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BACHELOR IN
AVIATION LOGISTICS BUSINESS MANAGEMENT
SCHOOL OF MANAGEMENT
MAE FAH LUANG UNIVERSITY
ACADEMICS YEAR 2016
©COPYRIGHT BY MAE FAH LUANG UNIVERSITY
Nattawadee Maneerat 5731210087
Thidaphon Saenngkaeo 5731210111
Phatcharaporn Thaviset 5731210146
Patcharaphorn Rapeekul 5731210147
Phetphailin Yammaneechai 5731210159
Manlika Udta 5731210180
Woraparch Meethum 5731210194
Wisaruta Chaowlaka 5731210201
Wissuta Teerageerayut 5731210202
Saminee Ngandee 5731210219
Areewan Meksa 5731210255
Kridichote Inunchote 5831210202
TThe criteria behind the success of AirAsia
I
Abstract
A low cost airline is airline that offer lower fare it make very popular to
passenger and new airline come to this market. AirAsia is one of the low cost carriers
since then AirAsia is named the World’s Best Low-Cost airline for the 8th year
running.
The objective of this research are to know about key-success and ways to be the
best low cost airline, understand how AirAsia operating and to know about information
how AirAsia can operate low cost that becomes successful in many countries. This
research will be under the interview 4 experts analyzed by brainstorming method and
qualitative method to accomplish the objective. The criteria behind the success of
AirAsia have 5 factors. The first one is machine. AirAsia use one type of aircraft and
have good aircraft design. The second is supportive. They have partnership in hotel, car
rental and tour agency moreover they have financial support from shareholders. Next,
they have good staff management in training and reduce cost of staff. The fourth is
environment. They have a good organization culture. And the last factor is methods that
are good service at low cost carriers and variety of service, variant of marketing in
promotion and advertising, and efficient operation. The researcher know the exactly
factors that make AirAsia become the best low cost carriers.
I
II
ACKNOWLEDGEMENT
The researchers would like to show respect for continued support throughout this
course of research. The research is supported by Professor Samatthachai Yamsa-ard.
We are very pleased for his teaching and his help.
We are honored to receive the support and support of our parents, teacher and
friends throughout the research period.
Group members
May o4, 2017
II
III
TABLE OF CONTENTS
Page
Abstract I
Acknowledgement II
Table of contents III
Chapter 1 Introduction 1
Topic 1
Subtopic
1. Air Asia history and development 1
2. Fleet size since established until current fleet 1
3. Organization culture 1
4. Cost & revenue structure 1
5. Strategies 1
Introduction and Motivation 2
Implication 4
Benefit 4
Conceptual Framework 4
Chapter 2 Business review and problem analysis 5
Part 1: Business review
1. History 5
2. Product of AirAsia 6
3. Fleet size 7
4. Passenger 9
5. Route and market share 10
6. Distribution channel 12
7. Customer segment 12
8. Customer behavior 13
9. Sales contribution 13
10. Organization structure 14
Part 2: Successful analysis 15
III
IV
Chapter 3 Literary review 16
Part 1:
Theory 16
Mind map (tool) 16
Part 2:
Operation management 17
Fleet planning 17
Airline Schedule planning 17
Supplier management 17
Customer management 18
External environment 18
Law and regulation 18
Technology and innovation 18
Economic 19
Political 20
Customer 21
Natural hazard 22
Internal environment 23
Organization structure 23
Organization culture 23
Planning and forecasting 23
Human resource 24
Employee empowerment 24
Chapter 4 Research methodology 25
1. The process of conducting research 25
2. Research design 25
3. Scope of research 25
4. Data collection 26
5. Summary of tools use in research
5.1 interview question 27
5.2 interview question analysis 28
Reference 31
IV
1
The criteria behind the success of
AirAsia
Chapter 1 Introduction
Topic
: The criteria behind the success of AirAsia.
Subtopic
1. Air Asia history and development
- Factors to promoting good brand image of Air Asia
- Award (safety, services)
- Situation that encourages the development of Air Asia airline
2. Fleet size since established until current fleet
- Number of routes compared with the other low cost airlines.
- Customer demands that influences the growth of AirAsia (past & future)
3. Organization culture
- Organization culture of the part to the development of AirAsia
- Factors that make AirAsia have good culture
- Vision mission
4. Cost & revenue structure
- Proportion of operation cost
- Investment
- Increase in revenues, incomes and proportion of profit
5. Strategies
- Marketing plans and strategies/partners that they use to attract the passenger
- Market segment of AirAsia against the competitors/.
- Customer segment
- Fare price and promotion compared with other low cost airlines
- Future trend and forecast for the market segment of AirAsia
2
Introduction and Motivation
Nowadays the airline industry has had high competition for the last 7 years after
the financial crisis in 2009, especially in low-cost carrier (LCC). Moreover, market
segments of LCC is up to 32% in 2013(Airline profiler, 2015) and LCC market tend to
grow to 10.42% in 2014-2019(report linker, 2015). As a result, the LCC penetration
rate within Southeast Asia is about 56.5% in 2015 (Airline leader, 2016) so, there are
always new low cost airlines operating in the aviation industry. Besides all over the low
cost airlines, AirAsia is one of the top LCC at world travel awards in Asia. In addition,
they have been operating since 2001 with the concept of the dream of making flying
possible for everyone which makes them successful and emerge as the world’s best low-
cost airline.
Air Asia is well known to be the most successful airline amongst other low cost
airlines. They have a huge number of passengers ranging up to 50.7 million in 2015 and
171 of feet size (AirAsia Annual Report, 2015) ; moreover, they also have the growth
rate 11% (The Star,2016).They have sold low fare tickets and good quality in safety
and service. On the other hand AirAsia is one of the airlines that have good marketing
plans. These plans urges passengers to continuously increase and has secured trust from
South East Asia passengers till date. We would like to study the factors that make
AirAsia acquire a successful sustainability by using analysis in terms of marketing
plans, system strategies and operation strategies.
Figure 1: Market segment of LCC
(Source from: http://www.airlineprofiler.eu/2015)
3
All of this reasons make us interested to study what factors make Air Asia
successful in the world’s best low-cost airline ranking no.1 best low cost for 8 years
(Skytrax) .
AirAsia Achievements
AirAsia Achievements
Year 2016
Year 2015
Year 2014
Year 2013
Year 2012
Year 2011
Figure 3: AirAsia Achievement
(Source from: http://www.airasia.com/my/en/about-us/awards.page)
Figure 2: Passenger Growth rate (2015-2016)
(Source from: http://www.airlineprofiler.eu/2015/10/international-low-cost-airline-market-research/)
4
Implication
To know about key-success and ways to be the best low cost airline, understand
how Airasia operating. To know about information how Airasia can operate low cost
that becomes successful in many countries.
Benefit
An airline should know about theirs advantages and disadvantages in working
processes to develop and improve the company.
Government can adapt information and strategy to improve flag-carrier in
costing, routing.
Customer to have better understanding in the organization and also have brand
loyalty.
Conceptual Framework
INPUT OUTPUT
Objective : 1
To know the criteria and key success behind
that AirAsia success by their own process and
information. Including, sub-factor such as
operation, management and HR management
that helps AirAsia become the famous
organization.
Objective : 2
Collecting and analyzing some of study
reports or other information that will related
to the success factor of AirAsia.
The result of research will make us know
that what the criteria behind the success of
AirAsia are.
Table 1: Conceptual Framework
5
Chapter 2
Business review and problem analysis
Part 1: Business review
1. History
AirAsia was established by a government-owned conglomerate in 1993 and
began operations in 1996. In December 2001 AirAsia had only two planes, the airline
face problem in heavily debt and was purchased by Tony Fernandes with took up USD
11 million debt.
Under the leading of Tony Fernandes, AirAsia had profitable in 2002 and
launching new routes from Kuala Lumpur with undercutting monopoly operator
“Malaysia Airlines” by sale the low price ticket. In 2003 AirAsia established second
hub in Senai International Airport, Johor Bahru and operated first international flight to
Bangkok. After that AirAsia established Thai subsidiary called “Thai AirAsia” and
Indonesia subsidiary called “Indonesia AirAsia” AirAsia also began set up flights to
Macau in 2004, Xiamen, Manila, Vietnam and Cambodia in 2005 and Brunei, Myanmar
in 2006 respectively.
At the end of 2006, Tony Fernandes announced a five-year plan for enhance
AirAsia's to be the leading of low cost carrier in Asia. The five-year plan Mentioned in
extension route network by connecting the existing destinations and expanding into
Vietnam, Indonesia, Southern China (Kunming, Xiamen, Shenzhen) and India through
the subsidiaries and AirAsia focus on developing hub in Bangkok and Jakarta by
expanding the new route and increase a frequency of flight that effected to increasing
number of passenger up to 13.9 million in 2007. In addition, AirAsia also adopted a JV
(Indonesia, Japan, the Philippines, and Thailand) model for expansion in the South East
Asian region.
In 2010, Fernandes established affiliates to operate long haul international flights
called “AirAsiaX” that launched flights to India with flies 45 weekly.
In 2011, AirAsia ordered 200 A320neos from Airbus that make them had highest
owned ratio for an Asian airline with 87% of Aircraft is on balance sheet .In addition,
AirAsia agreed to build an alliance with Malaysia Airlines by share swap. But the
alliance agreement was canceled by the Malaysian government. After that AirAsia
setting up hub in Philippines with the similar operations as Thai and Indonesia AirAsia.
6
In 2013, AirAsia has profits increased by 168% on a year-over-year when
compared to the same period in 2012. Moreover, AirAsia asked to take 49% share of
Indian sister airline which the maximum percent of share that allowed by the Indian
government in 2013 and AirAsia established the new airline with invest up to US$50
million to begin operated route in Chennai and expanding network throughout South
India that AirAsia already operates flights from Malaysia and Thailand subsidiary.
AirAsia become the largest low-cost airline in ASEAN now that AirAsia flies to
all ASEAN countries with a great market segment in Asian countries that include India,
Iran, Sri Lanka and Bangladesh. Moreover, AirAsia also has the good portions in United
Kingdom, France, Japan, Korea and Australia through affiliates AirAsiaX.
2. Product of Air Asia
2.1 AirAsia X Berhad
AirAsia X, the long-term, low-cost airline affiliate of the AirAsia Group that
currently flies to destinations in the Asia Pacific region and beyond. Now the airline
serves 23 destinations in Asia, New Zealand, Australia, Africa and Middle East. AirAsia
X operates a fleet of 30 A330-300s. Airline has carried more than 19 million people
since it began service in 2007; AirAsia X won the Best Low Cost Airline Premium.
Premium Cabin world's best low cost airline and premium seats annual Skytrax World
airline Award for four consecutive years from 2013 to 2016.
2.2 AirAsia Premium Red Lounge
The AirAsia Premium Red Lounge provides a warm and inviting space, where
passengers can rest or chill, as well as catch up on unfinished business before continuing
journey. The lounge offers VIP Room, Newspaper & magazines, Food & beverage,
Shower, Wi-Fi connectivity, Work station area, Charging area, Ladies dressing area,
Air-conditioning, Flight information. The lounge is located in International Departure,
Kuala Lumpur International Airport 2, and Malaysia.
2.3 Big Duty Free: Pre-book
Airasia offer the convenience of ordering duty free products online you can use up to
24 hours before flight departure and items purchased will be delivered to customer’s
onboard selected flights. Customers will be able to pre-book duty free via
www.bigdutyfree.com on all AK international flights both inbound and outbound from
KLIA2.
7
2.4 Rental car AirAsia
Customers can rent a car from the airport and city destinations that AirAsia fly
to. Choose where to pick up and drop off their vehicle in the place you want. This
service is powered by CarTrawler.
2.5 ROKKi Wi-Fi
ROKKi give access to entertainment via the internet on the flight.
3. Fleet size
Nowadays AirAsia has almost 171 fleets by using airbus A320 which come from
Malaysia 80 aircraft, Thai AirAsia 45 aircrafts, Indonesia 25 aircrafts, Philippine 14
aircrafts and 6 aircrafts from India. From the table below show that in year 2011 have
only 97 aircrafts and increase continuously even in year 2015 decrease from year 2014
but it just only 1 aircraft so it doesn’t have any effect to the airline. However, in the
future AirAsia will order more 404 aircraft, 304 fleets in types of airbus A320neo and
100 fleet of airbus A321neo.
Figure 4: AirAsia ROKKi Wi-Fi
(Source from: http://www.airasia.com/th/en/about-us/our-offerings.page)
8
AirAsia Fleet size
The table below shows that AirAsia plans to take an initial batch of five
A320neos, which will be configured with 186 seats, by the end of 2016. The group’s
new fleet plan now includes delivery of an initial batch of six A320neos, which are
expected to be configured with 240 seats, in 2019. Deliveries of both types are now
spread out through 2028, with the rate of deliveries accelerating significantly in the
early part of the next decade. Staggering deliveries over such a long period is not
unusual for AirAsia or other LCC groups with large order books. (CAPA aviation,
2016)
Figure6: AirAsia plans for A320neo-A321neo
(Source: CAPA center for aviation and company report)
Figure 5: AirAsia Fleet size 2011-2015
(Source from: AirAsia annually report 2015)
AirAsia plans for A320neo-A321neo
9
4. AirAsia Passenger
The AirAsia group has a huge number of passengers ranging up to 50.7 million
in 2015, up 11% from 45.58 million passengers in 2014. (AirAsia Annual Report,
2015).
According to the star online (2016) present that number of passengers carried by
Malaysia AirAsia has 24.25 million that increase to 10% from 2014, gained 7% in
capacity to 30.08 million. AirAsia India has 324% increases in the number of passengers
carried in 2015 to 1.46 million but the number of passenger in 2014 has only 345,298
while capacity increased by 322% raging up to 1.82 million from 430,560. However,
the number of passenger carried by Indonesia AirAsia decreases from 6.52 million in
2015 compared with 7.85 in 2014, it’s decreasing up to 17% while capacity was
decreasing 13% to 8.76 million from 10.04 million.
In the first quarter of 2016 from Preliminary Operating Statistics presented that
The Airasia group has 17% increase in the number of passenger at 13.9million and 6%
increase in capacity. Malaysia AirAsia has 17% increases in the number of passenger
at 6.48 million and 3% increase in capacity. Thai AirAsia has 18% increase in the
number of passenger at 4.37 million and 11% increase in capacity. Indonesia AirAsia
has 2% increase in the number of passenger and 10% decrease in capacity. Philippines
AIRASIA
JAN-MAR 2016
2016 2015 Change
Group
Passenger Carried 13,940,659 11,878,498 17%
Capacity 16,287,828 15,436,800 6%
Malaysia
Passenger Carried 6,475,081 5,538,684 17%
Capacity 7,579,068 7,347,600 3%
Thailand
Passenger Carried 4,365,286 3,701,286 18%
Capacity 4,965,480 4,476,960 11%
Indonesia
Passenger Carried 1,593,904 1,557,721 2%
Capacity 2,006,100 2,223,180 -10%
Philippines
Passenger Carried 967,588 843,250 15%
Capacity 1,107,900 1,088,820 2%
India
Passenger Carried 538,800 237,557 127%
Capacity 629,280 300,240 110%
Table2: AirAsia Passenger 2015-2016
(Source: AirAsia Annual Report, 2015)
10
AirAsia has 15% increase in the number of passenger at 0.97 million and 2% increase
in capacity and AirAsia India has 127% increase in the number of passenger at
0.54million.
5. Route and market share
Asia serving over 221
routes and 39 new routes
introduce in 2015 over 112
destinations from 20 hubs in
Malaysia, Thailand, Indonesia,
Philippines and India.
Malaysia AirAsia network
Malaysia AirAsia serving 107 routes with 50 unique routes in 72 destinations
in 17 countries from 5 hubs in Malaysia. Moreover , they have planned to introduce
13 new routes in 2015.The airline rapidly expanded its domestic and international
route network as shown in their Market share, covering 47% of domestic and 49% of
international market share. The picture below will show about the operation routes of
Malaysia AirAsia.
Thai AirAsia network
Thai AirAsia serving 60 routes and about 14 of their routes are unique covering
45 destinations in 11 countries from 5 hubs in Thailand. The airline has planned to
introduce 12 new routes in 2015. Moreover, in 2015 shown that Thai AirAsia received
28% of domestic and 18% in international market share. The picture below will show
about the operation routes of Thai AirAsia.
PhilippinesvAirAsiavnetwork
Philippines AirAsia serving 18 routes in 15 destinations in 6 countries from 3
hubs in Philippines. The airline has planned to introduce 3 new routes in 2015.
Moreover, in 2015 shown that the airline had received 13% of domestic and 7% in
international market share. The picture below will show about the operation routes of
Malaysia AirAsia. The picture below will show about the operation routes of
PhilippinesvAirAsia.
11
Indonesia AirAsia network
Indonesia AirAsia serving 38 routes and about 8 of their routes are unique
covering 19 destinations in 5 countries from 4 hubs in Indonesia. The airline has
planned to introduce 5 new routes in 2015. The airline received 3% of domestic and
27% in international market share in 2015. The picture below will show about the
operationcroutescofcIndonesiacAirAsia.
IndiacAirAsiacnetwork
India AirAsia serving 13 routes in 11 destinations in 1 country from 2 hubs in
India. The airline has planned to introduce 6 new routes in 2015. In 2015 shown that
the airline had received 2% of domestic and 6% in international market share. The
picture below will show about the operation routes of India AirAsia.
AirAsia X
AirAsia X is one of AirAsia group that provide in the long-haul that currently
flies to destinations in the Asia Pacific region and beyond. The airline serving 23
destinations across Asia, Australia, New Zealand, the Middle East and Africa with
A330-300s fleets. The picture below show about the routes that operate by AirAsia X.
Figure 7: AirAsia Market share 2015
(Source: AirAsia Annual Report, 2015)
12
6. Distribution channel
How to buy the ticket?
Customers can buy AirAsia ticket from many distribution channel such as
AirAsia website or Application, Airline Agency, and convenient store. The most
customers prefer to booked from AirAsia website according to low fare promotion, easy
to booked, and easy to payment. Distribution channel show below.
- www.airasia.com (AirAsia’s Computer Reservation System )
- Application
- Sell counter
- Sell office
- Call centre
- Kiosk machine
- Travelport-connected-agents-worldwide,-www.travelport.com
- Expedia
- Skyscanner : Application, www.skyscanner.net
- Booking : Application , https://booking.airasia.com
- 7-eleven
- Tour & Airline agency
How to contact?
Customers can contact to Air Asia by information below.
- www.airasia.com
- Counter service
- Customer Service
7. Customer segment
The main customers of AirAsia are people who have low salaries and budget.
Most of them fly for travel purpose. The second group is people who have middle
salaries, they fly for business reason. Nowadays customers who go for travel or business
want to pay cheaper to secure a seat on a flight.
AirAsia's objective is the all individuals salaries' identity fall in the middle or
lower wage in Malaysia. That is the motivation behind why the AirAsia dependably
utilize the low value vital to position it is constantly less expensive than their
competitors. Furthermore, it additionally focus to the age who are young, adults or more
can spend and might be constantly require a flight to other far destination in shorter
time. Third, behavioristic of AirAsia’s target also is the general people who are sensitive
in price and none loyalty. In this way, they will attract passenger by their promotion.
13
This type of target market will affect to other competitor who also serve the most
reduced cost or doing sale promotion. This type of target market are likely buy the
service which is economy, valuable and affordable.
8. Customer behavior
Passengers are the main player who driven the aviation industry development.
Nowaday, low cost carrier play a significant role in the airline industry in term of
modern strategic model and good service offering. Low cost carrier had changed the
passenger’s trend and made the great impact to the customer market in many countries.
AirAsia is considered as Asia's largest low-fare, no-frills airline that operates scheduled
domestic and international flights (UKessays,2015). It is also the first airline in the
region to implement fully ticketless travel. The one of the reasons that make AirAsia
popular among the other airlines is cheaper ticket prices than the full fare carrier. They
provide the ticket price for business class with the resemble price as regular ticket and
even the meals are not for free but the prices are affordable. In addition, They cut off
the value added that main airport are offering and use the electronic ticket instead of
using paper. That’s why they can attain their cost. Another, passenger's more interested
at internet thing. AirAsia provides the website which address at mobile.airasia.com.
More passengers buy ticket through the online channel and choose the easy way to pay
for them. Moreover, AirAsia have the good strategic planning and take the right action.
They began with using the facebook to attract the passenger and continually set the hot
prices ticket and another attractive promotion.
9. Sales contribution
According to Airasia annual report show that the total revenue is up to RM2.77
billion from the previous year which divided in revenue via internet 70% and operating
profit margin 32.3% (2015). In term of revenue, Most of the AirAsia revenue come
from passenger seat sales 66%, ancillary 16%, aircraft operating lease 11%, fees and
surcharge 7% (Macquarie Research,2013). And also, increase a lot in the last five years
although they have bad impact from the natural disaster in many countries. But they
still make profit continually.
14
AirAsia Revenue Breakdown
Unique Culture & Management Style
10. Organization structure
Democratic style
AirAsia Company use walk around management style that is open plan
workplace where everybody does not has their rooms. Staffs in organization don’t have
to stay where you are, they don’t have hierarchy. Everyone has the chance to share ideas
and they can walk up to the director of AirAsia any time. Their concept is “ employees
come first, customers come second”
Management philosophy: Director of AirAsia wants people to achieve their dreams and
passion.
Meritocracy Style
Age, gender, ethnicity and religious are not important
Director of Airasia is positive thinking person, he always believed that everybody can
achieve their passion as long as they have the dreams & goals.
The employees drive the brand’s success. ONE PEOPLE , ONE CULTURE,
ONE AIR ASIA and ONE FAMILY are AirAsia objective to ensure that the AirAsia
staff around the world support this culture to reach the goal of ensuring everywhere they
Figure 8: AirAsia Revenue Breakdown
(Source: Macquarie Research)
15
fly is the best experience at ONE AirAsia. The asset made AirAsia success story are
people, their commitment, determination and tolerance. They create positive and
positive AirAsia culture that infiltrates every line of operation. Annual report
(AirAsia.2006).
Values of AirAsia are inculcated the employees - safety, passion, integrity,
caring and fun. These values provide a reputation for AirAsia. The director of AirAsia
believe that usual style of dressing at work can affect the culture in organization. He
goes to work wearing his trade mark red AirAsia cap, short sleeved t-shirts and a pair
of jeans which are sometimes older than his employees so that decrease that barrier of
communication between himself and employees. “People are AirAsia’s best asset.’’ The
director of AirAsia try to create a flat structure that everyone has access to the leader
resulting in discovery of their potential and talent.
16Part2:Successfulanalysis
TheexplanationofmindmappingisinthenextPage
17
Successful analysis
5 factors that make AirAsia success
1. People
AirAsia have train staff resulting in good attitude staff and good
response to customer.
AirAsia can reduce cost of staff by use internship student and
improve staff to be multi-skill.
2. Method
Operation – Have low cost and efficient of operation because they
use secondary airport and high aircraft utilization.
Marketing – AirAsia have a 0 baht promotion and multi advertising
such as Instragram, Facebook and TV.
Channel – AirAsia provide convenience for customer to pay via
counter service, VISA and PayPal.
3. Environment
AirAsia have good organizational culture because, in organization
have low hierarchy, AirAsia treat a staff like family and give
important to staff.
4. Machine
AirAsia use leather chair because it can use for the long time. They
use one type of aircraft because they can save cost of staff training,
storage space, equipment, spare part and maintenance.
5. Supportive
AirAsia have many partner to corporate such as tour agency, hotel,
and car rent. They have financial support from 30 largest share
holder
18
Chapter 3 literary review
Part 1 Theory and Tools
Theory
Democratic style
According to leadership styles shown that “Democratic leadership style is a very
open and collegial style of running a team. Ideas move freely amongst the group and
are discussed openly”. The democratic leadership style means facilitate the
conversation, encouraging people to share their ideas, and then evaluate the information
to make the best decision.
Meritocracy Style
According to Jim Whitehurst said about Meritocracy in Workplaces That
“Everyone has the right to express their opinions and are encouraged to share them
openly and often”.
This is the key distinction of the meritocracy. While everyone does have a voice in their
workplaces.
Mind map analysis
Originated in the late 1960s by Tony
Buzan. Mind-maps are great to display the
context of problem or situation or even system.
Mind maps are also useful when working on
improving cross-functional business process
with groups of people. However, for a more
systems orientated view, use an entity
relationship diagram.
The purpose of mind map It shows all
aspects and sub as sub aspects (or causes and sub cause) of any kind of problem model
in a logical and graphical structure. Moreover it is a non-linear way of organizing
information and a technique that allows you to capture the natural flow of your ideas
while applyingaassociativeathinking.
19
Part 2
Operation management
Fleet planning
The new technology of aircraft that manufacture provide to airline is important
to choose aircraft with technology reduce noise in the cabin, fuel saving , more seat
capacity, reduce releases CO2 to atmosphere (Airbus,2016). Ordering aircraft plan will
effect to airline inside increase response of customer need and manage cost of operation
that means price/seat also decrease (Prachachat, 2016). Another, the reason that can
affect to airline decide use fleet of manufacture, sell aircraft on a per flight hour basis,
providing the airline flies a minimum flight hours per month. Such agreements include
maintenance, and all service parts required which, some manufacture does not offer this
commonality to Airline and the whole fleet shares some features making the training
from one model to other exceptionally short that could be a reason (Jose Sanchez-
Alarcos, 2015).
Airline schedule planning
Route planning is one of critical for success factor. Numerous strategies are
implemented by carrier to make sure their market position, their market share, and to
access customer demand. The main reasons of schedule planning process involving of
2 factors are schedule design and fleet assignment (Lohatepanont, M., & Barnhart, C.
2004).Airline schedule design and fleet assignment are concerned about WHERE
,WHEN,HOW often to offer flight and assignment aircraft types to flight legs to
maximize profit and maximize aircraft utilization(Jeff Julton,n.d.).
Supplier management
Every operator need to ensure their firm has trusting supplier relation because
of they have to share more information with them. If an operator has a supplier who is
failing, the tendency is to lose their profit (Trebilcock, 2014).moreover from Expert
Systems With Applications said that organization need to select the most suitable
suppliers that meet a company’s need, due to qualitative and quantitative criteria(
Rezaei, Jafar Fahim, Patrick B.M.Tavasszy, Lori, 2014 ). And owner should choose
supplier that offer better service on a reasonable price (Bargaining Power of Supplier
and Airline Industry, 2011)
20
Customer management
According to Golightly, internet has reduced costs of ticket sales but created a
more powerful customer who can easily shop around for the best price. With internet
use there is almost no switching cost for the customer (1967, p. 68). The top 3 of channel
that people buy the ticket are mobile application, internet-social network, airline official
website (Bangkok university, 2554). And the most channel that the pay the ticket is
electronic banking. So, airline must mainly focus on internet-channel to sell the ticket,
make a payment and communicate with passenger. Second, efficient operation in one
of the important things for several airlines. The aircraft should taking off and landing
on time with safe flight include no damage or get loss of their belonging. Moreover,
employees is the people who get close to the customer and directly affect to the airline’s
image and performance. Staff need well trained for competence skills and change their
mind set to the service mind; passenger gave 4.58 score out of 5 for necessary of staff
good manner and good service on board and 4.41 of staff on ground (Bangkok
University,2554) Including, providing the good timetable for customer and comfortable
seat on board . Another, customer relationship management is the way to make
customer’s loyalty. Continually refining insights into customer needs, habits and
economics, developing targeted and tailored value propositions based on those inputs,
strategically focusing business resources on activities that build long term customer and
economic value (tnooz, 2013).
External environment
Law & regulation
The antitrust law is the law which protect the benefit of consumers by keeping
price down and keeping quality up it means this law effect in airline because they can’t
merger with each other to fix fare price (Federal Trade Commission,n.d.) if we didn’t
have this law , airline will have power to maximize fare ;moreover , Australian
Competition & Consumer Commission indicated that price fixing is considered as an
illegal for competitor to co-operate together to fix prices. The penalties for price-fixing
are fined, the authority can fine up to $ 10 million and imprison at maximum five years
or both (government of Canada,n.d.)
Technology and innovation
13 efficiency improvements have slowed down since 1970s due to the slow of
technological advancement in engine, aerodynamic designs and airframe
materials.While aircraft manufacturer and airlines are more focus on global climate
change from jet engine emissions.Based on the analysis of various alternatives for
21
aviation, a best reduction in environmental impact can be achieved through biofuel in
the near future(Joosung and Jeonghoon,2011).Moreover, According to Teresa, The
global aviation industry processes 2% of all carbon dioxide emissions and 12% of the
total emissions from the transportation industry. By the way, advanced aircraft
technology provides the following benefits.New aircraft reduce fuel consumption by
double-digit percentages compared to older ones. Aircraft performance also improves
by using advanced technology winglets (reducing drag).Some of the technologies used
for fuel efficiency reduce noise by 30%. They also improve range and payload.
Increasing the range allows the airline to expand its connectivity and network. Payload
improvements increase revenue and profitability. Some of the new aircraft designs
provide the flexibility to add more seats (Teresa,2014). Another factor is intelligent
automation. It’s provides an opportunity in passenger experience. The arrival of web,
mobile and kiosk check-in means automation is now common for many passengers.
This pre-flight also reducing costs for airlines.Every airline goal is to deliver a service
that’s more informed and more personalized than competitors. For example,
Automation can collaboration with airline call-centers such as supporting agents during
calls by selling packages to passengers based on learned information. Airlines can use
intelligent automation to help the workforce from its current focus on managing
processes, to an emphasis on delivering customer experiences. (Accenture,2016)
Economic
The aviation industry causes great external effects such as; Promoting tourism,
higher employment, and boosting investment within any one country. This may increase
overall GDP. However, some of the negative effects associated with the industry
include the release of excessive emissions of harmful emissions into the polluting
atmosphere (Keller & Buttler, 2000).
The aviation industry is affected by fiscal and monetary policy, the government's
decision to make airline taxes included in their operating costs. Also investments in
infrastructure have a huge role to play. It can also be asserted that the decision to
liberalize the aviation industry can bring about the positive effects into the industry.
Closely linked to fiscal and monetary policy is the issue of wage inequality.
Companies that operate in countries with job losses are likely to attest or the
same within aviation. However, statistics show that inter-firm disparities in wages are
quite high especially with regard to pilots. Lastly, the aviation industry is affected by
elasticity in supply and demand depending on the size of the industry and how long it
has been in operation.(Smith.Carolyn,n.d.)
According to Teresa, 2014 said that a healthy economy acts as a catalyst for
industrial growth. Economic health is also measured by various economic indicators.
Examples of economic indicators include growth in gross domestic product (or GDP),
22
per capita income, disposable income, industrial production, level of business, and
consumer confidence. Fluctuation in oil prices is another major factor that impacts
airlines’ profitability. We’ll also see how economic indicators, like industrial output and
business confidence, directly influence growth in airline passenger and cargo
traffic.Economic factors support industry growth, like most industries, the airline
industry is impacted by the economic cycle’ s peaks and troughs. The current growth in
developed economies—like U.S. that’s driven by the loosening monetary policy—has
resulted in a rise in business confidence, industrial production, and international trade.
All of these results act as catalysts for airline industry. (Pearce, Brian.2016)
Political
The political factors that affecting airline industry 1.International Trade. The
aviation industry plays a vital role in the growth of the global economy. However, there
are places around the world where airline transportation is not being widely used due to
government restrictions. For example, the airline industry cannot easily expand to
foreign markets, which is not a partner with its own country. If the United States does
not trade with other countries such as Russia, it will be difficult for American airline
companies to expand into the markets, despite their riches. International trade may
involve international agreements on air transportation.In this situation, the airline
company must comply with these requirements to operate the business. Some of these
agreements may hinder the operation of air in some countries, affecting the entire
region.
2. Tax Policy. The tax rates vary from one economy or market to another. This
means there are some countries where the airline have to pay more taxes for operate.
As a result of this, their operational costs are stretched, hence, decreasing revenue base.
On the other hand, the tax policies may also encouraging business and profitability.
(Montréal,2013) 3. War, Terrorism, disease outbreaks. The political factors including
terrorists' activities can affected to airlines that to increase its security measures thereby
increasing high operation costs. This has adverse effects or impact on the low price
airlines. (Penelope Butcher et al, 2005).War, terror and epidemic of illnesses like Ebola
are also some of the main factors that can mostly affect airline transport too. In countries
that are destroyed by the war, it becomes difficult for airlines to operate in due to the
risk involved. In addition, terrorism is also a new threat to the aviation industry. In fact,
there are many countries where some major airlines have stopped operating due to the
risk of terrorism. In countries where these events are always experienced in the interests
of passengers and airline companies to suspend or stop air transportation. However,
there are cases where politicians have made the situation worse than the real conditions
on the ground. These words can affect the airline industry by reducing business when
the environment is not bad. (Teresa, 2014)
23
Customer
Demographic factors is an important role in forecasting demand. To match
customer expectations in regard to value-add service offerings. In according to
generation categorize by the year of birth :Baby boom(between 1946-1964) and
Generation Y or Millennial generation (between 1980–1999).Currently, the baby
boomers are still active customers (25%) but expected to decline to 16% by 2020 and
11% in 2025. While, Gen Y are 35% customer and increase to 46% in 2020 and 54%
in 2025.This reflect to airline to focus on changing customer travel preferences in order
to remain successful.Millennials are more willing to pay for facilities such as Wi-Fi and
in-flight entertainment, refundable tickets and tend to make more itinerary changes per
trip than non-millennial, More interested in discounts, airline packages, and low-cost
carriers, Likely to book tickets through online and also use the mobile applications.
Analysis of different groups’ travel preferences can help airline plan their target
segments, allows them to study which segment can have higher returns on investment
to increase profitability. It allows them to determine and plan future service
improvements (Teresa,2014). To succeed the expectations with Millennials.Can be
done by leading brands are spending as much time and building experiences and trusted
relationships as they do developing new products and services. Build trusted
relationships, Connect with a purpose, Realize the importance of experience, Adopt an
adaptive cross-industry perspective, Integrate new technologies and enhance social
presence (Oliver,2016). Moreover, to gain market share and sustain profit airline must
develop new ways to manage their customer relationships to optimize customer loyalty.
Full-service airlines must adopt a Customer relationship management strategy to pursue
competitive effectively in the future. Low-cost carriers also need to invest in
fundamental strategy to optimize the efficiency of customer satisfaction. By understand
customer value and needs, and train employees with the tools and knowledge to respond
to the customer.(Boland, Morrison and O’Neill,2002)
24
Natural Hazard
Accident not only affects to the reputation of airlines and the economy of air
transportation industry but also lead to human injury and loss of human life (McFadden
and Hosmane, 2001).
Effect of Environmental Factors on Aviation Safety
1. Effect of weather on aircraft flight
Weather is the major factor that occur aviation’s accidents and incidents which
effects to poor visibility may lead to pilot errors and collision with terrain or with other
aircrafts.
Weather-induced rough flights, capable of causing serious discomfort and even injury
are a matter of common experience by many passengers (Mahapatra and Zrnic,1991).
In poor weather and phenomena conditions it is very difficult to pilot decision making.
2. Effect of atmospheric conditions on aircraft flight
Atmospheric condition factors can lead to serious air disaster which are
thunderstorms, lightning, hail, icing, wind shear, heavy precipitation, heavy rain, low
cloud etc. The thunderstorm is the large number of accident and incident (battan, 1961;
Magono,1980). Hail is the second factor more hazardous for aircraft engines and
structures because it is solid nature and in extreme case it cause engine to flame out
(Guegan et.al,2011).
3. Effect of Meteorological and Geographical factors on aircraft flight
Low pressure, complex climate and rough topography are very difficult to aircraft
operation (Shanhua and Xueqing,2007). Weather change in mountains is very quickly.
The mountain’s weather in the morning is appropriate to fly more than afternoon
because in the afternoon there are more cloud. Pilot should know steepness of glaciers
and mountainsides before operate flights. For the prevention of CFIT (controlled flight
into terrain) accidents crew position awareness and monitoring of navigational systems
are very essential.
4. Effect of natural calamities in aircraft flight
Natural disasters impact on aircraft flights and airport infrastructure. Volcanic
eruptions and earthquake can affect the airplanes. Earthquakes is the disasters that is the
most damage for airports, aviation facilities. And it is the cause of people injuries and
damage to the structures (Smith,2011). The ash is very hard and small in size it can
scratch and damage airplane body parts, engine parts and injection of ash that can also
damage aircraft electronic system.
25
Internal environment
Organization Structure
Organizational structure has become a powerful tool in management. Unlike in
the past, management has focused more on technical and administrative issues.
Organizational structure is a form of relationship that determines how it works by
structuring its position, responsibility, authority, and the underlying foundation that is
the place to start positioning the communication systems of the people in the
organization. Golightly (1967) states, “If recent airline experience has proved anything
new about organization, it is that structure is even more important to a service business
that it is in a typical make-and-sell enterprise” (p.70).The best structure is to increase
effective in communicating and inhibit obstacles between people and hierarchies.
(Harogopal, 2006). To make the organization have a good structure and relationship in
the organization. Companies can have a strategy to build competitive
advantage. According to Spector said that functional structure emphasizes work
excellence, brigade structure for market response, and horizontal structure for chain
processes.
Organization culture
Organization culture is a set of values and ways of doing things that has been
accepted by most of employee and staff (Laudon & Laudon, 2007, p.87). That adapt to
business processes and effect to the end product that face by the customers. According
to John McLaughlin said that, organizational culture is a system of shared assumptions,
values, and beliefs, which manage how people behave in organizations. These shared
values have a strong influence on the people in the organization and dictate how they
dress, act, and perform their jobs that will affect to service that customer receive.
It was considered that the culture of a company can provide a competitive
advantage that could bring superior financial performances only if there are fulfilled
three conditions (Barney, 1986).
Planning and Forecasting
The ability to communicate their own products is well-designed, especially the
needs of consumers and consumers. Planning is an important management tool in the
airline because it helps in predicting and creating emergency planning situations due to
very dynamic unstable environments that may change and be planned(European Journal
of Business and Management,2013).
26
Human resource
From organization perspective, service level and the way service that delivered
through the front line staff can be an important source of competitive advantage and
strength of the customer-front-line staff is important factor of customer loyalty (Bove
and Johnson, 2001; Castro et al., 2004). According to Jeff Fulton said that, the high-
capability staff is critical in this service business like the airlines. So, Training programs
focusing on front-line communicative skills with customers and customer-focused
continuous improvement.
The front-line staff and service is a core part of the brand, from a customer
experience point of view, consumers often see front-line staff as the firm itself and
getting the service experience or customer perceptions from front-line staff and service
(Jochen Wirtz, Loizos Heracleous, Nitin Pangarkar 2008).
Human resource are related to successful of airline through employee
Productivity or airline service capacity per employee is a measure of how effectively
the employees work together and providing service to serve passengers from one place
to another. Morale is a measure of how employees are to providing good service to the
customers. (Richad M. Mcabe, PHD 2006).
Employee empowerment
Employees empowerment is one of the most important factors in the
organization. According to The Certified Manager of Quality/Organizational
Excellence Handbook, pages 45-46 said that Employee empowerment also means
giving up some of the power traditionally held by management, which means managers
also must take on new roles, knowledge and responsibilities. Employee empowerment
leads to entrepreneurial traits and informs employees of the actions and encourages
them to believe that they can control and take care of others. Employees who have the
power to assert their self-control through hard work and effort are instrumental in the
success of all institutions. (Anthony L. Emerson, 2012). Therefore having employee
empowerment can make it more credible and effective in the organization.
27
Chapter 4
Research methodology
The study of research is to know the criteria behind the success of AirAsia. We
studied literatures, data collection and report that were on the public. The research use
data analysis tools to set up the objectives to interview exclusive director of AirAsia
Airline. Moreover we list and set the questions by using the objective to interview the
exclusive director of AirAsia Airline. And key player of this research are the proficient
in aviation industry that include chief executive officer of AirAsia, chief financial
officer, president and group chief operation officer, group chief commercial officer. For
the information procure from the exclusive director of AirAsia Airline. All exclusive
director said in the same of how to operation in organization to make AirAsia Airline
success.
1. The process of conducting research
For gain the right and the most effective information, The researchers choose to
interview the people who relate to Airasia organization, such as Air Asia executive,
Human resources manager, Airasia marketing and others by unstructured interview
method.
2. Research Design
The purpose of this research is to know the criteria behind the success of AirAsia.
The interview asked questions about how AirAsia success to the person who related
with AirAsia such as AirAsia executive, Human resources manager,Airasia marketing
and others. The question and the answers are used for maximize benefits follow the
objective of the research. The results from the answer will show the real reasons of the
criteria behind the success of AirAsia. The interview method is unstructured interview
that researchers have questions pattern to ask. Finally, researchers analyze data by
brainstorming and qualitative analysis to find conclusions.
3. Scope of research
This research built to analyze the factors that AirAsia successful and be the
main reader among low cost carrier such as Operation management, external
environment, and internal environment by using 2 ways to collect the data are
primary resource ; interview the exclusive director of AirAsia Airline. And
secondary resource ; this resource come from the annual report of the airlines,
thesis and some report of another student.
28
4. Data Collection
4.1 Primary Data
Interview question
1. In your opinion, what is the important key of the AirAsia's success in term of
competitive advantage? (CEO)
2. How airline take the responsibility to the staffs training and the staffs
education? (CEO)
3. What is your organization's structure and what strategies would you use to
motivate your team to achieve organization's goal?
4. Does government/university in Thailand support the new staffs or who just
trained, and how?
5. What is your organization’s risk management?
6. Does the LCCs is one of the factors that make you success? (CEO)
7. What is the medium and long term plan of AirAsia’s marketing?
8. Where do you see your organization 10 years from now?(All department)
29
Interviewer
Chief Executive
Officer of AirAsia
Miss.Aireen Omar
Chief Financial
Officer
Mr.How Kim Lian
President and Group
Chief Operation
Officer
Mr.Bo Lingam
Group Chief
Commercial Officer
Miss.Siegtraund The
Interview question analysis
We defined the question to make sure that our objective achieving. In the first
question,
1. In the First question, we want to identify what is the main factors that make
AirAsia become the successful airline and what is the supportive factors which
partial influence the organization achieving. Aireen Omar, chief Executive
Officer of AirAsia will answer this question.
2. Second question, it’s linked to the answer of the first question. Including we
want to know that staff training and education is related to airline development.
Aireen Omar, chief Executive Officer of AirAsia will answer this question.
3. Its about their organization’s structure and strategies that AirAsia use to
manage the authorized of employees and motivate them. It can be the one of
factor that affect their efficient work and be one of the factor of success.
Mr.Aireen Omar, the Chief Executive Officer of AirAsia will answer this
question.
4. We want to know about other organizations that support and make any affect
to the AirAsia airline in term of human resource management. Aireen Omar, chief
30
Executive Officer of AirAsia will answer this question.
5. In this Questions we want to know how organization control and deal with their
risk and what is the risk management of their organization such as tools, strategy
or plan. Answer by CEO, CFO,COO, and CCO.
6.The second question will ask Mr.Aireen Omar the Chief Executive Officer of
Airasia airline about does the LCCs could be key success factors for organization.
7. What is the their marketing plan in both medium term, long term for the coming
future. CCO will
8.In the last question is about the view of organization in next 10 years,this
question will ask Aireen Omar CEO. The purpose of this question are to know
how does a company’s readiness for future and what is the organization’s
strategies planning in the future.
4.2 Secondary Data
From previous interview result
1.Tony Fernandes saw an opportunity to introduce a new airline with an unusual
business model. While aviation industry facing business regression from 9/11 terrorism,
airlines across the world were retrenching employees, and travelers scar to air travel.
Air Asia was launched in 2001 with slogan of making flying possible for everyone.
Since then, AirAsia has success to become the world’s best low-cost airline.
2. Nadda Buranasiri (Chief Executive Officer of AirAsia X) We use Thai AirAsia's
network to be the strength. Our marketing strategy is the highlight of visit to Bangkok
and beyond. Although, other airline offer cheaper ticket price but it was just a short-
term marketing because every airline had the same cost, so the prices were not very
different in normal conditions. But factors that make travelers decide is the brand
royalty.
3.Tassapon Bijleveld (Chief Executive Officer Director of Thai AirAsia) The advantage
in competition for Aviation industry is cost. Air Asia have efficiency to reduce the cost
both fixed cost and variable cost. They can reduce cost approximately 1 of 3 which is
the competitive advantage that make AirAsia is the leader in low cost carrier in
Thailand.
31
4. Kamarudin bin Meranun (Chief Executive Officer Director of AirAsia X) Building
the strong band to be known and accepted in market by expand and increase amount
of passenger under slogan “Everyone can fly” that effect to competitor in aviation
business. Their strength is managing the cost better than competitor so they can set the
promotion especially zero bath of airfare.
5. Summary of tools use in research
Summary of tools
Objective Data collection Data analysis
To identify what is the
critical factors that make
AirAsia very success in
aviation industry
Primary data
Interview
- Chief Executive Officer of
AirAsia
-Chief Financial Officer
-President and Group Chief
Operation Officer
-Group Chief Commercial
Officer
Secondary data
Thesis
AirAsia’s Annual
Reports, 2015
Study report
News
Previous interview
result
- Brainstorming
- Mind Mapping analysis
Table3: Summary of tools use in research
32
Analysis framework
INPUT PROCESS OUTPUT
Objective : 1
To know the criteria and key
success behind that AirAsia
success by their own process
and information. Including,
sub-factor such as operation,
management and HR
management that helps
AirAsia become the famous
organization.
Objective : 2
Collecting and analyzing
some of study reports or other
information that will related
to the success factor of
AirAsia.
Data collection
Primary data
Interview
- Chief Executive Officer of
AirAsia
-Chief Financial Officer
-President and Group Chief
Operation Officer
-Group Chief Commercial
Officer
Secondary data
Thesis
AirAsia’s Annual
Reports, 2015
Study report
Tools analysis
-Mind mapping analysis
The result of research will
make us know that what the
criteria behind the success of
AirAsia are.
Table5: Analysis Framework
33
Reference
[1] AirAsia Berhad . (2017). Call centre. Retrieved May 03, 2017, from
http://www.airasia.com/th/en/contact-us/call-centre.page
[2] Adzhar People Department. (2011, April). JusmStart-Malaysia Retrieved May 03, 2017, from
http://www.airasia.com/common/pdf/JusmStart-Malaysia.pdf
[3] AirAsia Berhad . (2017). Annual-report 2015. Retrieved May 03, 2017, from
http://www.airasia.com/cdn/docs/common-docs/investor-relations/annual-report-2015.pdf
[4] Adzhar People Department. (2011, April). JusmStart-Malaysia Retrieved May 03, 2017, from
http://www.airasia.com/common/pdf/JusmStart-Malaysia.pdf
[5] Brin, K. (2016, October). Guide to Antitrust Laws. Retrieved May 03, 2017, from
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws
[6] BA Techniques RSS. (2016, January 31). Mind mapping .Retrieved May 03, 2017, from
https://businessanalystlearnings.com/ba-techniques/2016/1/31/mind-mapping
[7] Bell, D. A. (2012). Meritocracy is a good thing. New Perspectives Quarterly, 29(4), 9-18.
[8] Commission, A. C. (2013, June 03). Price fixing. Retrieved May 03, 2017, from
https://www.accc.gov.au/business/anti-competitive-behaviour/cartels/price-fixing
[9] Competition Bureau. (2015, November 05). Price fixing. Retrieved May 03, 2017, from
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00112.html
[10] Lohatepanont, M., & Barnhart, C. (2004). Airline schedule planning: Integrated models and
algorithms for schedule design and fleet assignment. Transportation Science, 38(1), 19-32.
[11] Shuk-Ching Poon, T., & Waring, P. (2010). The lowest of low-cost carriers: the case of
AirAsia. The International Journal of Human Resource Management, 21(2), 197-213.
[12] Sultan, F., & Simpson Jr, M. C. (2000). International service variants: airline passenger
expectations and perceptions of service quality. Journal of services marketing, 14(3), 188-216.
[13] Laikar, A. (2014, March 25). AirAsia and Travelport Sign Breakthrough Distribution Agreement.
Retrieved May 03, 2017, from http://ir.travelport.com/news-releases?item=1081
[14] Lohatepanont, M., & Barnhart, C. (2004). Airline schedule planning: Integrated models and
algorithms for schedule design and fleet assignment. Transportation Science, 38(1), 19-32.
[15] Ng, H. S., Kee, M. H. D., & Brannan, M. (2011, October). The role of key intangible
performance indicators for organisational success. In Proceedings of the 8th lnternational Conference
on lntellectual Capital, Knowledge Management and Organisational Learning.
34
[16] Prachachat news. (2013, July 03). " " A321neo 100
. Retrieved May 03, 2017, from
http://www.prachachat.net/news_detail.php?newsid=1468413295
[17]The story of AirAsia . (2011, December). Malaysia Airport klia2. Retrieved May 03, 2017, from
http://www.klia2.info/airlines/airasia/the-story-of-airasia
[18] The Economic Time . (2013, February 21). Tony Fernandes well-versed he is with the working
of AirAsia. Retrieved May 03, 2017, from
http://economictimes.indiatimes.com/slideshows/people/the-story-of-tony-fernandes-and-airasia/tony-
fernandes-well-versed-he-is-with-the-working-of-airasia/slideshow/18608806.cms
[19] Thomas, G. (2009). AirAsia Spots Success. ATW: Air Transport World, 46(9).
[20] Yee Liau, Bee, and Pei Pei Tan. "Gaining customer knowledge in low cost airlines through text
mining." Industrial Management & Data Systems 114.9 (2014): 1344-1359.
[21] Yashodha, Y. (2012). AirAsia Berhad: Strategic analysis of a leading low cost carrier in the
Asian region. Elixir International Journal of Management Arts, 51, 11164-11171.
[22] Zainol, A. Z., & Romle, A. R. (2007). The truths of service quality (passenger handling) in
airlines industry: a descriptive exploration between Malaysia Airlines and AirAsia. Journal of Global
Business Management, 3(1), 1-7.
[23] . (2016, August 26). . Retrieved May 03,
2017, from http://www.forbesthailand.com/people-detail.php?did=1131

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The criteria behind the success of AirAsia

  • 1. BACHELOR IN AVIATION LOGISTICS BUSINESS MANAGEMENT SCHOOL OF MANAGEMENT MAE FAH LUANG UNIVERSITY ACADEMICS YEAR 2016 ©COPYRIGHT BY MAE FAH LUANG UNIVERSITY Nattawadee Maneerat 5731210087 Thidaphon Saenngkaeo 5731210111 Phatcharaporn Thaviset 5731210146 Patcharaphorn Rapeekul 5731210147 Phetphailin Yammaneechai 5731210159 Manlika Udta 5731210180 Woraparch Meethum 5731210194 Wisaruta Chaowlaka 5731210201 Wissuta Teerageerayut 5731210202 Saminee Ngandee 5731210219 Areewan Meksa 5731210255 Kridichote Inunchote 5831210202 TThe criteria behind the success of AirAsia
  • 2. I Abstract A low cost airline is airline that offer lower fare it make very popular to passenger and new airline come to this market. AirAsia is one of the low cost carriers since then AirAsia is named the World’s Best Low-Cost airline for the 8th year running. The objective of this research are to know about key-success and ways to be the best low cost airline, understand how AirAsia operating and to know about information how AirAsia can operate low cost that becomes successful in many countries. This research will be under the interview 4 experts analyzed by brainstorming method and qualitative method to accomplish the objective. The criteria behind the success of AirAsia have 5 factors. The first one is machine. AirAsia use one type of aircraft and have good aircraft design. The second is supportive. They have partnership in hotel, car rental and tour agency moreover they have financial support from shareholders. Next, they have good staff management in training and reduce cost of staff. The fourth is environment. They have a good organization culture. And the last factor is methods that are good service at low cost carriers and variety of service, variant of marketing in promotion and advertising, and efficient operation. The researcher know the exactly factors that make AirAsia become the best low cost carriers. I
  • 3. II ACKNOWLEDGEMENT The researchers would like to show respect for continued support throughout this course of research. The research is supported by Professor Samatthachai Yamsa-ard. We are very pleased for his teaching and his help. We are honored to receive the support and support of our parents, teacher and friends throughout the research period. Group members May o4, 2017 II
  • 4. III TABLE OF CONTENTS Page Abstract I Acknowledgement II Table of contents III Chapter 1 Introduction 1 Topic 1 Subtopic 1. Air Asia history and development 1 2. Fleet size since established until current fleet 1 3. Organization culture 1 4. Cost & revenue structure 1 5. Strategies 1 Introduction and Motivation 2 Implication 4 Benefit 4 Conceptual Framework 4 Chapter 2 Business review and problem analysis 5 Part 1: Business review 1. History 5 2. Product of AirAsia 6 3. Fleet size 7 4. Passenger 9 5. Route and market share 10 6. Distribution channel 12 7. Customer segment 12 8. Customer behavior 13 9. Sales contribution 13 10. Organization structure 14 Part 2: Successful analysis 15 III
  • 5. IV Chapter 3 Literary review 16 Part 1: Theory 16 Mind map (tool) 16 Part 2: Operation management 17 Fleet planning 17 Airline Schedule planning 17 Supplier management 17 Customer management 18 External environment 18 Law and regulation 18 Technology and innovation 18 Economic 19 Political 20 Customer 21 Natural hazard 22 Internal environment 23 Organization structure 23 Organization culture 23 Planning and forecasting 23 Human resource 24 Employee empowerment 24 Chapter 4 Research methodology 25 1. The process of conducting research 25 2. Research design 25 3. Scope of research 25 4. Data collection 26 5. Summary of tools use in research 5.1 interview question 27 5.2 interview question analysis 28 Reference 31 IV
  • 6. 1 The criteria behind the success of AirAsia Chapter 1 Introduction Topic : The criteria behind the success of AirAsia. Subtopic 1. Air Asia history and development - Factors to promoting good brand image of Air Asia - Award (safety, services) - Situation that encourages the development of Air Asia airline 2. Fleet size since established until current fleet - Number of routes compared with the other low cost airlines. - Customer demands that influences the growth of AirAsia (past & future) 3. Organization culture - Organization culture of the part to the development of AirAsia - Factors that make AirAsia have good culture - Vision mission 4. Cost & revenue structure - Proportion of operation cost - Investment - Increase in revenues, incomes and proportion of profit 5. Strategies - Marketing plans and strategies/partners that they use to attract the passenger - Market segment of AirAsia against the competitors/. - Customer segment - Fare price and promotion compared with other low cost airlines - Future trend and forecast for the market segment of AirAsia
  • 7. 2 Introduction and Motivation Nowadays the airline industry has had high competition for the last 7 years after the financial crisis in 2009, especially in low-cost carrier (LCC). Moreover, market segments of LCC is up to 32% in 2013(Airline profiler, 2015) and LCC market tend to grow to 10.42% in 2014-2019(report linker, 2015). As a result, the LCC penetration rate within Southeast Asia is about 56.5% in 2015 (Airline leader, 2016) so, there are always new low cost airlines operating in the aviation industry. Besides all over the low cost airlines, AirAsia is one of the top LCC at world travel awards in Asia. In addition, they have been operating since 2001 with the concept of the dream of making flying possible for everyone which makes them successful and emerge as the world’s best low- cost airline. Air Asia is well known to be the most successful airline amongst other low cost airlines. They have a huge number of passengers ranging up to 50.7 million in 2015 and 171 of feet size (AirAsia Annual Report, 2015) ; moreover, they also have the growth rate 11% (The Star,2016).They have sold low fare tickets and good quality in safety and service. On the other hand AirAsia is one of the airlines that have good marketing plans. These plans urges passengers to continuously increase and has secured trust from South East Asia passengers till date. We would like to study the factors that make AirAsia acquire a successful sustainability by using analysis in terms of marketing plans, system strategies and operation strategies. Figure 1: Market segment of LCC (Source from: http://www.airlineprofiler.eu/2015)
  • 8. 3 All of this reasons make us interested to study what factors make Air Asia successful in the world’s best low-cost airline ranking no.1 best low cost for 8 years (Skytrax) . AirAsia Achievements AirAsia Achievements Year 2016 Year 2015 Year 2014 Year 2013 Year 2012 Year 2011 Figure 3: AirAsia Achievement (Source from: http://www.airasia.com/my/en/about-us/awards.page) Figure 2: Passenger Growth rate (2015-2016) (Source from: http://www.airlineprofiler.eu/2015/10/international-low-cost-airline-market-research/)
  • 9. 4 Implication To know about key-success and ways to be the best low cost airline, understand how Airasia operating. To know about information how Airasia can operate low cost that becomes successful in many countries. Benefit An airline should know about theirs advantages and disadvantages in working processes to develop and improve the company. Government can adapt information and strategy to improve flag-carrier in costing, routing. Customer to have better understanding in the organization and also have brand loyalty. Conceptual Framework INPUT OUTPUT Objective : 1 To know the criteria and key success behind that AirAsia success by their own process and information. Including, sub-factor such as operation, management and HR management that helps AirAsia become the famous organization. Objective : 2 Collecting and analyzing some of study reports or other information that will related to the success factor of AirAsia. The result of research will make us know that what the criteria behind the success of AirAsia are. Table 1: Conceptual Framework
  • 10. 5 Chapter 2 Business review and problem analysis Part 1: Business review 1. History AirAsia was established by a government-owned conglomerate in 1993 and began operations in 1996. In December 2001 AirAsia had only two planes, the airline face problem in heavily debt and was purchased by Tony Fernandes with took up USD 11 million debt. Under the leading of Tony Fernandes, AirAsia had profitable in 2002 and launching new routes from Kuala Lumpur with undercutting monopoly operator “Malaysia Airlines” by sale the low price ticket. In 2003 AirAsia established second hub in Senai International Airport, Johor Bahru and operated first international flight to Bangkok. After that AirAsia established Thai subsidiary called “Thai AirAsia” and Indonesia subsidiary called “Indonesia AirAsia” AirAsia also began set up flights to Macau in 2004, Xiamen, Manila, Vietnam and Cambodia in 2005 and Brunei, Myanmar in 2006 respectively. At the end of 2006, Tony Fernandes announced a five-year plan for enhance AirAsia's to be the leading of low cost carrier in Asia. The five-year plan Mentioned in extension route network by connecting the existing destinations and expanding into Vietnam, Indonesia, Southern China (Kunming, Xiamen, Shenzhen) and India through the subsidiaries and AirAsia focus on developing hub in Bangkok and Jakarta by expanding the new route and increase a frequency of flight that effected to increasing number of passenger up to 13.9 million in 2007. In addition, AirAsia also adopted a JV (Indonesia, Japan, the Philippines, and Thailand) model for expansion in the South East Asian region. In 2010, Fernandes established affiliates to operate long haul international flights called “AirAsiaX” that launched flights to India with flies 45 weekly. In 2011, AirAsia ordered 200 A320neos from Airbus that make them had highest owned ratio for an Asian airline with 87% of Aircraft is on balance sheet .In addition, AirAsia agreed to build an alliance with Malaysia Airlines by share swap. But the alliance agreement was canceled by the Malaysian government. After that AirAsia setting up hub in Philippines with the similar operations as Thai and Indonesia AirAsia.
  • 11. 6 In 2013, AirAsia has profits increased by 168% on a year-over-year when compared to the same period in 2012. Moreover, AirAsia asked to take 49% share of Indian sister airline which the maximum percent of share that allowed by the Indian government in 2013 and AirAsia established the new airline with invest up to US$50 million to begin operated route in Chennai and expanding network throughout South India that AirAsia already operates flights from Malaysia and Thailand subsidiary. AirAsia become the largest low-cost airline in ASEAN now that AirAsia flies to all ASEAN countries with a great market segment in Asian countries that include India, Iran, Sri Lanka and Bangladesh. Moreover, AirAsia also has the good portions in United Kingdom, France, Japan, Korea and Australia through affiliates AirAsiaX. 2. Product of Air Asia 2.1 AirAsia X Berhad AirAsia X, the long-term, low-cost airline affiliate of the AirAsia Group that currently flies to destinations in the Asia Pacific region and beyond. Now the airline serves 23 destinations in Asia, New Zealand, Australia, Africa and Middle East. AirAsia X operates a fleet of 30 A330-300s. Airline has carried more than 19 million people since it began service in 2007; AirAsia X won the Best Low Cost Airline Premium. Premium Cabin world's best low cost airline and premium seats annual Skytrax World airline Award for four consecutive years from 2013 to 2016. 2.2 AirAsia Premium Red Lounge The AirAsia Premium Red Lounge provides a warm and inviting space, where passengers can rest or chill, as well as catch up on unfinished business before continuing journey. The lounge offers VIP Room, Newspaper & magazines, Food & beverage, Shower, Wi-Fi connectivity, Work station area, Charging area, Ladies dressing area, Air-conditioning, Flight information. The lounge is located in International Departure, Kuala Lumpur International Airport 2, and Malaysia. 2.3 Big Duty Free: Pre-book Airasia offer the convenience of ordering duty free products online you can use up to 24 hours before flight departure and items purchased will be delivered to customer’s onboard selected flights. Customers will be able to pre-book duty free via www.bigdutyfree.com on all AK international flights both inbound and outbound from KLIA2.
  • 12. 7 2.4 Rental car AirAsia Customers can rent a car from the airport and city destinations that AirAsia fly to. Choose where to pick up and drop off their vehicle in the place you want. This service is powered by CarTrawler. 2.5 ROKKi Wi-Fi ROKKi give access to entertainment via the internet on the flight. 3. Fleet size Nowadays AirAsia has almost 171 fleets by using airbus A320 which come from Malaysia 80 aircraft, Thai AirAsia 45 aircrafts, Indonesia 25 aircrafts, Philippine 14 aircrafts and 6 aircrafts from India. From the table below show that in year 2011 have only 97 aircrafts and increase continuously even in year 2015 decrease from year 2014 but it just only 1 aircraft so it doesn’t have any effect to the airline. However, in the future AirAsia will order more 404 aircraft, 304 fleets in types of airbus A320neo and 100 fleet of airbus A321neo. Figure 4: AirAsia ROKKi Wi-Fi (Source from: http://www.airasia.com/th/en/about-us/our-offerings.page)
  • 13. 8 AirAsia Fleet size The table below shows that AirAsia plans to take an initial batch of five A320neos, which will be configured with 186 seats, by the end of 2016. The group’s new fleet plan now includes delivery of an initial batch of six A320neos, which are expected to be configured with 240 seats, in 2019. Deliveries of both types are now spread out through 2028, with the rate of deliveries accelerating significantly in the early part of the next decade. Staggering deliveries over such a long period is not unusual for AirAsia or other LCC groups with large order books. (CAPA aviation, 2016) Figure6: AirAsia plans for A320neo-A321neo (Source: CAPA center for aviation and company report) Figure 5: AirAsia Fleet size 2011-2015 (Source from: AirAsia annually report 2015) AirAsia plans for A320neo-A321neo
  • 14. 9 4. AirAsia Passenger The AirAsia group has a huge number of passengers ranging up to 50.7 million in 2015, up 11% from 45.58 million passengers in 2014. (AirAsia Annual Report, 2015). According to the star online (2016) present that number of passengers carried by Malaysia AirAsia has 24.25 million that increase to 10% from 2014, gained 7% in capacity to 30.08 million. AirAsia India has 324% increases in the number of passengers carried in 2015 to 1.46 million but the number of passenger in 2014 has only 345,298 while capacity increased by 322% raging up to 1.82 million from 430,560. However, the number of passenger carried by Indonesia AirAsia decreases from 6.52 million in 2015 compared with 7.85 in 2014, it’s decreasing up to 17% while capacity was decreasing 13% to 8.76 million from 10.04 million. In the first quarter of 2016 from Preliminary Operating Statistics presented that The Airasia group has 17% increase in the number of passenger at 13.9million and 6% increase in capacity. Malaysia AirAsia has 17% increases in the number of passenger at 6.48 million and 3% increase in capacity. Thai AirAsia has 18% increase in the number of passenger at 4.37 million and 11% increase in capacity. Indonesia AirAsia has 2% increase in the number of passenger and 10% decrease in capacity. Philippines AIRASIA JAN-MAR 2016 2016 2015 Change Group Passenger Carried 13,940,659 11,878,498 17% Capacity 16,287,828 15,436,800 6% Malaysia Passenger Carried 6,475,081 5,538,684 17% Capacity 7,579,068 7,347,600 3% Thailand Passenger Carried 4,365,286 3,701,286 18% Capacity 4,965,480 4,476,960 11% Indonesia Passenger Carried 1,593,904 1,557,721 2% Capacity 2,006,100 2,223,180 -10% Philippines Passenger Carried 967,588 843,250 15% Capacity 1,107,900 1,088,820 2% India Passenger Carried 538,800 237,557 127% Capacity 629,280 300,240 110% Table2: AirAsia Passenger 2015-2016 (Source: AirAsia Annual Report, 2015)
  • 15. 10 AirAsia has 15% increase in the number of passenger at 0.97 million and 2% increase in capacity and AirAsia India has 127% increase in the number of passenger at 0.54million. 5. Route and market share Asia serving over 221 routes and 39 new routes introduce in 2015 over 112 destinations from 20 hubs in Malaysia, Thailand, Indonesia, Philippines and India. Malaysia AirAsia network Malaysia AirAsia serving 107 routes with 50 unique routes in 72 destinations in 17 countries from 5 hubs in Malaysia. Moreover , they have planned to introduce 13 new routes in 2015.The airline rapidly expanded its domestic and international route network as shown in their Market share, covering 47% of domestic and 49% of international market share. The picture below will show about the operation routes of Malaysia AirAsia. Thai AirAsia network Thai AirAsia serving 60 routes and about 14 of their routes are unique covering 45 destinations in 11 countries from 5 hubs in Thailand. The airline has planned to introduce 12 new routes in 2015. Moreover, in 2015 shown that Thai AirAsia received 28% of domestic and 18% in international market share. The picture below will show about the operation routes of Thai AirAsia. PhilippinesvAirAsiavnetwork Philippines AirAsia serving 18 routes in 15 destinations in 6 countries from 3 hubs in Philippines. The airline has planned to introduce 3 new routes in 2015. Moreover, in 2015 shown that the airline had received 13% of domestic and 7% in international market share. The picture below will show about the operation routes of Malaysia AirAsia. The picture below will show about the operation routes of PhilippinesvAirAsia.
  • 16. 11 Indonesia AirAsia network Indonesia AirAsia serving 38 routes and about 8 of their routes are unique covering 19 destinations in 5 countries from 4 hubs in Indonesia. The airline has planned to introduce 5 new routes in 2015. The airline received 3% of domestic and 27% in international market share in 2015. The picture below will show about the operationcroutescofcIndonesiacAirAsia. IndiacAirAsiacnetwork India AirAsia serving 13 routes in 11 destinations in 1 country from 2 hubs in India. The airline has planned to introduce 6 new routes in 2015. In 2015 shown that the airline had received 2% of domestic and 6% in international market share. The picture below will show about the operation routes of India AirAsia. AirAsia X AirAsia X is one of AirAsia group that provide in the long-haul that currently flies to destinations in the Asia Pacific region and beyond. The airline serving 23 destinations across Asia, Australia, New Zealand, the Middle East and Africa with A330-300s fleets. The picture below show about the routes that operate by AirAsia X. Figure 7: AirAsia Market share 2015 (Source: AirAsia Annual Report, 2015)
  • 17. 12 6. Distribution channel How to buy the ticket? Customers can buy AirAsia ticket from many distribution channel such as AirAsia website or Application, Airline Agency, and convenient store. The most customers prefer to booked from AirAsia website according to low fare promotion, easy to booked, and easy to payment. Distribution channel show below. - www.airasia.com (AirAsia’s Computer Reservation System ) - Application - Sell counter - Sell office - Call centre - Kiosk machine - Travelport-connected-agents-worldwide,-www.travelport.com - Expedia - Skyscanner : Application, www.skyscanner.net - Booking : Application , https://booking.airasia.com - 7-eleven - Tour & Airline agency How to contact? Customers can contact to Air Asia by information below. - www.airasia.com - Counter service - Customer Service 7. Customer segment The main customers of AirAsia are people who have low salaries and budget. Most of them fly for travel purpose. The second group is people who have middle salaries, they fly for business reason. Nowadays customers who go for travel or business want to pay cheaper to secure a seat on a flight. AirAsia's objective is the all individuals salaries' identity fall in the middle or lower wage in Malaysia. That is the motivation behind why the AirAsia dependably utilize the low value vital to position it is constantly less expensive than their competitors. Furthermore, it additionally focus to the age who are young, adults or more can spend and might be constantly require a flight to other far destination in shorter time. Third, behavioristic of AirAsia’s target also is the general people who are sensitive in price and none loyalty. In this way, they will attract passenger by their promotion.
  • 18. 13 This type of target market will affect to other competitor who also serve the most reduced cost or doing sale promotion. This type of target market are likely buy the service which is economy, valuable and affordable. 8. Customer behavior Passengers are the main player who driven the aviation industry development. Nowaday, low cost carrier play a significant role in the airline industry in term of modern strategic model and good service offering. Low cost carrier had changed the passenger’s trend and made the great impact to the customer market in many countries. AirAsia is considered as Asia's largest low-fare, no-frills airline that operates scheduled domestic and international flights (UKessays,2015). It is also the first airline in the region to implement fully ticketless travel. The one of the reasons that make AirAsia popular among the other airlines is cheaper ticket prices than the full fare carrier. They provide the ticket price for business class with the resemble price as regular ticket and even the meals are not for free but the prices are affordable. In addition, They cut off the value added that main airport are offering and use the electronic ticket instead of using paper. That’s why they can attain their cost. Another, passenger's more interested at internet thing. AirAsia provides the website which address at mobile.airasia.com. More passengers buy ticket through the online channel and choose the easy way to pay for them. Moreover, AirAsia have the good strategic planning and take the right action. They began with using the facebook to attract the passenger and continually set the hot prices ticket and another attractive promotion. 9. Sales contribution According to Airasia annual report show that the total revenue is up to RM2.77 billion from the previous year which divided in revenue via internet 70% and operating profit margin 32.3% (2015). In term of revenue, Most of the AirAsia revenue come from passenger seat sales 66%, ancillary 16%, aircraft operating lease 11%, fees and surcharge 7% (Macquarie Research,2013). And also, increase a lot in the last five years although they have bad impact from the natural disaster in many countries. But they still make profit continually.
  • 19. 14 AirAsia Revenue Breakdown Unique Culture & Management Style 10. Organization structure Democratic style AirAsia Company use walk around management style that is open plan workplace where everybody does not has their rooms. Staffs in organization don’t have to stay where you are, they don’t have hierarchy. Everyone has the chance to share ideas and they can walk up to the director of AirAsia any time. Their concept is “ employees come first, customers come second” Management philosophy: Director of AirAsia wants people to achieve their dreams and passion. Meritocracy Style Age, gender, ethnicity and religious are not important Director of Airasia is positive thinking person, he always believed that everybody can achieve their passion as long as they have the dreams & goals. The employees drive the brand’s success. ONE PEOPLE , ONE CULTURE, ONE AIR ASIA and ONE FAMILY are AirAsia objective to ensure that the AirAsia staff around the world support this culture to reach the goal of ensuring everywhere they Figure 8: AirAsia Revenue Breakdown (Source: Macquarie Research)
  • 20. 15 fly is the best experience at ONE AirAsia. The asset made AirAsia success story are people, their commitment, determination and tolerance. They create positive and positive AirAsia culture that infiltrates every line of operation. Annual report (AirAsia.2006). Values of AirAsia are inculcated the employees - safety, passion, integrity, caring and fun. These values provide a reputation for AirAsia. The director of AirAsia believe that usual style of dressing at work can affect the culture in organization. He goes to work wearing his trade mark red AirAsia cap, short sleeved t-shirts and a pair of jeans which are sometimes older than his employees so that decrease that barrier of communication between himself and employees. “People are AirAsia’s best asset.’’ The director of AirAsia try to create a flat structure that everyone has access to the leader resulting in discovery of their potential and talent.
  • 22. 17 Successful analysis 5 factors that make AirAsia success 1. People AirAsia have train staff resulting in good attitude staff and good response to customer. AirAsia can reduce cost of staff by use internship student and improve staff to be multi-skill. 2. Method Operation – Have low cost and efficient of operation because they use secondary airport and high aircraft utilization. Marketing – AirAsia have a 0 baht promotion and multi advertising such as Instragram, Facebook and TV. Channel – AirAsia provide convenience for customer to pay via counter service, VISA and PayPal. 3. Environment AirAsia have good organizational culture because, in organization have low hierarchy, AirAsia treat a staff like family and give important to staff. 4. Machine AirAsia use leather chair because it can use for the long time. They use one type of aircraft because they can save cost of staff training, storage space, equipment, spare part and maintenance. 5. Supportive AirAsia have many partner to corporate such as tour agency, hotel, and car rent. They have financial support from 30 largest share holder
  • 23. 18 Chapter 3 literary review Part 1 Theory and Tools Theory Democratic style According to leadership styles shown that “Democratic leadership style is a very open and collegial style of running a team. Ideas move freely amongst the group and are discussed openly”. The democratic leadership style means facilitate the conversation, encouraging people to share their ideas, and then evaluate the information to make the best decision. Meritocracy Style According to Jim Whitehurst said about Meritocracy in Workplaces That “Everyone has the right to express their opinions and are encouraged to share them openly and often”. This is the key distinction of the meritocracy. While everyone does have a voice in their workplaces. Mind map analysis Originated in the late 1960s by Tony Buzan. Mind-maps are great to display the context of problem or situation or even system. Mind maps are also useful when working on improving cross-functional business process with groups of people. However, for a more systems orientated view, use an entity relationship diagram. The purpose of mind map It shows all aspects and sub as sub aspects (or causes and sub cause) of any kind of problem model in a logical and graphical structure. Moreover it is a non-linear way of organizing information and a technique that allows you to capture the natural flow of your ideas while applyingaassociativeathinking.
  • 24. 19 Part 2 Operation management Fleet planning The new technology of aircraft that manufacture provide to airline is important to choose aircraft with technology reduce noise in the cabin, fuel saving , more seat capacity, reduce releases CO2 to atmosphere (Airbus,2016). Ordering aircraft plan will effect to airline inside increase response of customer need and manage cost of operation that means price/seat also decrease (Prachachat, 2016). Another, the reason that can affect to airline decide use fleet of manufacture, sell aircraft on a per flight hour basis, providing the airline flies a minimum flight hours per month. Such agreements include maintenance, and all service parts required which, some manufacture does not offer this commonality to Airline and the whole fleet shares some features making the training from one model to other exceptionally short that could be a reason (Jose Sanchez- Alarcos, 2015). Airline schedule planning Route planning is one of critical for success factor. Numerous strategies are implemented by carrier to make sure their market position, their market share, and to access customer demand. The main reasons of schedule planning process involving of 2 factors are schedule design and fleet assignment (Lohatepanont, M., & Barnhart, C. 2004).Airline schedule design and fleet assignment are concerned about WHERE ,WHEN,HOW often to offer flight and assignment aircraft types to flight legs to maximize profit and maximize aircraft utilization(Jeff Julton,n.d.). Supplier management Every operator need to ensure their firm has trusting supplier relation because of they have to share more information with them. If an operator has a supplier who is failing, the tendency is to lose their profit (Trebilcock, 2014).moreover from Expert Systems With Applications said that organization need to select the most suitable suppliers that meet a company’s need, due to qualitative and quantitative criteria( Rezaei, Jafar Fahim, Patrick B.M.Tavasszy, Lori, 2014 ). And owner should choose supplier that offer better service on a reasonable price (Bargaining Power of Supplier and Airline Industry, 2011)
  • 25. 20 Customer management According to Golightly, internet has reduced costs of ticket sales but created a more powerful customer who can easily shop around for the best price. With internet use there is almost no switching cost for the customer (1967, p. 68). The top 3 of channel that people buy the ticket are mobile application, internet-social network, airline official website (Bangkok university, 2554). And the most channel that the pay the ticket is electronic banking. So, airline must mainly focus on internet-channel to sell the ticket, make a payment and communicate with passenger. Second, efficient operation in one of the important things for several airlines. The aircraft should taking off and landing on time with safe flight include no damage or get loss of their belonging. Moreover, employees is the people who get close to the customer and directly affect to the airline’s image and performance. Staff need well trained for competence skills and change their mind set to the service mind; passenger gave 4.58 score out of 5 for necessary of staff good manner and good service on board and 4.41 of staff on ground (Bangkok University,2554) Including, providing the good timetable for customer and comfortable seat on board . Another, customer relationship management is the way to make customer’s loyalty. Continually refining insights into customer needs, habits and economics, developing targeted and tailored value propositions based on those inputs, strategically focusing business resources on activities that build long term customer and economic value (tnooz, 2013). External environment Law & regulation The antitrust law is the law which protect the benefit of consumers by keeping price down and keeping quality up it means this law effect in airline because they can’t merger with each other to fix fare price (Federal Trade Commission,n.d.) if we didn’t have this law , airline will have power to maximize fare ;moreover , Australian Competition & Consumer Commission indicated that price fixing is considered as an illegal for competitor to co-operate together to fix prices. The penalties for price-fixing are fined, the authority can fine up to $ 10 million and imprison at maximum five years or both (government of Canada,n.d.) Technology and innovation 13 efficiency improvements have slowed down since 1970s due to the slow of technological advancement in engine, aerodynamic designs and airframe materials.While aircraft manufacturer and airlines are more focus on global climate change from jet engine emissions.Based on the analysis of various alternatives for
  • 26. 21 aviation, a best reduction in environmental impact can be achieved through biofuel in the near future(Joosung and Jeonghoon,2011).Moreover, According to Teresa, The global aviation industry processes 2% of all carbon dioxide emissions and 12% of the total emissions from the transportation industry. By the way, advanced aircraft technology provides the following benefits.New aircraft reduce fuel consumption by double-digit percentages compared to older ones. Aircraft performance also improves by using advanced technology winglets (reducing drag).Some of the technologies used for fuel efficiency reduce noise by 30%. They also improve range and payload. Increasing the range allows the airline to expand its connectivity and network. Payload improvements increase revenue and profitability. Some of the new aircraft designs provide the flexibility to add more seats (Teresa,2014). Another factor is intelligent automation. It’s provides an opportunity in passenger experience. The arrival of web, mobile and kiosk check-in means automation is now common for many passengers. This pre-flight also reducing costs for airlines.Every airline goal is to deliver a service that’s more informed and more personalized than competitors. For example, Automation can collaboration with airline call-centers such as supporting agents during calls by selling packages to passengers based on learned information. Airlines can use intelligent automation to help the workforce from its current focus on managing processes, to an emphasis on delivering customer experiences. (Accenture,2016) Economic The aviation industry causes great external effects such as; Promoting tourism, higher employment, and boosting investment within any one country. This may increase overall GDP. However, some of the negative effects associated with the industry include the release of excessive emissions of harmful emissions into the polluting atmosphere (Keller & Buttler, 2000). The aviation industry is affected by fiscal and monetary policy, the government's decision to make airline taxes included in their operating costs. Also investments in infrastructure have a huge role to play. It can also be asserted that the decision to liberalize the aviation industry can bring about the positive effects into the industry. Closely linked to fiscal and monetary policy is the issue of wage inequality. Companies that operate in countries with job losses are likely to attest or the same within aviation. However, statistics show that inter-firm disparities in wages are quite high especially with regard to pilots. Lastly, the aviation industry is affected by elasticity in supply and demand depending on the size of the industry and how long it has been in operation.(Smith.Carolyn,n.d.) According to Teresa, 2014 said that a healthy economy acts as a catalyst for industrial growth. Economic health is also measured by various economic indicators. Examples of economic indicators include growth in gross domestic product (or GDP),
  • 27. 22 per capita income, disposable income, industrial production, level of business, and consumer confidence. Fluctuation in oil prices is another major factor that impacts airlines’ profitability. We’ll also see how economic indicators, like industrial output and business confidence, directly influence growth in airline passenger and cargo traffic.Economic factors support industry growth, like most industries, the airline industry is impacted by the economic cycle’ s peaks and troughs. The current growth in developed economies—like U.S. that’s driven by the loosening monetary policy—has resulted in a rise in business confidence, industrial production, and international trade. All of these results act as catalysts for airline industry. (Pearce, Brian.2016) Political The political factors that affecting airline industry 1.International Trade. The aviation industry plays a vital role in the growth of the global economy. However, there are places around the world where airline transportation is not being widely used due to government restrictions. For example, the airline industry cannot easily expand to foreign markets, which is not a partner with its own country. If the United States does not trade with other countries such as Russia, it will be difficult for American airline companies to expand into the markets, despite their riches. International trade may involve international agreements on air transportation.In this situation, the airline company must comply with these requirements to operate the business. Some of these agreements may hinder the operation of air in some countries, affecting the entire region. 2. Tax Policy. The tax rates vary from one economy or market to another. This means there are some countries where the airline have to pay more taxes for operate. As a result of this, their operational costs are stretched, hence, decreasing revenue base. On the other hand, the tax policies may also encouraging business and profitability. (Montréal,2013) 3. War, Terrorism, disease outbreaks. The political factors including terrorists' activities can affected to airlines that to increase its security measures thereby increasing high operation costs. This has adverse effects or impact on the low price airlines. (Penelope Butcher et al, 2005).War, terror and epidemic of illnesses like Ebola are also some of the main factors that can mostly affect airline transport too. In countries that are destroyed by the war, it becomes difficult for airlines to operate in due to the risk involved. In addition, terrorism is also a new threat to the aviation industry. In fact, there are many countries where some major airlines have stopped operating due to the risk of terrorism. In countries where these events are always experienced in the interests of passengers and airline companies to suspend or stop air transportation. However, there are cases where politicians have made the situation worse than the real conditions on the ground. These words can affect the airline industry by reducing business when the environment is not bad. (Teresa, 2014)
  • 28. 23 Customer Demographic factors is an important role in forecasting demand. To match customer expectations in regard to value-add service offerings. In according to generation categorize by the year of birth :Baby boom(between 1946-1964) and Generation Y or Millennial generation (between 1980–1999).Currently, the baby boomers are still active customers (25%) but expected to decline to 16% by 2020 and 11% in 2025. While, Gen Y are 35% customer and increase to 46% in 2020 and 54% in 2025.This reflect to airline to focus on changing customer travel preferences in order to remain successful.Millennials are more willing to pay for facilities such as Wi-Fi and in-flight entertainment, refundable tickets and tend to make more itinerary changes per trip than non-millennial, More interested in discounts, airline packages, and low-cost carriers, Likely to book tickets through online and also use the mobile applications. Analysis of different groups’ travel preferences can help airline plan their target segments, allows them to study which segment can have higher returns on investment to increase profitability. It allows them to determine and plan future service improvements (Teresa,2014). To succeed the expectations with Millennials.Can be done by leading brands are spending as much time and building experiences and trusted relationships as they do developing new products and services. Build trusted relationships, Connect with a purpose, Realize the importance of experience, Adopt an adaptive cross-industry perspective, Integrate new technologies and enhance social presence (Oliver,2016). Moreover, to gain market share and sustain profit airline must develop new ways to manage their customer relationships to optimize customer loyalty. Full-service airlines must adopt a Customer relationship management strategy to pursue competitive effectively in the future. Low-cost carriers also need to invest in fundamental strategy to optimize the efficiency of customer satisfaction. By understand customer value and needs, and train employees with the tools and knowledge to respond to the customer.(Boland, Morrison and O’Neill,2002)
  • 29. 24 Natural Hazard Accident not only affects to the reputation of airlines and the economy of air transportation industry but also lead to human injury and loss of human life (McFadden and Hosmane, 2001). Effect of Environmental Factors on Aviation Safety 1. Effect of weather on aircraft flight Weather is the major factor that occur aviation’s accidents and incidents which effects to poor visibility may lead to pilot errors and collision with terrain or with other aircrafts. Weather-induced rough flights, capable of causing serious discomfort and even injury are a matter of common experience by many passengers (Mahapatra and Zrnic,1991). In poor weather and phenomena conditions it is very difficult to pilot decision making. 2. Effect of atmospheric conditions on aircraft flight Atmospheric condition factors can lead to serious air disaster which are thunderstorms, lightning, hail, icing, wind shear, heavy precipitation, heavy rain, low cloud etc. The thunderstorm is the large number of accident and incident (battan, 1961; Magono,1980). Hail is the second factor more hazardous for aircraft engines and structures because it is solid nature and in extreme case it cause engine to flame out (Guegan et.al,2011). 3. Effect of Meteorological and Geographical factors on aircraft flight Low pressure, complex climate and rough topography are very difficult to aircraft operation (Shanhua and Xueqing,2007). Weather change in mountains is very quickly. The mountain’s weather in the morning is appropriate to fly more than afternoon because in the afternoon there are more cloud. Pilot should know steepness of glaciers and mountainsides before operate flights. For the prevention of CFIT (controlled flight into terrain) accidents crew position awareness and monitoring of navigational systems are very essential. 4. Effect of natural calamities in aircraft flight Natural disasters impact on aircraft flights and airport infrastructure. Volcanic eruptions and earthquake can affect the airplanes. Earthquakes is the disasters that is the most damage for airports, aviation facilities. And it is the cause of people injuries and damage to the structures (Smith,2011). The ash is very hard and small in size it can scratch and damage airplane body parts, engine parts and injection of ash that can also damage aircraft electronic system.
  • 30. 25 Internal environment Organization Structure Organizational structure has become a powerful tool in management. Unlike in the past, management has focused more on technical and administrative issues. Organizational structure is a form of relationship that determines how it works by structuring its position, responsibility, authority, and the underlying foundation that is the place to start positioning the communication systems of the people in the organization. Golightly (1967) states, “If recent airline experience has proved anything new about organization, it is that structure is even more important to a service business that it is in a typical make-and-sell enterprise” (p.70).The best structure is to increase effective in communicating and inhibit obstacles between people and hierarchies. (Harogopal, 2006). To make the organization have a good structure and relationship in the organization. Companies can have a strategy to build competitive advantage. According to Spector said that functional structure emphasizes work excellence, brigade structure for market response, and horizontal structure for chain processes. Organization culture Organization culture is a set of values and ways of doing things that has been accepted by most of employee and staff (Laudon & Laudon, 2007, p.87). That adapt to business processes and effect to the end product that face by the customers. According to John McLaughlin said that, organizational culture is a system of shared assumptions, values, and beliefs, which manage how people behave in organizations. These shared values have a strong influence on the people in the organization and dictate how they dress, act, and perform their jobs that will affect to service that customer receive. It was considered that the culture of a company can provide a competitive advantage that could bring superior financial performances only if there are fulfilled three conditions (Barney, 1986). Planning and Forecasting The ability to communicate their own products is well-designed, especially the needs of consumers and consumers. Planning is an important management tool in the airline because it helps in predicting and creating emergency planning situations due to very dynamic unstable environments that may change and be planned(European Journal of Business and Management,2013).
  • 31. 26 Human resource From organization perspective, service level and the way service that delivered through the front line staff can be an important source of competitive advantage and strength of the customer-front-line staff is important factor of customer loyalty (Bove and Johnson, 2001; Castro et al., 2004). According to Jeff Fulton said that, the high- capability staff is critical in this service business like the airlines. So, Training programs focusing on front-line communicative skills with customers and customer-focused continuous improvement. The front-line staff and service is a core part of the brand, from a customer experience point of view, consumers often see front-line staff as the firm itself and getting the service experience or customer perceptions from front-line staff and service (Jochen Wirtz, Loizos Heracleous, Nitin Pangarkar 2008). Human resource are related to successful of airline through employee Productivity or airline service capacity per employee is a measure of how effectively the employees work together and providing service to serve passengers from one place to another. Morale is a measure of how employees are to providing good service to the customers. (Richad M. Mcabe, PHD 2006). Employee empowerment Employees empowerment is one of the most important factors in the organization. According to The Certified Manager of Quality/Organizational Excellence Handbook, pages 45-46 said that Employee empowerment also means giving up some of the power traditionally held by management, which means managers also must take on new roles, knowledge and responsibilities. Employee empowerment leads to entrepreneurial traits and informs employees of the actions and encourages them to believe that they can control and take care of others. Employees who have the power to assert their self-control through hard work and effort are instrumental in the success of all institutions. (Anthony L. Emerson, 2012). Therefore having employee empowerment can make it more credible and effective in the organization.
  • 32. 27 Chapter 4 Research methodology The study of research is to know the criteria behind the success of AirAsia. We studied literatures, data collection and report that were on the public. The research use data analysis tools to set up the objectives to interview exclusive director of AirAsia Airline. Moreover we list and set the questions by using the objective to interview the exclusive director of AirAsia Airline. And key player of this research are the proficient in aviation industry that include chief executive officer of AirAsia, chief financial officer, president and group chief operation officer, group chief commercial officer. For the information procure from the exclusive director of AirAsia Airline. All exclusive director said in the same of how to operation in organization to make AirAsia Airline success. 1. The process of conducting research For gain the right and the most effective information, The researchers choose to interview the people who relate to Airasia organization, such as Air Asia executive, Human resources manager, Airasia marketing and others by unstructured interview method. 2. Research Design The purpose of this research is to know the criteria behind the success of AirAsia. The interview asked questions about how AirAsia success to the person who related with AirAsia such as AirAsia executive, Human resources manager,Airasia marketing and others. The question and the answers are used for maximize benefits follow the objective of the research. The results from the answer will show the real reasons of the criteria behind the success of AirAsia. The interview method is unstructured interview that researchers have questions pattern to ask. Finally, researchers analyze data by brainstorming and qualitative analysis to find conclusions. 3. Scope of research This research built to analyze the factors that AirAsia successful and be the main reader among low cost carrier such as Operation management, external environment, and internal environment by using 2 ways to collect the data are primary resource ; interview the exclusive director of AirAsia Airline. And secondary resource ; this resource come from the annual report of the airlines, thesis and some report of another student.
  • 33. 28 4. Data Collection 4.1 Primary Data Interview question 1. In your opinion, what is the important key of the AirAsia's success in term of competitive advantage? (CEO) 2. How airline take the responsibility to the staffs training and the staffs education? (CEO) 3. What is your organization's structure and what strategies would you use to motivate your team to achieve organization's goal? 4. Does government/university in Thailand support the new staffs or who just trained, and how? 5. What is your organization’s risk management? 6. Does the LCCs is one of the factors that make you success? (CEO) 7. What is the medium and long term plan of AirAsia’s marketing? 8. Where do you see your organization 10 years from now?(All department)
  • 34. 29 Interviewer Chief Executive Officer of AirAsia Miss.Aireen Omar Chief Financial Officer Mr.How Kim Lian President and Group Chief Operation Officer Mr.Bo Lingam Group Chief Commercial Officer Miss.Siegtraund The Interview question analysis We defined the question to make sure that our objective achieving. In the first question, 1. In the First question, we want to identify what is the main factors that make AirAsia become the successful airline and what is the supportive factors which partial influence the organization achieving. Aireen Omar, chief Executive Officer of AirAsia will answer this question. 2. Second question, it’s linked to the answer of the first question. Including we want to know that staff training and education is related to airline development. Aireen Omar, chief Executive Officer of AirAsia will answer this question. 3. Its about their organization’s structure and strategies that AirAsia use to manage the authorized of employees and motivate them. It can be the one of factor that affect their efficient work and be one of the factor of success. Mr.Aireen Omar, the Chief Executive Officer of AirAsia will answer this question. 4. We want to know about other organizations that support and make any affect to the AirAsia airline in term of human resource management. Aireen Omar, chief
  • 35. 30 Executive Officer of AirAsia will answer this question. 5. In this Questions we want to know how organization control and deal with their risk and what is the risk management of their organization such as tools, strategy or plan. Answer by CEO, CFO,COO, and CCO. 6.The second question will ask Mr.Aireen Omar the Chief Executive Officer of Airasia airline about does the LCCs could be key success factors for organization. 7. What is the their marketing plan in both medium term, long term for the coming future. CCO will 8.In the last question is about the view of organization in next 10 years,this question will ask Aireen Omar CEO. The purpose of this question are to know how does a company’s readiness for future and what is the organization’s strategies planning in the future. 4.2 Secondary Data From previous interview result 1.Tony Fernandes saw an opportunity to introduce a new airline with an unusual business model. While aviation industry facing business regression from 9/11 terrorism, airlines across the world were retrenching employees, and travelers scar to air travel. Air Asia was launched in 2001 with slogan of making flying possible for everyone. Since then, AirAsia has success to become the world’s best low-cost airline. 2. Nadda Buranasiri (Chief Executive Officer of AirAsia X) We use Thai AirAsia's network to be the strength. Our marketing strategy is the highlight of visit to Bangkok and beyond. Although, other airline offer cheaper ticket price but it was just a short- term marketing because every airline had the same cost, so the prices were not very different in normal conditions. But factors that make travelers decide is the brand royalty. 3.Tassapon Bijleveld (Chief Executive Officer Director of Thai AirAsia) The advantage in competition for Aviation industry is cost. Air Asia have efficiency to reduce the cost both fixed cost and variable cost. They can reduce cost approximately 1 of 3 which is the competitive advantage that make AirAsia is the leader in low cost carrier in Thailand.
  • 36. 31 4. Kamarudin bin Meranun (Chief Executive Officer Director of AirAsia X) Building the strong band to be known and accepted in market by expand and increase amount of passenger under slogan “Everyone can fly” that effect to competitor in aviation business. Their strength is managing the cost better than competitor so they can set the promotion especially zero bath of airfare. 5. Summary of tools use in research Summary of tools Objective Data collection Data analysis To identify what is the critical factors that make AirAsia very success in aviation industry Primary data Interview - Chief Executive Officer of AirAsia -Chief Financial Officer -President and Group Chief Operation Officer -Group Chief Commercial Officer Secondary data Thesis AirAsia’s Annual Reports, 2015 Study report News Previous interview result - Brainstorming - Mind Mapping analysis Table3: Summary of tools use in research
  • 37. 32 Analysis framework INPUT PROCESS OUTPUT Objective : 1 To know the criteria and key success behind that AirAsia success by their own process and information. Including, sub-factor such as operation, management and HR management that helps AirAsia become the famous organization. Objective : 2 Collecting and analyzing some of study reports or other information that will related to the success factor of AirAsia. Data collection Primary data Interview - Chief Executive Officer of AirAsia -Chief Financial Officer -President and Group Chief Operation Officer -Group Chief Commercial Officer Secondary data Thesis AirAsia’s Annual Reports, 2015 Study report Tools analysis -Mind mapping analysis The result of research will make us know that what the criteria behind the success of AirAsia are. Table5: Analysis Framework
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