AIR ASIA Business Plan PDF

Preview

Summary

Download AIR ASIA Business Plan PDF

Description

CHAPTER ONE : INTRODUCTION

1.1 OBJECTIVE The objective of company analysis of Air Asia Berhad is to diagnose and identify every problem that the company has or going to face in few years ahead. These have been associated with all areas such as marketing management, operation, strategy management, financial management area, and others. The scopes of business project include of management of the company, Malaysian economic analysis over 10 years, industry analysis, market feasibility, five year financial analysis, and strategy company analysis.

By closely examined every scopes of the company, it provides a company problematic area identification for the company analyst. Based on the problem identification, it is studied that competitive advantages of Air Asia as a market leader in airline services

This problematic area identification then being studied and several solutions are being suggested. There are many promising ways suggested such as solution using the TOWS Matrix, Balanced Scorecard approach, Enterprise Resource Planning, Supply Chain Management, and Business Intelligence. These solutions are suggested to counter and ensure that Air Asia will remain as leading airlines services by maintaining its competitive advantages.

1

CHAPTER ONE : INTRODUCTION

1.2 OVERVIEW OF AIR ASIA AirAsia originally was founded by government and on 2 December 2001 was bought by Tony Fernandez. AirAsia was established in year 1993. AirAsia has travel around the earth and ascend to become the world’s best in year 2001. AirAsia continues to spread out the way for low-cost aviation through the innovation, efficient and passionate approach to business with a route a network that extent through over 20 countries.

There are some companies which link with AirAsia such as AirAsia X, Thai AirAsia, Philippines’ Air Asia Inc., Air Asia Japan and Indonesia.

In addition, for the vision part in AirAsia, AirAsia aims 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. While for the mission of AirAsia, AirAsia wants to be the best airline company to work whereby employees are treated as part of the big family. Besides, Air Asia try to maintain the lowest cost hence everyone can fly with AirAsia. Highest quality product, embracing technology to lower the cost and improvement in service levels will be maintained by the AirAsia airline also. Lastly, create a globally recognized ASEAN brand will be the mission part of Air Asia.

In the values part, AirAsia will implement trough the following key strategies which are:  Safety  Low fare, no frills  Lean distribution system  Point to point network  High aircraft utilization

2

CHAPTER TWO : BACKGROUND OF COMPANY

2.1 HISTORY OF AIR ASIA Air Asia is a low cost airline based in Kuala Lumpur, Malaysia. It operates scheduled domestic and international flights and is Asia’s largest low fare, no frills airlines. Air Asia pioneered low cost travelling in Asia. It is also the first airline in the region to implement fully ticketless travel and unassigned seats. Its main base is the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai Air Asia and Indonesia Air Asia fly from Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively.

The airlines established in 1993 and started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB – Hicom. On December 2, 2001 the heavily – indebted airlines was purchased by the former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $ 0.29).

Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day.

Air Asia currently is the main customer of the Airbus A 320. The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. The first unit of the plane arrived on 8 December, 2005.

3

CHAPTER TWO : BACKGROUND OF COMPANY

Through the corporate philosophy of “Now Everyone Can Fly”, AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. AirAsia creates values through the following vision and mission:

2.2 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.

2.3 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

2.4 BASIC PRINCIPLE The founding principle of AirAsia is to be aware at all times that we are engaged in a business where the responsibility of peoples’ lives is in our hands. We safeguard that responsibility through the safety and quality of our operations. We operate with the highest level of integrity, striving to exceed industry standards in a proactive manner while doing so with respect to others and the environment.

4

CHAPTER TWO : BACKGROUND OF COMPANY

2.5 SAFETY VALUES The safety values of AirAsia are:  Provide a product with safety and quality as our first goals.  Do our job with the highest level of integrity.  Prepare our employees through first-class training.  Provide equipment that is well maintained.  Select contractors, vendors and suppliers who meet our values.  Value oversight from regulators and other organizations that enhance our system through checks and balances.  Embed an ethical culture by maintaining openness with regard to safety and quality.  Embed a continuous improvement ethos by learning from aviation industry experiences.  Maintain a high level of environmental consideration in all of our activities. This basic foundation for doing business allows us the pleasure of serving our guests.

5

CHAPTER TWO : BACKGROUND OF COMPANY

2.6 VALUE ADDED SERVICES On 15 May 2007, a service named „Xpress Boarding ‟ was launched, enabling passengers to get priority boarding for a fee. This product is available in all hubs including Thai Air Asia and Indonesia Air Asia. On Air Asia X flights, passengers are given a choice of purchasing extra baggage weight, meals, and comfort kit and seat selection all with nominal fees. On 26 November 2008,

Air Asia has launched its Air Asia X London flights to London Stanstead Airport. AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand, and Indonesia.

Today, AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies. AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business.

6

CHAPTER TWO : BACKGROUND OF COMPANY

2.7 BUSINESS STRATEGY Air Asia wants to be the lowest short haul airline in every market it goes in. To achieve the goal, it has some strategies such as lean cost structure, different ways of promotion, keeping safety, satisfying guests, and developing human resources. Air Asia always tries to keep the operations simple and efficient to keep the costs low, for example by simple and efficient online ticket booking. Another Air Asia’s way to save costs is not to provide food and drinks on the plane, as the goal of the airline is just to ‘move someone from one to another place’ cheaply. It sells food, snacks and beverages on the plane, so customers who want to eat or drink can just buy what they want. By implementing this strategy, Air Asia can gain profit from the sales of the food and beverages because it sells the products for higher price than supermarket or wholesaler price. Air Asia also tries to keep the cost low by recruiting only numbers of workers needed and selecting only capable and hard workers, so each worker will have works to do and the company does not have to pay workers who do not work efficiently. The company also gives multiple tasks to some of the employees, for example Air Asia does not hire cleaners to clean used planes that stop in airports. Instead, the stewardess or stewards of the planes have to clean the used plane. So, other than saving another amount of money, it also can make maximum use of the human resources available. Air Asia also maintains the safety of the airplanes by complying with the highest International Aviation Safety Standards and practices. To guarantee the safety of the airplane, all Air Asia‘s airplanes machines are taken care by GE Engine Service since July 2002 for 5 years.

7

CHAPTER TWO : BACKGROUND OF COMPANY

For airplanes that are parked in the airport, airline companies have to pay hourly rated fare. In addition, to save money from paying airplanes parking fare. Hence, air Asia tries to keep flight schedule efficient and one time. The planes only stops for approximately 25 minutes for cleaning, so every time the airplanes stop in the airport, the planes will be cleaned before the passengers come into the plane, and the airplanes will take off right away. Specifically, Air Asia realized that satisfying customers is the key for long term success and that is why it always tries to satisfy its customers by flying on time to be friendly to every air Asia customers. 90 percentages of air Asia Indonesia’s flight in May 2007 flied on time.

8

CHAPTER TWO : BACKGROUND OF COMPANY

2.8 CORPORATE STRUCTURE

9

CHAPTER TWO : BACKGROUND OF COMPANY

2.9 ORGANIZATIONAL STRUCTURE

10

CHAPTER TWO : BACKGROUND OF COMPANY

2.10 BUSINESS CANVAS MODEL Air Asia has introduced business canvas model and they has implemented Business Model Low Cost Carrier (LCC) and it is a first model in Asia that has been created by Alex Osterwalder. Their concept is based on the idea that people would fly a lot more often if they get an affordable fare. LCC make air travel the most simple, convenient and inexpensive form of transportation in the world so that they can move maximum number of passengers at the minimum of cost. Its mean Low Airfare is Value Proposition of LCC.

11

CHAPTER TWO : BACKGROUND OF COMPANY

Low Airfare will be match only for specific customer segment. Most of the businessman or people in leisure trip will prefer to flight with Full Service Airline. The right customer segment of LCC is Price-Conscious Traveler, a traveler who seek best or lowest price, because they only want to simple move from a place to another and have no tight time for their traveling. They will only flying if they get cheap or may be free ticket.

LCC will keep cost of their channel and their customer relation as simple as possible and will cover all their customers. Air Asia has choosing Internet as the most cost effective channel that can attract more customers to choose Air Asia. Passengers will book flight using their laptop, tablet or smartphone and they can pay with credit card and then just print at home their eticket before to go. More than 65% of their sales are electronic ticket and done via Airasia.com.

To support website, Air Asia provide Call Centre and to get close with their customer they open Sales Office on some big cities to let their customers to come and buy with them by face to face. Since Air Asia has provided the basic service of flying so that they will get Low Airfare from more and more passengers as their revenue stream. Beside that they also get Additional service fee from service such as food, drinks, over baggage, choosing seat in advance and so on.

Air Asia’s Key Resources is Single Type Aircraf, because their pilots, flight attendants, mechanics and operations personnel are specialized in a single type of aircraft, which means there is no need for costly re-training of staff, for maintaining a stock with parts for different types of aircraft, for knowledge and skills in order to operate and maintain different types of aircraft. Flight attendants responsible not only to serve customer, but also they also need to clean up of flight interior. Internet Transaction Platform is the key to effective channel cost.

12

CHAPTER TWO : BACKGROUND OF COMPANY

Key Activities of Low Cost Carrier is to high utilize their aircraft which means that their aircraft more flying activities than just parking. Air Asia first flight will be starting from on early morning and their last flight will end on late midnight and fast turnaround. To keep cost from arrangement connecting flight, labeling luggage, LCC only provide point-to-point route. No-Frills on board and Single Class Seating is keep airline cost with simple activities. Beyond internal resources and activities, LCC have to make a partner with secondary airport so they can fly to and from airports that cheaper than major airports and they are also a lot less congested and “turnaround times” for aircraft are a lot shorter.

Revenue streams Cost structure Key partners

CHAPTER THREE : MACRO ANALYSIS 13

3.1 INTRODUCTION The global airline industry continues to grow rapidly, but consistent and robust profitability is elusive. Measured by revenue, the industry has doubled over the past decade, from US$369 billion in 2004 to a projected $746 billion in 2014, according to the International Air Transport Association (IATA). Much of that growth has been driven by low-cost carriers (LCCs), which now control some 25 percent of the worldwide market and which have been expanding rapidly in emerging markets; growth also came from continued gains by carriers in developed markets, the IATA reported. Yet profit margins are razor thin, less than 3 percent overall. In the commercial aviation sector, just about every player in the value chain which airports, airplane manufacturers, jet engine makers, travel agents, and service companies, to name a few are turns a tidy profit. Yet it’s one of the enduring ironies of the industry that the companies that actually move passengers from one place to another, the most crucial link in the chain, struggle to break even. That is largely due to the complex nature of the business, manifested in part by the significant degree of regulation (which minimizes consolidation), and the vulnerability of airlines to exogenous events that happen with great regularity, such as security concerns, volcanic eruptions (independent.co.uk), and infectious diseases (reuters.com). But ongoing price pressure is also a factor; the airline industry is one of the few sectors that have seen prices fall for decades. Since the 1950s, airline yields (defined as the average fare paid by a passenger per kilometer) have consistently dropped.

CHAPTER THREE : MACRO ANALYSIS 14

Given these unique circumstances, airlines must continue to focus on top-line growth because their limited profitability depends almost solely on revenue gains, while increasing productivity in order to shore up and perhaps even increase margins. The way individual commercial airlines react to and navigate several trends playing out across the globe will determine carrier performance in the coming years.

CHAPTER THREE : MACRO ANALYSIS 15

3.2 GROSS DOMESTIC PRODUCT The gross domestic product (GDP) measures of national income and output for a given country's economy. The gross domestic product (GDP) is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time.

FIGURE ONE: MALAYSIA GDP

The Gross Domestic Product (GDP) in Malaysia was worth 326.93 billion US dollars in 2014. The GDP value of Malaysia represents 0.53 percent of the world economy. GDP in Malaysia averaged 74.84 USD Billion from 1960 until 2014, reaching an all-time high of 326.93 USD Billion in 2014 and a record low of 2.42 USD Billion in 1961. GDP in Malaysia is reported by the World Bank Group.

CHAPTER THREE : MACRO ANALYSIS 16

3.21 ECONOMY CONTINUES TO EXPAND 2013

2013 Q1

Q2

2014

Q3

Q4

2014 Q1

Q2

2015

Q3

Q4

GDP

4.7

AGRICULTURE

1.9

6.7

0.1

MINING

1.2

-1.2

4.8

2

MANUFACTURING

3.4

0.6

3.7

4.3

5

6.2

7

CONSTRUCTION

10.8

13.3

9.9

10.4

10

11.8

19.3

10

9.7

8.8

9.7

6

6.1

5.2

6

6.5

6.6

6.8

6.4

6.5

6.6

6.4

SERVICES

4.3

4.6

4.9 1.3

5 0.1

6 2.1

-0.6

3.3

6.3 2.6 -0.1

6.5 6.7 2.1 7.3

5.6

3.4

5.7

5.6

-3.7

-4.7

1.4

9.5

9.6

5.3

5.4

5.6

FIGURE TWO: GDP SUPPLY SIDE % annual changes

The Malaysian economy remained resilient to record a steady growth of 5.6% in the first quarter of 2015 (Q4 2014: 5.7%), despite uncertainties in the external environment. Growth was supported by strong domestic economic activity, particularly private consumption and investment. On the supply side, the services sector sustained a growth of 6.4% (Q4 2014: 6.6%) supported mainly by wholesale and retail trade, information and communication as well as business services subsectors. Meanwhile, growth in the manufacturing sector further strengthened by 5.6% (Q4 2014: 5.4%), boosted by better performance of export-oriented industries, particularly the electrical and electronics (E&E) as well as transport equipment subsectors.

CHAPTER THREE : MACRO ANALYSIS

17

The construction sector grew at a stronger pace of 9.7% (Q4 2014: 8.8%) on account of higher activity in the non-residential and residential subsectors. Similarly, the mining and quarrying sector recorded a robust growth of 9.6% (Q4 2014: 9.5%) following higher production of crude oil. However, the agriculture sector declined further by 4.7% (Q4 2014: -3.7%) due to lower production of oil palm as well as forestry and logging activities.

CHAPTER THREE : MACRO ANALYSIS

18

3.22 STRONG DOMESTIC ECONOMIC ACTIVITY 2013

2014

2013