AirAsia is the airline industry started based on the low cost carrier (LCC) concept in Malaysia. The low cost concept is introduced in the year of 2001 with the belief that “Now Everyone Can Fly” by Tony Fernandes. AirAsia was first established in 1993 and began its operation on 18 November 1996. In the year 2001, Anthony Fernandes (or known as Tony Fernandes) bought the airline which is suffering a loss. It was re-established as the low cost carrier after the bought over. AirAsia’s vision is to be the largest low cost airline in Asia and serve the 3 billion people who are currently underserved with poor connectivity and high fares. Their low fare model is made possible through the implementation of the key strategies including Safety First, High Aircraft Utilisation, Low Fare, No Frills, Streamline Operations, Lean Distribution System and Point to Point Network. Since its re-establishment, AirAsia had won several rewards and one of the most significant awards is being the World’s Best Low Cost Airline for 4 consecutive years (AirAsia 2012). The Low budget fares are structured in the way that all fares are quoted one way to allow customers the flexibility to choose where and when they would like to fly. It also adopts a simplistic fare structure based on the time value relationship for seats. The earlier a person book the ticket, the cheaper the fare will be. The first few tiers are targeted to value conscious passengers so that they can get extremely cheap tickets if they book earlier. Once the revenue collected is sufficient to cover all the operational cost of the flight in the mid tier bucket, the system will then move on to the top tier fare bucket where the prices began to bring profits to the organization (AirAsia 2012).
Diagram 1: Low Cost Structure
Tony Fernandes was able to transform an airline which is in debt until it success and able to generate profits for the company after the re-establishment in the year 2001. Besides, it also allows the company to expand and start more services in connection with other countries besides Malaysia. AirAsia X is also established in 2007 which introduces the low cost and also for long haul segments (AirAsia 2012).
Critical Analysis/ Current Problems
Organisation Structure is the degree of complexity, formalization and centralization in an organisation(Robbins & Barnwell 2006). We can see that AirAsia is having the organization structure as its foundation for its operations. Complexity can be defined as the level of differentiation that exists within an organization. Complexity is further categorised into Horizontal Differentiation, Vertical Differentiation and also Spatial Differentiation (Robbins & Barnwell 2006). Horizontal differentiation is the degree of differentiation among unit based on the orientation of members, the nature of the tasks they perform, and their education and training (Robbins & Barnwell 2006). AirAsia’s staff has been divided into several functional departments including Operations & Planning, Business Development, Quality & Safety, Engineering, IT & e-Commerce, Legal & Services, Communications, Finance, Human resources and Airport & Planning. Each Department has its own responsibilities to make sure the operations going on smoothly with every department’s cooperation. The Chief Executive Officer and his Deputy are in charge of managing all the departments. Formalisation is the degree to which jobs and procedures are standardized. AirAsia promotes high degree of formalization provides a better and clear description of the job of the employees (Robbins & Barnwell 2006). It aims to set guidance for the employees to make judgments and decisions in their own field of work. For instance, the finance department is fully subscribe to their work on the money matters and does not have to worry about the engineer department’s technical problems. Every department plays its role in the organization. Rules...
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