employees (major source of productivity).

AirAsia X venture presented a whole set of new challenges. AirAsia had successfully transferred several of its competitive advantages from AirAsia to AirAsia X. All these elements allowed AirAsia X to become the low-cost operator on most of its routes.

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