Introduction of AirAsia Berhad

AirAsia Berhad (MYX: 5099) is a Malaysian low-cost airline headquartered near Kuala
Lumpur, Malaysia. AirAsia group operates scheduled domestic and international flights
to 100 destinations spanning 22 countries. Its main hub is klia2, the low-cost carrier
terminal at Kuala Lumpur International Airport (KLIA) in Sepang, Selangor, Malaysia: all
its Kuala Lumpur departures and arrivals operate through this terminal. Its affiliate
airlines Thai AirAsia, Indonesia AirAsia, Philippines AirAsia,AirAsia Zest, 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 subsidiary, AirAsia X, focuses on long-haul routes. AirAsia's
registered office is in Petaling Jaya, Selangor while its head office is at Kuala Lumpur
International Airport.

Founded 20 December 1993

Commenced 16 November 1996

operations

Hubs Kuala Lumpur International Airport

Destinations 68 (excluding subsidiaries)

Company Now Everyone Can Fly
slogan
Parent Tune Group
company
Headquarters Low cost carrier terminal Sepang, Selangor, Malaysia
Key people  Tony Fernandes, Co-founder and CEO of AirAsia Group
 Aireen Omar, CEO[2]
Employees +10,000 (2014)
Website www.airasia.com

AirAsia at a Glance
AirAsia Berhad is part of the AirAsia Group, a world-famous low cost airline that
operates extensive networks both domestically and internationally. AirAsia pioneered
low cost airfares in Asia and is now currently the largest low fare, no-frills airline in Asia.
It is also one of the largest airlines in all of Asia in terms of passengers carried. AirAsia
has also been voted the World‟s Best Low Cost Airline in 2009 and 2010. AirAsia Berhad
is currently based in the Low Cost Carrier Terminal (LCCT), Kuala Lumpur International
Airport (KLIA), Sepang. Its associate airline - AirAsiaX, is also located at the LCCT and
shares operational facilities with AirAsia Berhad.

A Brief History of AirAsia

The airline was established by a Malaysian conglomerate in 1993 and commenced

operations in 1996. In December 2001, with the airline heavily in debt, AirAsia was
purchased by Tony Fernandes of Tune Air Sdn. Bhd. for the price of RM1. As part of the
purchase, Tony also took up the RM40million debt. Under the leadership of Tony
Fernandes, the airline was 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 maiden 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. In 2011, we are setting up
another AirAsia hub in the Philippines and are well on the way in setting up other
similar operations elsewhere in the region soon after.

What Air Asia want to achieve

Our vision is to be the largest low cost airline in Asia so that we can provide a low cost
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.

Mission
To be the top company to work in, where employees are treated like family

To create a globally recognized ASEAN brand

To attain the lowest cost of any airline, so that everyone can fly with us
To maintain the highest quality, to embrace technology, cost reduction, elevate
Service levels and provide our guests with a “WOW” experience

Why Cost Efficiency?

Keeping costs and fares low is how we make “Now Everyone Can Fly´a reality. Air Asia
attacks inefficiencies, curb wastage, push for the best possible value in their spending
and maintaining this throughout the corporation relentlessly is how AirAsia can become
the most efficient airline in the world. Attacking costs is something AirAsia do every
day. The better they attack costs, the more competitive the fares become and more
opportunities for growth will be easily attainable.

Market Players

Malaysia has a handful of major, domestically registered airlines – on the LCC side,
there is AirAsia, and its sister, AirAsia X. Then there is the new,
full-service market entrant, Malindo Air. There are currently more
than 10 LCC brands in the region – including Singapore’s Tigerair andScoot;
Indonesia’s Citilink and Lion Air; the Philippines’ Zest; Thailand’s Nok Air and Orient
Thai; Vietnam’s VietJet, and Australia’s Jetstar together with its subsidiaries/affiliates in
other countries. With the SAM, competition will only intensify.

Malindo Air is an airline based in Malaysia, headquartered in Petaling Jaya. The

name Malindo is derived from the names of respective
countries: Malaysia and Indonesia.
Malaysian Airlines: MAS also owns MAS Wings, which operates domestic flights in
eastern Malaysia, and MAS Kargo, the national cargo carrier. MAS itself is listed on the
KL exchange, with a majority shareholding held by Penerbangan Malaysia, a subsidiary
of the government

Tiger Air: Tiger Airways Singapore Pte Ltd, operating as Tigerair, is a budget
airline headquartered in Singapore.

PT Lion Mentari Airlines, operating as Lion Air, is an Indonesian low-cost carrier.

Based in Jakarta, Indonesia, Lion Air is the country's largest privately-run airline, and
the second largest airline, flying to 79 destinations in
Indonesia, Singapore, Malaysia,Vietnam and Saudi Arabia, as well as charter routes
to China and Hong Kong
PROBLEMS OF AIRASIA

Although Air Asia has been performing since 1996 but they are new in Bangladesh. Air
Asia has emerged in Bangladesh once in 2008 and again in 2015. Air Asia has a lot to
offer as low cost airlines but still they have lack of market share due to their less
advertisement and promotional activities.

Intense competition

Southeast Asia has become an intently competitive market, forcing AirAsia X to cut
fares as it rapidly added capacity. While market conditions should improve at least
slightly some competitors are likely to continue to respond aggressively.
AirAsia X’s network low-cost model, with a heavy focus on transit traffic, has the
potential to shake up several medium-haul markets which until now have only been
served by full-service carriers. As a result AirAsia X has the potential to stir up the pot
across Asia-Pacific. Often-bigger competitors will naturally try to fight off AirAsia X as its
model poses a threat to their own survival.

Lack of profitability

AirAsia X has been unprofitable three out of the last four years (2011, 2013 and 2014).
Most recently it has been unprofitable in three consecutive quarters including a MYR129
million (USD 40 million) net loss in 2Q2014, which was over three times the loss from
2Q2013. The group’s financials improved significantly following the early 2012
network restructuring, which saw AirAsia X pull out of several unprofitable markets
including Christchurch, Paris, London, Delhi and Mumbai. Without the restructuring it is
unlikely AirAsia X would have been able to complete an initial public offering in Jul-
2013. But since the IPO the group has struggled financially.

Point to Point Sale

As Low cost carrier brands grow, charging extra for food and entertainment may be
acceptable on short or medium haul routes but many consumers see it as unfair on long
haul routes so strategic changes need to be made if they really do want to build brands.

Lack of Social Engagement

Building a brand in the consumer economy is more than the CEO and Chairman
tweeting all day. It requires a strategic plan with processes to deal with reputation
issues and a willingness to engage with consumers who raise positive AND negative
issues on and off line. Brands are defined by the economic, experiential and emotional
value they deliver to customers. Fail on any of these counts and your brand will
struggle. The disgruntled Face book customer and customers like those in
this article have undone a lot of the work AirAsia has done to build a people friendly
brand.

All in one Fare

According to the ACCC, AirAsia’s website did not include all taxes, duties, fees and other
mandatory charges when advertising fares on certain routes from the Gold Coast,
Melbourne and Perth. In Australia if a company wishes to advertise part of a price, it
must also advertise one total price for the product or service. When the passengers find
the fare online and then purchase the ticket they find that there is a huge fare
difference which leads them to frustration about the company.

SOLUTIONS:

All in One Fare: Air Asia can include all of its fare to the first page so that people
don’t get confused about the fare. Just like any other airlines where the face of the wed
page shows all fare, tax and meal cost separately Air Asia should come up with that
kind of improved webpage design.

Social Media Coverage: A Face book page with direct access to a community director
and suggestions for alternative routes or airlines and how to go about booking flights
would have been a tactical initiative to show the airline cared. I definitely think that
engaging customers through social media platforms is a must in today’s world. Or if you
don’t want to do anything with social media, then don’t do anything. Half baked
solutions don’t work, like putting up a Facebook page (and a wall) which makes people
feel you want to interact with them and then shutting them down when a post is not
flattering

Low costs: AirAsia X has the lowest unit costs in the industry AirAsia X has the
lowest unit costs in the industry. It is the only airline in the world with CASK below
USD4 cents. This is aided by AirAsia X operating longer average stage lengths (about
5,000km) than other LCCs. AirAsia X’s shortest route is three and a half hours. Other
players in the medium/long-haul segment are not publicly traded or do not provide
separate figures for narrow body and wide body operations. But AirAsia X primarily
competes against Asian full service carriers which have unit costs that are two to four
times higher. AirAsia X is the only LCC on all 22 of its routes – although it does compete
against other LCC groups on several connecting city pairs.

Transit traffic: AirAsia X has been able to grow transit traffic to record levels. Over
50% of AirAsia X’s traffic now connects onto other AirAsia X or AirAsia flights. It has
pioneered the network LCC model and is almost certainly the only LCC with such a high
portion of transit traffic. The group’s success at more than doubling its portion of transit
traffic in only three years has enabled rapid expansion. The local Malaysian market
would have never been able to absorb the growth over the last year. Total passenger
traffic at AirAsia X was up 23% in 2013 to 3.2 million, driven by 39% growth in
2H2013. Passenger traffic was up another 40% in 1H2014 to 2.1 million.
New route expansion: At present, fuel costs account for 50% of AirAsia X's
operation. Consequently, AirAsia X gains a disproportionate cost improvement as fuel
prices fall, both giving the airline an advantage when competing head to head with full
service airlines and in terms of the range that can be flown commercially. As a rough
benchmark, five years ago when oil was priced around USD70 per barrel, AirAsia X not
only operated European services with the fuel-hungry A340, but was also planning
service to the US west coast.

Increase range of network: Oil prices have tended downwards recently, to around
12 month lows, although they remain above USD90 per barrel; jet fuel has fallen in
sync. A combination of more benign fuel prices and new fuel-efficient A330neos would
greatly increase AirAsia X's range of network options. It would also increase the margin
between the LCC and its full service competitors.