Entry Strategy of Air Asia in Dubai

Welcome on board!
Friday, July 4, 14

The Entry Strategy of
in Dubai
Friday, July 4, 14

About Air Asia
Friday, July 4, 14

Air Asia: Company History
Friday, July 4, 14

Air Asia in Brief
AirAsia
is
one
of
the
award
winning
and
largest
low
fare
airlines
in
Asia.
Has
a
fleet
of
165
aircra8s
and
flies
to
100
des:na:ons
spanning
over
22
countries.
Operates
from
hubs
located
in
Malaysia,
Thailand,
Indonesia,
Philippines
and
India.
Affiliate
airlines:
Friday, July 4, 14

Air Asia: Revenue (26 February 2014)
Friday, July 4, 14

Characteristic of Air Asia
Boss
No#extra#
charges
Above#
80%####
on45me#
departur
es
High#
safety#&#
quality#
standards
Low#
fares
132#routes,#
40#offered#
by#no#other#
airline
Easy4
check#in#
online
Frequent#
flyers#
offerings
Now$
Everyone$
can$Fly
Friday, July 4, 14

Entry Strategy to Dubai 2016!
Friday, July 4, 14

Dubai: Introduction
Friday, July 4, 14

INTRODUCTION
Demographics

Popula:on
2106177
(1
January
2013)

Indian
(51%),
Emira:
(17%),
Pakistani
(16%),

Bangladeshis
(9%),

Filipinos
(3%),
Others
(4%)

Area:
4,114
km2

Average
household
income
(monthly):
$3186
(2009)
Average
household
income
(yearly):
$35910
(2009)
Economic
Criteria
GDP
Disposable
Income
Friday, July 4, 14

INTRODUCTION
Poli%cal
&
Legal
Environment
1.Federal
presiden:al
elected
monarchy.

2.No
poli:cal
par:es,
poli:cal
par:es
are
forbidden.

3.Dubai
is
subject
to
the
federal
law
of
the
UAE
but
retains
the
right
to

administer
its
own
internal
affairs
and
enjoys
certain
other
exclusive

rights.
Legal
representa:on
1.Easy
legal
representa:on.

2.The
full
spectrum
of
regional
and
interna:onal
law
firms
operate
in
Dubai,

with
many
of
the
larger
interna:onal
firms
choosing
to
operate
from
the
DIFC
Corporate
governance
With
the
mission

to
develop
corporate
transparency
and
principles
of
good

corporate
governance
and
an:-‐money
laundering
Hawkamah
Corporate

Governance
Ins:tute,
has
been
established.
Friday, July 4, 14

INTRODUCTION
Tax
System
1.No
federal
corporate
or
income
tax
levied
in
the
UAE
(except
on
oil
companies

and
foreign
banks).

2.Free
zone
en::es
are
subject
to
a
number
of
tax
concessions.
3.There
is
no
value
added
tax
or
sales
tax
in
Dubai
or
the
UAE.
4.There
are
no
exchange
controls
on
the
remieance
of
proﬁts
or
repatria:on
of

capital
and
there
are
virtually
no
restric:ons
on
foreign
trade.
The
Court
System
1.Dubai
has
retained
its
own
independent
courts
(and
judges),
which
are
not
a

part
of
the
UAE
Federal
Judicial
Authority.

2.Dubai’s
courts
will
ﬁrst
apply
federal
laws,
such
as
the
Companies
Law
or
the

Civil
Code,
as
well
as
the
laws
and
decrees
enacted
by
the
Ruler
of
Dubai,

where
federal
law
is
absent
or
silent.

Friday, July 4, 14

INTRODUCTION
Structuring
and
licensing
for

interna%onal
businesses

wishing

to
do
business
in
Dubai(FDI
Regula%ons)
1.Register
a
local
en:ty
under
the
Companies
Law
or
the

Civil
Code
2.51%
of
the
share
capital
must
be
held
by
UAE
na:onals
3.Register
a
branch
or
representa:ve
ofﬁce
of
a
foreign

company
4.Must
appoint
a
UAE
na:onal
to
sponsor
the
ofﬁce
for
its

license
applica:on
and
for
various
other
maeers.
5.Enter
into
a
commercial
agency
rela:onship
with
a
UAE

na:onal.

Friday, July 4, 14

Landmark
developments
in
Dubai
in
terms
of
law
and
regula:on,
most

notably,
in
the
crea:on
of
the
many
free
zones
in
Dubai
(Dubai

Interna:onal
Financial
Centre
(DIFC))

Condi:ons
for
doing
business
in
free
zones
1.Businesses
wishing
to
set
up
in
the
free
zones
are
required
to
establish
places
of
business

physically
within
the
geographical
boundaries
of
the
par:cular
free
zone.
2.100
percent
foreign
ownership
of
companies
allowed
(compared
to
49
percent
for
most

companies
incorporated
outside
the
free
zones).

3.Tax
concessions,
no
restric:ons
on
the
repatria:on
of
capital
and
proﬁts.
Freedom
from
currency
restric:ons
and
import
du:es.

Why Dubai?
Friday, July 4, 14

Why Air Asia drew back from Dubai on 2010?

“We
will
resume
once
we
are
able
to
have
a
more
economical
aircra8”

“We
believe
with
the
right
aircra8,
it
can
be
very
promising”

“Underwhelming
demand
for
:cket,
uneconomical
aircra8”
“Could
have
reached
out
more
to
local
travel
agents,
many
UAE
are
s:ll
unable
to

purchase
:ckets
online
via
credit
card”
Friday, July 4, 14

Entry Strategy of AirAsia in Dubai
Joint venture
agreement with
Citibank UAE
Friday, July 4, 14

Why Citibank?
Since
1812.
A
global
bank
with
3,777
branch
loca:ons
in
36
countries.
Provides
insurance,
credit
cards
and
investment
products.
Its
online
services
division
is
among
the
most
successful
in
the
ﬁeld
claiming
about
15
million
users.
Friday, July 4, 14

Market Analysis
Market growth rates
Forecasted demand
Competitors
Potential barriers to entry
Friday, July 4, 14

Market Analysis: Market Growth Rate
Dubai
Interna%onal
Airport
-‐Over
7,000
weekly
flights
operated
by
140
airlines
to
over
230
des:na:ons
across
every
con:nent

except
Antarc:ca.
(February
2014)
-‐7th
busiest
airport
in
the
world
by
passenger
traffic.
(Passenger
Traffic
Hub)
-‐2nd
busiest
airport
in
the
world
by
interna:onal
passenger
traffic.
-‐5th
busiest
cargo
airport
in
world
handled
2.44
million
tons
of
cargo.(2013)

(Cargo
Traffic
Hub)
Friday, July 4, 14

Market Analysis: Forecast Demand
Interna%onal
Passenger
Development
UAE
will
add
29.2
million
passengers
(6.6%
CAGR).

Routes
between
the
Middle
East
and
Asia-‐Paciﬁc
will
see
the
strongest
growth.
Regional
Outlook
over
the
2013-‐2017
forecast
period
The
Middle
East
will
report
the
strongest
interna:onal
passenger
growth
with
6.3%
CAGR.
15
Million
tourists
by
2015
(40,000
visitors
per
day)Airline
Industry
Forecast
2012-‐2016
Friday, July 4, 14

Market Analysis: Competitors
Competitors
Passenger!
Emirates (64%)!
Flydubai (LCC) (10.4%)
Iran Aseman Airlines
Qantas
Cargo
Al Rais Cargo
Emirates Skycargo
Friday, July 4, 14

Market Analysis: Potential Barries to Entry
-‐Highly
compe::ve
market
-‐Excellent
infrastructure
-‐Joint-‐venture
with
the
local
partner
holding
at
least
51%
of
the
equity.

-‐100%
foreign
ownership
permieed
in
the
many
free-‐trade
zones.-‐
-‐Only
one
LCC
(ﬂydubai).
However,
Exis:ng
airlines
highly
cost
compe::ve.
Most
of
the
airlines
are
state
owned
hence

can
be
quite
diﬃcult
to
enter
the
market
Friday, July 4, 14

Market Analysis: Potential Barries to Entry
-‐Highly
compe::ve
market
-‐Excellent
infrastructure
-‐Joint-‐venture
with
the
local
partner
holding
at
least
51%
of
the
equity.

-‐100%
foreign
ownership
permieed
in
the
many
free-‐trade
zones.-‐
-‐Only
one
LCC
(ﬂydubai).
However,
Exis:ng
airlines
highly
cost
compe::ve.
Most
of
the
airlines
are
state
owned
hence

can
be
quite
diﬃcult
to
enter
the
market
UAE
ranked
46

Ease
of
doing
business
survey
Friday, July 4, 14

Risk Analysis
1.Regulatory
risks(unan:cipated
government
interven:on)

2.Unan:cipated
environmental
or
social
impacts
as
a
result
of
the
venture

3.Market
risks
(compe::on)

4.Opera:onal
(maintenance,
suitability,
safety)
5.Currency
ﬂuctua:ons
6.Inﬂa:on
7.Changes
to
taxa:on
8.Credit
card
debt
problems
Friday, July 4, 14

Profit Potential Estimates
Produc've*&*skilled*
employees,*simple,*
aggressive*and*focused*
management*structure
High*aircra;*
u'liza'on
Standard*ﬂeet*of*
aircra;
Frequent*reliable*
schedules
Short*haul,*pointBtoB
point*routes,*o;en*to*
secondary*airports
Courteous*but*limited*
passenger*service****
(e.g.*no*meal)
Compe''ve*Advantage*
LOW$COST
Friday, July 4, 14

Porter Strategy
Friday, July 4, 14

TOWS Analysis
S
1.Limited Type of Aircraft
2.Established Brand
3.First Mover Advantage
4.Low Cost
5.Strong Management Team
6.Excellent Utilization of IT
W
1.Problems in punctuality
2.No own maintenance, repair &
overhaul facility
3.Secondary Airport location
4.New market
5.Depends too much on IT
O
1.World Expo 2020 Dubai
2.Àsia Pacific Labor`
Market
3.Open Skies Regulation
4.High Cost Competitors
5.Increase in fuel price may
eliminate unprofitable
competitor
T
1.Oil price fluctuation
2.Tax & Subsidies regulations
3.Strong competition
4.Political & Economic
Situation
SxO
1.Promotion Package for
World Expo 2020 Dubai
2.Special package for labor
workers/ groups
3.Establishing Dubai Tour
Package & keep the price low
WxO
1.Expanding fleet, purchase
bigger aircraft
3. Keep the price low
SxT
1. Maintain a good
relationship with
government officials
2.Allow seat allocation for
groups
TxW
1.Training ground staffs
2.Recruiting Staffs for
maintenance, repair, and
overhaul facility
Friday, July 4, 14

Marketing Strategy
Promotion Package for Labor worker/ group
Promotion of Air Asia-Citibank
Establishing good network with local travel agent
Becoming an ofﬁcial partner for EXPO 2020 Dubai
Friday, July 4, 14

Concluding Remarks
Why do we think AirAsia Dubai will work?
Friday, July 4, 14

1.New
land
of
opportuni:es:
Strategic
loca:on
2.One
of
the
inspira:onal,
exci:ng
and
successful
countries
in
the
world
with

huge
growth
poten:al.
3.Immensely
aerac:ve
des:na:on
for
tourists
and
business
alike.
4.Expo
2020
in
Dubai
(
increase
in
visitors
of
at
least
25
million
and
up
to
100
million)

and
the
2022
FIFA
World
Cup
in
Qatar.

5.Poli:cal
and
economic
stability.
6.Fewer
compe::on.
Dubai
Friday, July 4, 14

Ci:bank
Dubai
is
the
branch
of
interna:onal
ﬁnancial
group
–
Ci:bank
Group
in
the

United
Arab
Emirates,
the
leading
bank
in
the
country’s
credit
card
market.
One
of
the
oldest
banks
with
diversiﬁed
services
and
a
very
strong
online
banking

network.
Perks
on
ground
and
in
the
air
-‐
a
world
full
of
privileges.
Beau:ful
Harmony

Friday, July 4, 14

Internet&users&and&its&&penetra-on
Country&or&area Internet&users Rank Penetra-on Rank
!United!Arab!Emirates! 4,517,169 64 85.0% 20
Internet&users&by&region!
2005
b
! 2010
b
! 2013
a,b
!
Africa! 2%!!!!!!! 10%!!!!!!! 16%!!!!!!!
Americas! 36%! 49%! 61%!
Arab&States! 8%! 26%! 38%!
Asia&and&Paciﬁc! 9%! 23%! 32%!
Europe! 46%! 67%! 75%!
a
!Es<mate.!
b
!Per!100!inhabitants.!
Sustainability of AirAsia Dubai
Friday, July 4, 14

See you on
2016!
Friday, July 4, 14

TOWS Analysis
Star%ng(a(Joint(Venture(in(Dubai
Perhaps(the(easiest(way(for(a(foreign(investor(to(establish(a(business(presence(in(the(UAE(is(to(
enter(into(a(Joint(Venture((JV)(with(a(UAE(Na>onal((Local)(or(a(company(100%(owned(by(UAE(
Na>onals.((
(
A(Joint(Venture(can(be(arranged(on(the(following(basis:((
(
•  All(aspects(of(the(business(and(stock(of(products(remain(the(property(of(the(foreign(investor.(
•  The( foreign( investor( controls( the( management( of( the( business( including( opera>ons( of( its(
bank(accounts.(
•  The(foreign(investor(eﬀec>vely(receives(all(proﬁts(except(for(an(agreed(fee(paid(to(the(Local.(
•  The( UAE( Na>onal( provides( sponsorship( to( the( foreign( investor’s( employees( for( residence(
visas(and(work(permits.(
•  The( UAE( Na>onal( must( have( a( license( to( operate( the( Joint( Venture( in( the( name( of( the(
foreign(investor.(
•  Licenses(are(issued(by(the(Municipality(or(Economic(department(of(the(Emirate(where(the(
business(will(be(set(up.(
•  A(Joint(Venture(is(not(suitable(for(manufacturing,(contrac>ng(or(similar(businesses.((
Friday, July 4, 14

Star%ng(a(Joint(Venture(in(Dubai
Perhaps(the(easiest(way(for(a(foreign(investor(to(establish(a(business(presence(in(the(UAE(is(to(
enter(into(a(Joint(Venture((JV)(with(a(UAE(Na>onal((Local)(or(a(company(100%(owned(by(UAE(
Na>onals.((
(
A(Joint(Venture(can(be(arranged(on(the(following(basis:((
(
•  All(aspects(of(the(business(and(stock(of(products(remain(the(property(of(the(foreign(investor.(
•  The( foreign( investor( controls( the( management( of( the( business( including( opera>ons( of( its(
bank(accounts.(
•  The(foreign(investor(eﬀec>vely(receives(all(proﬁts(except(for(an(agreed(fee(paid(to(the(Local.(
•  The( UAE( Na>onal( provides( sponsorship( to( the( foreign( investor’s( employees( for( residence(
visas(and(work(permits.(
•  The( UAE( Na>onal( must( have( a( license( to( operate( the( Joint( Venture( in( the( name( of( the(
foreign(investor.(
•  Licenses(are(issued(by(the(Municipality(or(Economic(department(of(the(Emirate(where(the(
business(will(be(set(up.(
•  A(Joint(Venture(is(not(suitable(for(manufacturing,(contrac>ng(or(similar(businesses.((
Friday, July 4, 14

Al
Maktoum
Interna:onal
Airport
DWC

Jebel
Ali,
Dubai
Emirate,
United
Arab
Emirates

No
airline
service
|
Pilot
info
|
1
comment
|
1
visitor

Al
Minhad
Air
Base
NHD

Dubai,
Dubai
Emirate,
United
Arab
Emirates

No
airline
service
|
Pilot
info
|
2
comments
|
4
visitors

Dubai
Creek
SPB
DCG

Dubai,
Dubai
Emirate,
United
Arab
Emirates

No
airline
service
|
Pilot
info
|
1
comment

Dubai
Interna:onal
Airport
DXB

Dubai,
Dubai
Emirate,
United
Arab
Emirates

Routes
|
Flights
|
Pilot
info
|
7
comments
|
120
visitors

Dubai
Skydive
AE-‐0003

Dubai
Emirate,
United
Arab
Emirates

No
airline
service
|
Pilot
info

Friday, July 4, 14

flydubai(annual(seat(capacity:(200942014 flydubai(annual(ASK(capacity:(200942014
flydubai
des%na%ons
and
overlap
with
Emirates:
2009-‐2014
Friday, July 4, 14

Entry Strategy of Air Asia in Dubai

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