AirAsia with lowest flight cost so that everyone

AirAsia is one
of the leading Malaysia airlines company was established in 2001 by Dato’ Tony
Fernandez. AirAsia is bought by Tune Air Sdn Bhd which is a partner business
company. Nowadays, AirAsia has become award winning and largest low-cost
airline in Asia region. The slogan “Now Everyone Can Fly” is set to
offer low-cost, no frill and quality flying services for everyone as their
preferred transport choice. Its affiliate airlines such as AirAsia
Thai, AirAsia Indonesia, AirAsia Philippines and AirAsia India which have 174
airbus and 20 hubs in different country (AirAsia, 2016). AirAsia’s vision is
to be established as the largest low-cost airline that serves 4.4 billion
people with best and affordable flying experience in Asia. Their missions are:

·        
To ensure close relationship between
company and employees as a big family

·        
To make AirAsia recognize as ASEAN
brand

·        
To offer full premiers services
with lowest flight cost so that everyone can fly with AirAsia

·        
Maintain the quality of product
and technology to achieve the goal which is reduce cost

1.0  Situational Analysis

In
this session, five modelling techniques are used to analyse both internal and
external forces affecting AirAsia.

1.1 
Macro-environment (EPISTLE)

An
EPISTLE framework is help to understand all the macro-environment factors
affecting AirAsia.

·        
Economic factors:

The gross domestic product (GDP) of
ASEAN is now forecast at 5.0% in 2017 and 5.1% in 2018. Low inflation and slow
rising international petroleum prices cause the high growth (Bank, 2017).

Figure 1: ASEAN’s Statistic

This presents an opportunities for AirAsia which
is offer cheap flight tickets to attract travellers in Asia. AirAsia is one of low-cost
model airline has successful grown in the Asia-pacific region by understanding majority
of travellers preferred to get tickets at reduced prices especially economic
recession (Subramanian
and Gopalakrishna, 2011). Additionally, now many Asians
affordable to flight to over different destinations due to economic growth in
the region and improved living cost. Hence, AirAsia is generated most of the
revenues from the ticket sales with great e-business strategy (AirAsia, 2016).

Figure 2: AirAsia’s Revenue

·        
Political factors:

It’s difficult for AirAsia when flying
outside Malaysia due to bilateral air rights agreement. This is one of
obstacles that affecting the way of Asia-Pacific carriers. Landing also known
as gateway airport and navigation charges are expensive in key destinations especially
there are no cheaper secondary airports such as Beijing, Hong Kong, Singapore
and Bangkok. This is a significant factor and crisis for AirAsia in country which
is regulated by bilateral agreements (Subramanian
and Gopalakrishna, 2011).

However,
it is also an opportunity for AirAsia open new routers in ASEAN country due to ASEAN Multilateral
Agreement (open skies policy). Besides, Malaysia government support in low-cost carriers by opening Kuala Lumpur
International Airport 2 and significant tax incentives for all Malaysia
airlines.

·        
Information factors:

In AirAsia’s website, the company information
such as financial status or others statistics are
published open to public.
Investor can visit the https://www.airasia.com/my/en/about-us/investor-relations-main.page to get their annual report, quarterly report or others statistics for analyse and decide whether invest the company. With the latest
information, public will know about current financial status and risk factors affecting
AirAsia.

·        
Social Factors:

AirAsia has wide diverse cultural and
languages aspects which is useful to operate in 18 countries. Thus, AirAsia has
opportunity
to find staff especially Malaysian staff
that able speak several languages and cultural diversity to ensure affective managing operation at outside Malaysia like
Indonesia, China and others.

·        
Technological Factors:

AirAsia’s website and AirAsia’s mobile app are
provided for travellers can easily to book air ticketing, hotel, car hire and
travel insurance through online service with e-business
strategy and web-based Customer Relationship Management (AirAsia,
2016). Besides, GO Holiday is an airline
online program where they can easily book holiday packages. Next, AirAsia’s
airbus A320 is more fuel-efficient and extra capacity than older models which
leads to better performance. A great performance of the IT infrastructure will
increase efficiency of airline in different countries in Asia.

·        
Legal Factors:

Legal
considerations for AirAsia increased when enormous growth market in
Asia-pacific region, they need fulfil all the legal requirements and policies like
ASEAN Multilateral Agreement to conduct business operations in various countries (Subramanian and Gopalakrishna,
2011). However, AirAsia
is more emphasis on domestic flights because government does not have a clearly
written policy for commercial air transport in Malaysia. Therefore, AirAsia has
managed to operate cheap flights locally and internationally in past years.

·        
Environmental Factors:

AirAsia has implemented
several environmental protection sets which are necessary to operate and minimise
negative impact of pollution like noise controls and carbon emissions (Shaw, 2012). “No Frills
Service” is introduced to reduce all unnecessary waste. Therefore, they believe
efficient use of existing facilities to minimise airport capital expenditure and
invest more in technologies like aircraft which are more save fuel efficient.

 

1.2 
Competitive Factors (Porter)

Porter’s Five
Forces model is to analyse competition and potential profitable of airline
market.

Figure 3: Porter’s Five Forces of AirAsia

The
bargaining power of buyers is high due to many competitors existing in the
market. Thus, success of industry can influenced by
buyer. Nowadays, customers are high educated and price sensitive. They will do
comparison and choose the specific airline that cost cheaper. Hence, AirAsia has
lowest price and best services which can be a good choice for buyers. Besides,
they can easily switch to other airline that also provides same level service
like Tiger Airway, Firefly and others. However, AirAsia give an image that
always delay the flight. As a business travellers, they will prefer more reliable airline than
AirAsia.

Next, power of supplier is moderate because large number of suppliers available even that is limited to certain
category and high switching cost in airline industry. There
are only two options which are Boeing and Airbus. Besides, maintenance aircraft
and air fuel are costly. To shift from one supplier to another is hard and
moderate bargaining
power of aircraft producers without cause any major alteration in the company.

The entry
barriers is high to enter airline industry like capital requirement and
government legislation because it needs to set up services and difficult to get
a new flight route. Threat of new entrants is high which is provided opportunities for foreign airlines to enter into Asia. With deregulation by Asian country, competition increased due to
growing demand of low-cost full service by budget airline. Besides, government barriers has eliminated to decreases the cost of entering in
the market of Asia (Shaw, 2012). Although
high cost of aircraft, AirAsia success started budget airline business with few
aircrafts to create brand marketing and loyalty in order making investment.

Threat of substitutes
is find a better product or services which can replace the old in order give more
satisfaction and confidence. In airline industry, there are two kinds of
substitutes which is indirect and direct substitutes. Indirect substitutes are
train, bus and others which are most preferred transport in Asia due to the low
cost. Whereas, direct substitutes are other airlines. For example, travellers
want travel in Thailand from KL. They can choose either the cheapest
transportation like rail or pay affordable flight ticket by comparing prices
and reasonable. Overall,
threat of substitute is moderate but in some region is high like India and
China.

Nowadays,
there have some negative and positive trends in every industry. In airline industry,
it has limited customers but high rivalry among existing competitors so growth
rate is not too high. Hence, AirAsia has pressured to offer low-fare flight
tickets to be compete with others. However, customers can easily switch to
another airline like Tiger Airways and Firefly that offer similar level service
with lower price and promotion. From this case, rivalry among existing
competitor is quite high due to high fixed cost (staffs and finance cost), high
exit cost (flight cancellation refund) and low switching cost.

1.3 
Industry Attractiveness (BCG)

Figure 4: BCG of AirAsia

BCG is used
to analysis AirAsia product or service portfolio. Open new route is question
mark because it contains potential risks (legal and regulation) in new country.
Besides, SimCard and online shopping service are newly introduced to customers
and under low market share. AirAsia will invest and adverts their services more
at this stage in order to achieve good quality and profitable.  Additional service like AirAsiaGo, Rokki,
insurance and leasing assets are the star of AirAsia. In 2016, Rokki earned RM503K and insurance earned RM13 million which are under high market growth to
achieve more profitable. The added value services in star is test their value
at market. The star will follow the product life cycle stage, it may be decline
to the dog or mature to the cash cow stage on the BCG.

Next, cash
cow of AirAsia is tickets sales for worldwide route especially Malaysia has which
are the main income source. Merchandise and F also another cash cow that earned
RM87.02 million in 2016. Due to high demand
of customer request, it has high market share which is highest profit to
AirAsia. The dog in AirAsia is ancillary service that
earned RM1.26 billion, which mean the lower down operation cost due to the
“self-check-in” system introduced. Besides, some route has turned down as dog
because AirAsia has stop all flight service to certain country like London. Due
to low profitable and slow market growth, London flight is declined from star
stage.

1.4 
Internal Situational Analysis
(SWOT)

SWOT is used
to analyse the strengths, weakness, opportunities and threats that AirAsia faced.
Major strength of AirAsia is able offers low fare tickets to customers without
compromise the service quality. Besides, low operational and maintenance cost of
AirAsia because they have single type fleets that easy for pilot dispatch and
maintenance it compare with other airlines. AirAsia is effective use of online
reservation systems, no frill and easy check to reduce operational cost. Multi-skilled
management team of AirAsia and great IT infrastructure to help them serve better
in order to achieve goal and service quality in the low-cost market.

Due to low
cost and profit, weakness of AirAsia is provides limited service to customers and
lack of manpower. Therefore, millions of customers and issues like flight delay
need to handle in an amount required time when there is peak time especially at
airport. Besides, a huge amount of investment needed for implementation of
latest technologies.

Next, opportunity
can be increase in the worldwide especially Asia market due to low-cost fare
model of airline and open new routes that favourable through long haul flight.
Additional deal and customer services will prove beneficial and profitability for
the company in order to remain sustainable for future. Due to the high fuel
prices or economic down, some competitors are falling back is one of the
opportunity.

Threats
happen when AirAsia’s competitor is increased in worldwide especially Asia
which will affect the growth and sustainability of airline negatively in future
(Shaw, 2012). From this
case, full service airlines like MAS are start cut costs to compete with AirAsia.
Hence, operation cost of AirAsia is increased to produce value-added services
for consumers. Due to high fuel prices, AirAsia’s profit has decreased. Other
threats like online sales system disruption, terrorism attack and disasters that
affect consumer loyalty and confidence. Besides, the control of aviation
regulation and government policy is increased.

1.5 
Consideration of strategic option
(Ansoff and Porter)

Figure 5: Ansoff matrix

Market
Penetration is implemented in AirAsia by introduced big loyalty program and
mobile application to customer. Free seat sales is a strategy that increase frequency
of flight. In product development, there have various ancillary products and
services introduced like roKKi (board wi-fi), Xcite in flight environment, new
menu of gourmet food and provide private space. Whereas, market development of AirAsia
has its expertise and experience of flight business to expand new hubs in other
country like Japan, India and others. Diversification is implemented when freight
services of AirAsia is expanding to scheduled flights, which is includes cargo,
courier and mail service.

Figure 6: Porter’s generic strategies

The business
strategy of AirAsia is more focus on cost leadership in specific market especially
prices sensitive customers. Therefore, AirAsia provides low fare services which
is lower than other competitors to build up competitive advantage. Besides, operation
effectiveness and outstanding efficiency are characteristics of AirAsia. Besides,
the bigger cost advantages enable AirAsia to compete and provide the lowest
possible price than other competitor to consumers.  Hence, cost is focus as competitive
preference to differentiation in airline industry.

2.0   Strategic
implementation of Information Technology

Yield
Management System (YMS) also known as Revenue Management System that used for AirAsia’s
online seats system. This helps to maximize expected revenue by analysis market
and customer’s behaviour. In order to expand capacity of revenue, fixed number
of available seats are selling at various prices in different period time. Usually,
a reservation that done early or the seat of scheduled flight is selling slow will
be promote at cheaper price than a lately booking or almost full seat of scheduled
flight. Besides, favourable route also will be adjusting price based on amount
of customer demand. The higher demand for the route, the price more expensive.

In past couple
years, Computer Reservation System (CRS) is an integrated web-based booking system
that develop by Navitaire (Navitaire, 2005). This computerized system is using
direct sales engine which is conduct agents activities like hotel booking, car
rental others by using internet access. Hence, it has successful eliminated the
agent’s commissions. Besides, AirAsia has introduced the AirAsiaGo, first ticketless
and advanced boarding passes through online booking.

To increase
effectivity of AirAsia’s operation, a full Enterprise Resource Planning System
(ERP) system is implemented to manage and integrate important areas for certain
process stage. For example, annual report is based on analysis of finance, inventory
sale, human resource and others areas. With all IT strategies implementations,
AirAsia is operated as low-cost model by maximizing revenue (YMS) and reducing operation
costs (CRS, ERP). From the cost saving, AirAsia able reduced tickets price,
discounts and others services for customers. In future, advanced planning and
scheduling (APS) system is a potential strategy that can implement for tracking
costs based on the operation activities and allocates costs based on resources
demand.

3.0 
Identification and Description of
Security Threat

Major security
threat that happed commonly in AirAsia is phishing scam which is known as cyber
fraud. Nowadays, there have several kinds of phishing scam that using AirAsia
brand can be found in email, WhatsApp, Facebook, Twitter and others. As we know
that, phishing is the way of identical thefts want to steal user sensitive
information like personal (name, address and other) and bank information (card
detail and other) through email and instant message. Beside, phishing occurs
when user enter a fake website or application that request user enter
information.

There have six
type of phishing attacks can be identified which are Deceptive Phishing,
Malware-Based Phishing, DNS-Based Phishing (“Pharming”),
Content-Injection Phishing, Man-in-the-Middle Phishing, and Search Engine
Phishing (Associates, 2007). Deceptive Phishing
is the common way when an email message is sent to user ask for verify the
information. Next, Malware-Based Phishing is about scams that involve a
malicious software in PC. Some hackers using a fake company’s domain name and
host’s files to obtain user visit that fake website is known as pharming.

In additional,
Content-Injection Phishing is the content of a site that replaced with false
content to mislead the user enter confidential information. Man-in-the-Middle
Phishing is the harder way to detect when hacker record and collect the
information that user enter with the purpose of sell or use it. Last, Search
Engine Phishing is phishers create fake attractive offers or websites that
indexed with search engines to attract user click in.

To prevent
phishing, it has several characterise can be observe which are contains unknown
attachments that might have malware and phony links like www.182.11.22.2.com. Besides, we need to
beware those mail or others that request need to submit confidential
information like card number and others especially those urgent mail.

4.0 
Statistical Risk Analysis of
Security Threat

AirAsia is focus
on internet service which are online sales system, feedback system, help centre
and other that can be compromised by cyber intrusion. The higher integrity of
information and data storage of business, the higher risk can be occurs
security threats for AirAsia. The potential risks are analysed and given the
impact score in table.

Threat/incidents

Criterion
1

Criterion
2

Criterion
3

Weighted
Impact
Score

Impact

Revenue

Profit

Reputation

Custom
Weight

30

40

30

100

Webpage /
system phishing

0.3

0.4

0.4

37

Social
media scam

0.2

0.4

0.4

34

Fraudulent
emails and instant messages

0.2

0.2

0.3

25

Table
1: IT threat of the Phishing Problem

The automated
ticket touts manipulating our booking engine is the threat of webpage or system
phishing. Besides, some fake websites or offers using AirAsia brand to attract
customer to view it. Phishing is happened because customer mislead and
misdirect to enter personal information.

Next, social
media scam that are recently seen in our life. Social media like WhatsApp,
Facebook, Twitter and others that usually contain fake URL or news to ensure
customer open and view it. From the moment when user click in, the information
might be steal by hidden method. For example, last year the Facebook post about
AirAsia is offer free tickets to public through an
online survey. In this, there some victims might be
involve this and get steal their information.

Last, fraudulent
emails and instant messages are the traditional way of phishing. Normally, it
contains urgent information need user to verify with links or attachments. As
an example, the Japan Airlines (JAL) has been hacked and obtained around 750K
member details. In order to stop this, they blocked all the external system and
found out all started from a phishing link in fraud email which causes JAL loss
millions of Yens in 2014.

6.0 Conclusion and Recommendations

Conclusion, AirAsia
has good strategies in marketing and operation to become the best and LCC in
Asia which is allows everyone can fly around the world. AirAsia can understand
what are their strength and weakness to operate it business in effective way.
In order to earn highest profitability, a good cost leadership style of AirAsia
has successful offered low-cost ticket to customer and reduced operation cost.
Advanced planning and scheduling (APS) system is one of the strategy can be
implement for the future of AirAsia to increase company performance and
maintain service quality. This strategy can help AirAsia reduce the cost and
allocate the cost well for each resources. Beside, effective management team by
hire different region and skilled of staff also one of the strength of AirAsia
that makes its business run smoothly outside Malaysia.

The
IT threat of the AirAsia can
train worker or hire centralised team that know IT policies and procedure to prevent the risk happen. The
responsible of team is regularly reviews and monitors all
security threats globally. The duties such as check
the webpage or system is embedded another virus or another IT threat, such as
the phishing scam same as other sources like twitter, Facebook and another
social media. Besides, they need publish a public notice to inform their
customer with through AirAsia website or social media to alert them. Specialised tools are implemented to mitigate the risk of automated
ticket touts. A campaign of awareness on e-mail phishing can introduce to
public attend it. Lastly, AirAsia must keep
attention on latest IT threat issues and always backup data. Most important is a
secure system that let customers use it with confidence.