Introduction To Airasia X Management Essay
The contents to be written in this work will be about Air Asia X, its profile and general findings. With the outcomes of aircrafts, it is essential to look for a good air company for safety and quality services. The aim of this work is to show the difference between Air Asia X and Air Asia itself. This report shows the profits of Air Asia X on how they operate and render their services.
INTRODUCTION TO AIRASIA X
Air Asia X was setup in 2007 with 20% of its share capital held by Air Asia and 20% by the Virgin Group. From November 2007 it operated only two long-haul routes from Kuala Lumpur with a leased A330 aircraft: Hangzhou in China and Gold Coast in Australia. Initially, it plans to operate to Trichy in India and Perth in Australia, with a Japanese city and London Stansted added in early 2009.The lowest air fare for its Perth service. Air Asia X clearly has many features that are similar to the recently failed Oasis Hong Kong. The key difference is in the choice of Kuala Lumpur as its base. (Michelle Fong 2010).
Australia Gold coast became the X’s first destination which took place in November 2 2007. Focusing on the low-cost, long-haul segment – Air Asia X was established in 2007 to provide high-frequency and point-to-point networks to the long-haul business. Air Asia X’s cost efficiencies are derived from maintaining a simple aircraft fleet and a route network based on low-cost airports, without complex code-sharing and other legacy overheads that weigh down traditional airlines without compromising on safety. Guests continue to enjoy low fares, through cost savings that we pass on to our guests.
Air Asia X’s efficient and reliable operations are fully licensed and monitored by Malaysian and international regulators, and adhere to full international standards. Air Asia X is committed in offering X-citing low fares, X-emplary levels of safety and care, and an X-traordinary in-flight and service experience to all our guests – spreading the amazing Air Asia experience to X-citing destinations in Australia and Greater Asia.
Air Asia x business environment
Business environment comprises of all the factors that affects a company’s operations; including customers, competitors, suppliers, distributors, industry trends, substitutes, regulations, government activities, the economy, demographics, social and cultural factors, innovations, and technological developments.
In examining the Air Asia X business environment, I will use the porter forces to explain the business environment.
THREAT OF ENTRY
There is a high barrier entering airlines industry since it requires high capital to set up everything such as purchase or lease air craft, set up office, hire staffs, etc. Thus, this has reduced the treat to Air Asia X. Moreover, brand awareness is quite important in most industry including the airline industry. Hence, to enter this industry not only required high capital but also have to take some time to create brand awareness. Consumers always choose the product or service they really trust and since Air Asia X originated from Asia and has been in operation since 2007 Thus, instead of creating brand awareness, new entry has to create so called brand loyalty. Hence, this is reducing treat to Air Asia too. However, the government legislation is one of the barriers for entering airlines industry. For example, Air Asia x which has its own landing gateway that is LCCT Therefore Air Asia X find itself easy getting a new route from government. This not only affects the timeline set by Air Asia X but also influence their profit. Nevertheless, this has limited the new entrance due to the government policy. In overall, the treat of entry is low to Air Asia.
Threat of entry can depend on;
HIGH EXIT COST
Once entry the airline industry, it is hard for an airline company to exit the industry. It is due to the cost in paying the loans is high, staff retrenchment and flight cancellation refunds. Even making losses, the companies have to continue running to cope with fixed costs. It makes the industry very competitive.
Power of suppliers
Most industries have someone to play the role as supplier. Power of the suppliers is important as it will affect the industry. In airline industry, the power of suppliers is quite high since there are only two major suppliers which are Airbus and Boeing hence there are not many choices to airline industry. Nevertheless, the global economic crisis has limited the new entrant and also reducing the upgrade of planes in the immediate future. However, both suppliers provide almost same standard aircrafts therefore the switching to Air Asia X is low. Moreover, Air Asia x placed a large amount of order from Airbus in order to expand its international routes. As a result, the power of suppliers may be reduced as Airbus’s profit may be influenced by Air Asia x. Generally, the power of supply is moderate low to Air Asia X.
Threat of substitutes
Substitutes are products or services which can replace the originals and give almost same satisfaction to the consumers. In airline industry, there are two types of substitutes, indirect and direct substitutes. Indirect substitutes include train, bus, cruise and etc. On the other hand, direct substitutes indicate the other airline. Consumers usually prefer low cost. For example, from Kuala Lumpur to Singapore, there are few transports that consumers can choose such as bus, train and air travel. If the customer is going to a budgeted trip, definitely he will choose bus which is the lowest price among the three. Moreover, the technology is now make information much more easily to assess. Customers can easily compare the price among few airlines just by assessing internet as internet make information more transparency. Air Asia X makes air travel the most viable, efficient and convenient mode of transportation. For example, travel from Kuala Lumpur to Bangkok, the customer may choose to take bus or air flight. However, air plane are much more convenient and also lesser time consuming compare with taking bus to Bangkok. Thus, the threat of substitutes is moderate to Air Asia X.
Rivalry among existing competitors
In every industry, there is positive or negative trend to industry growth rate. If there is a positive trend, then the firms have not to steal the market share among them. In airline industry, the growth rate is really low due to limited customers. Thus, in order to expand, Air Asia has to steal the market share from its competitors. ( Roy L. Simerly) Secondly, Air Asia X leads the main battlefield in price among competitors due to its low operating costs. However, there are more competitors enter to airline industry who have major carriers as their backers or owners which may lead to price war in the future. Moreover, Air Asia X is not the only one who provides airline service. There are few low cost carriers such as Firefly, Tiger Airway and etc. which makes their services provided weak differentiation. Thus, it becomes a threat to Air Asia X. In this case, the rivalry among existing competitors is quite high to Air Asia X.
Low operational cost
Highly Trained, well paid and motivated staff
High Utilization of Resources
First mover advantage
Influential Political support
Strong Brand Presence
Excellent Utilization of IT
Strong Management Team
Well established brand name across Asia
Partnership in Expedia
Quick turnaround times
Service resources limited by lower costs.
Depends heavily on outsourcing.
Increased customer complaints.
Air Asia X mission and vision
To grow and maintain great level of low cost fees
To be great in terms of flight services
Trying to be the best in the world.
Analyse AirAsia X current strategy
Aligned with its mission statement, Air Asia X business strategy is centered on cost leadership.
Air Asia x always tries to keep the operations simple and efficient to keep a low cost, for example by including the seat and departure/landing taxes but explicitly excluded all frills, and also making these following optional such as seat assignments checked baggage, onboard food and beverages, Inflight entertainment, flight transfer/changes, pillows and blankets.
Another Air Asia x way to save cost is not to provide food and drinks on the plane as the goal of the airline in respect to the sister air Asia which is just to move someone from one place to another. It sells its foods on the plan generally it makes it optional even when booking ticket.
Fu sen said, Air Asia x also tries to keep the cost low by recruiting only numbers of workers needed and selecting only capable and hard workers, so each worker will have work to do and the company does not have to pay workers who do not work efficiently.
Unlike other airlines which gives good packages on the aircraft, passengers who buy air ticket from air Asia x are not entitled to get free food on board, for them to get more profits because of their low cost. Air Asia x innovated good services and low cost of transportation from one place to another, though their services are kind of poor. Their motivation is to beat the cheapest airline worldwide. Air Asia X innovated their own selling products for good benefit for boarder; they also had to expand their existing products. Air Asia X announces Supersize Luggage Strategy, proposing boarders up to 50% reserves of their savings.
Air Asia X it has been stated that Air Asia X is the only Malaysian company which has taken the award for the world best fifty most innovative companies, and also won the award for the best low cost airline in the world and for service, customer and product quality in 2011 at the world airline awards, in which they were able to obtain this award for 3yrs.
Possible alternative strategies evaluation
There are three strategies that Air Asia x can pursue in order to be a major player in the world or international level. these are substantive growth through diversification , limited strategy through market penetration or market development and retrenchment which i will explain from my own point of view
Diversification is when a company is selling new product into a new market. The risky part of diversification is a risky strategy and any company going into it needs to be prepared before going in. Diversification cost lots of more money than doing limited growth strategy.
Air Asia X for example by selling all flight tickets without the help of agents and open many air Asia X ticket spot. Air Asia x will be able to control all the prices and can sell tickets for lower prices. This is possible because air Asia X can maintain and train staffs to be friendly and helpful at all times,
In conclusion, diversification strategy needs lot of money for the building or renting office buildings, to pay more employees and the company needs to knowledge about the new field that it is going to enter.
As shown above, I wrote about air Asia X’s profile, its status, mission and vision, both their business environment, and on hoe they operate, talking about Asia X, I listed the SWOT analysis abiding by the company. Not excluding the high exit cost, and the low ticket cost of air Asia X, their competitors, organizational strategy, the pestle criteria, analysis, and most importantly the low cost model of long distance tour of over five hours and above were not an exception.
For what I have learnt so far about Air Asia X, I feel Air Asia is a great company and will continue to be great in years to come in the world. Their motive from Asia to develop an international flight services came to pass through their motivation and inspires of other great company’s like Lufthansa and all.
This work has been identified a series of areas for possible further studies which includes; plan versus reacts, global IPO and other priorities, and also in building the global brand.