Company Background and Analysis of Airasia

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Company Background and analysis of AirAsia

This report conducts an analysis of AirAsia, the world’s Lowest Cost Airline. AirAsia is a Malaysian low cost airline. AirAsia was found in 1993 and it started its operations from 18 Nov 1996. It was established initially by DRB-Hicom, a government owned- conglomerate. On 2 December 2001, the heavily- indebted airline was purchased Tony Fernandes former Time Warner Executive.

Tony was inspired by the Low-Cost Carrier business model of Southwest Airlines and proposed to start a Low-Cost Carrier but the government refused to issue a new license and requested Tony to buy an existing airline. Hence Tune Air set up by Tony and his investors bought Air Asia for a token sum of RM1.

Before 2001. AirAsia failed to attract enough passengers from Malaysia Airline to establish its own stand in the market. The turning point for AirAsia was in 2001 subsequent to its purchase by Tony Fernandes. Tony Fernandes enrolled low-cost airline experts to restructure the business model of AirAsia. He invited Connor McCarthy, formerly the director of the group operation Ryanair, to join his executive team. In the late 2001, AirAsia airline was re-launched in Malaysia as trendy, no-frills operation with three B737 aircraft as a lowfare, low-cost domestic airline.

AirAsia’s simple slogan “Now Everyone Can Fly” has won the heart of customer’s. AirAsia’s profit for the second quarter (i.e.,ending 31 december 2004) was reported RM 44.4 million, which is a 323 % increase over the previous quarter(AirAsia, 2005).

Mission and Vision of AirAsia

The vision of AirAsia is to be the low cost Asian airline to reach out people with poor connectivity and high fares.

The mission of AirAsia is as:

To be the best company to work for where emplyess are treated as part of big family.

Create a globally recognized ASEAN brand.

To establish lowest cost so that everyone can afford to fly with AirAsia.

Adopt technology to reduce cost and enhance service levels.

AirAsia’s Buisness Strategy

AirAsia has established its low fare business model through implementation of the following key strategies:

Safety: AirAsia is partnering with the world’s most renowned maintenance providers to comply with the world operations to ensure passenger’s safety.

To guarantee the safety of the airplanes, the machines are taken care by GE Engine Service since july 2002 for 5 years. AirAsia has also partenered with Volvo Aero to provide plane structure and machine spare parts for all Air Asia planes.( AirAsia.com,2008).

graph 1 source: airasia.com

High Aircraft utilization: implementing the region’s fastest turnaround time at only 25 minutes to assure lower costs and higher productivity.

Airline companies have to pay hourly rates fare for airplanes parked at the airport. To reduce costs AirAsia’s flights are schedules to be on time stopping for approximately 25 minutes for airplanes maintance such cleaning.

Customer satisfaction is a key factor for long term success. Hence AirAsia tries to fly planes on time and be friendly to every AirAsia cutomer. It is reported that AirAsia Indonesia’s flights in May 2007 fled on time(AirAsia.com, 2010)

Low fare without compromising on quality and services.

The goal of AirAsia is to move someone from one to another place at low cost. Hence it does not provide food and drinks on the plane. The airline sells food, snacks and bevarages on the plane so the customers who want to eat or drink can just buy what they want. Hence AirAsia can gain profit from the sales of the food and beverages bought at a whole sale price.

Streamline operations making processes as simple as possible.

Example: simple and efficient online ticket booking. According to an ex employee of Awair- the airline company bought by AirAsia, the tickets booked online can be printed by the customers or the customers can just remember the booking...
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