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the AirAsia Company strategic management: “ How AirAsia can be a leader in the lowest cost carrier in the airplane industry”

1.0 Introduction

“Without a strategy the organization is like a ship without rudder, going around in circles”. (Joel Ross and Michael Kami)

Nowadays, the competition among airplane industries is very tough. According to Daniel Chan (2000), with just about two years to go to the turn millennium, air wars over Asia are hotting up, with some of the world’s biggest airlines engaged in intense over Asian skies[1]. Each Of Airplanes Company in the world trying to conduct some strategies to compete with another competitor in their industry. A lot of airplane companies come out with different strategies to make their company better than their competitors. To compete with their competitor in the business environment, a company needs to make a strategy to achieve their long terms objective and can be successful for doing their business.

Moreover, to be successful in their long terms objective and their business, company need to identify their strategic management, because with good strategic management company can be achieving their vision and mission to achieve the successfulness in their business. Regarding this issues, the strategic management becomes important due to the following reason such as globalization to survival their business, and than e-commerce become the critical success to the company nowadays.

The two following reason are need to take into consideration, and than to be successful in the company management, a company needs to consider the company ability and how to integrating it with the as well as main factor in the internal and external factor. The main factor in the internal and external factor can be identified with SWOT analysis. The internal factor can take a look into strength and weakness in a company, and for the external factor, a company can look at opportunities and threats in the external environment.

Furthermore, according to Daniel Chan (2000), the airline industry is a unique and fascinating industry. It captures the interest of a wide audience because of its glamour, reach, and impact on the large and growing numbers of consumers/travelers worldwide[2]. Based on this statement, airline industry become the greatest opportunity for AirAsia. The growing numbers/travelers worldwide can be the wonderful opportunity for AirAsia for running their business. In addition, to captures and attract a customer to choose AirAsia as an airline option, AirAsia need to develop and create a wonderful strategy and come out with special offering to their customer to successfully in their business.

On this paper, I would like to identify and analyze the AirAsia Company strategic management: “ How AirAsia can be a leader in the lowest cost carrier in the airplane industry”. I’m interested to more deeply identify and analyze the strategic management in AirAsia Company because AirAsia have a lot of achievement and awards since year 2001 until present and than they have the greatest strategy which is can make AirAsia to be a leader in the world’s low cost carrier in airline industry.

And than, AirAsia is one of the companies with good company strategic management and has a successful story in the airplane industry in the world. AirAsia now becoming the leading low cost carrier airline in the world and the achievement that AirAsia received to ascertain that AirAsia is one of the best airplane companies. The achievement that AirAsia received in 2009 on the last awards and recognition is the best low cost airline in the world.

In Addition, on this paper will be structured into four sections. Section 1.0 is introduction, Section 2.0 covers about AirAsia Current issues, in this section will be discusses about why AirAsia need to consider a strategy, and AirAsia current issues. Section 3.0 mainly discusses about AirAsia business strategy, this section also will be discusses about why AirAsia stressed to be low cost carrier in airline industry, AirAsia SWOT (strength, weakness, opportunity, and threat) analysis, and also AirAsia business strategy to solve the current issues. And than, section 4.0 would be the last section is conclusion for this paper.

2.0 AirAsia Current issues: how to be low cost carrier leader in airline industry

On this section, I will discuss about the AirAsia current issues: how to be low cost carrier in airline industry. This section involve, why AirAsia need to consider a strategic management, and than what is the current issues that happen in AirAsia Company. This section will discusses the importance of developed and consider strategic management in AirAsia Company, and identify of current issues in AirAsia Company.

2.1 Why AirAsia need to consider a strategic management

Why a company needs to consider a strategic management nowadays? According to Daniel Chan (2000), since the 1970s, the competition for the Asian air travel market has always been intense. This became more intense in the 1990s as traffic volumes were squeezed[3]. Based on that statement, the competition among airplane industry will become more grow, traffic volume also would be increase, and also the Asian air travel market has always been intense.  When the competition in the airplane industry becoming though, complex, and rapidly change, AirAsia company as a company that joined in the airplane industry business need to thinking strategically and also must preparing a good strategic management. The AirAsia strategic management needs to effectively and efficiently prepare and implement in the AirAsia company management. Why AirAsia need to consider strategic management? The first reason is because the airline industry is a unique and complex industry[4]. Based on the statement, the complexity and unique of the airline industry, AirAsia need to come out with the greatest strategy to compete with their rival in the same industry. Without the right strategic management, its possible AirAsia could not be able be compete with the complex business environment in the airline industry.

Furthermore, the second reason why AirAsia need to consider a strategic management because in a company nowadays, general management which is the process of achieving organizational goals by engaging in the four major functions of planning, organizing, leading, and controlling may not sufficient and supportive for the organization succeed in the world of complex environments. It concerns about the process to manage the company internally but do not concentrate more on creating competitiveness regarding environments affecting the organization. Even companies adopt general management to sustain profitability by reducing the defects or costs, and improving operations process in order to increase productivity, they may not succeed in the competition because they perform only similar activities better than competitors but do not create distinctive competitiveness.

Additionally, they perform only operational effectiveness but not strategy. Operational effectiveness and strategy are both essential to superior performance but they work in very different ways. Strategy is about competitive position that the company performs different activities from rivals or performing similar activities in different ways. To learn how the companies create strategies and put them into action, the executives or strategists should examine carefully an aspect of strategic management.

Moreover, the organization or company nowadays is faced with constantly changing external environments and needs to ensure that its own internal resources and capabilities are more than sufficient to meet the needs of the external environment. Organizations or companies do not exist simply to survive in the market place but want to grow and prosper in a competitive environment. In order to make sense of what is going on around them, firms must undertake an analysis of their external and internal environment. To understand and how take an action about external and internal environment, a company needs to support themselves with a good strategic management.

Because of this reason, AirAsia need to consider a strategic management as the important things in their company. The strategy that AirAsia need is not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully.

In addition, the third reason, why AirAsia company needs to consider and stress to a strategic management? This is because, strategic management becomes important in AirAsia due to the following reasons. The first reason why strategic management becomes important is because the globalization. The globalization consideration impacts virtually all-strategic decisions in a company. The globalization also forced AirAsia Company to survival for business. To see and appreciate the world from the perspective of others has become a matter of survival business.

The underpinning of strategic management hinge upon managers gaining an understanding of competitors, markets, prices, suppliers, distributors, governments, creditors, shareholders, and customers worldwide. The price and quality of firm’s products and services must be competitive on a worldwide basis, not just a local basis[5]. The globalization makes a rapid change in the business environment. Every company has a same chance and opportunity for doing their business. For those company doesn’t aware and take this as important consideration, they will failed to compete with their rival or competitors in their business.

Moreover, the strategic management becoming important due to the following reason is because the rapid development in E-Commerce. Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital strategic management and allows a company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic commerce is minimizing the expense and cumbersomeness, improved products, and higher profitability[6].

In conclusion, Air Asia is need to aware and consider with the strategic management. The reason of the airline industry is a unique and complex industry, not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, and the last one is because the effect of globalization and E-commerce becoming an effective tool in a company nowadays.

Regarding to the importance of strategic management for AirAsia Company, the next part will discusses about the current issues that happened in AirAsia Company.

2.2 AirAsia current issues

The leading low fare airline in the Asia – AirAsia has been expanding rapidly since 2001, to become an award winning and the largest low cost carrier in Asia. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia. To date, AirAsia has flown over 55 million guests across the region and continues to spread its wings to create more extensive route network through its associate companies, Thai AirAsia and Indonesia AirAsia.

Established on 12 December 2001, AirAsia has been such a big phenomenon in airline industry especially in Asia. AirAsia with the ordinary symbol but with strong brand, “now everyone can fly” nowadays has been phenomena in Airlines industry. AirAsia is one of the airline companies who more focused with the strategy how to reduce inefficiency and make it low possible fare in the world. With the cost-efficiency, low complexity and profitability are always the cornerstones of building a strong business.

Furthermore, according to Dawna and Blaise (2005), the most successful carriers came to dominate their hub markets allowing them to exert greater control over pricing and capacity[7]. Based on this statement, the current issues in AirAsia Company are how to achieve to be a lowest carrier in the world in Airplane industry. Regarding to this issues, Dawna and Blaise said, the most successful carrier in the airline industry allowing them to exert greater control over pricing and capacity.

In addition, according to Haddad (2003), the key to their current success has been to cut costs to the bone through lower salaries and reduced overhead[8]. In airline industry nowadays, customer not only looks at the service that airline company offered to them, but the price of the airline ticket also can influencing the customer to use an airline company. AirAsia Company can compete with the other competitor in the airline industry if they can cut costs through lower salaries and reduced overhead.

Moreover, according to Daniel Chan (2000), these moves but a very small price to pay for continued and greater access to the world’s most prospective air travel markets[9]. The very small price are offered to the customer also can give biggest affect in this business. As all airlines in low cost carrier (LCC) industry compete on costs, AirAsia needs to offer the lowest possible fare in order to win the competition in the current markets served as well as new markets[10].

In conclusion, the current issues in AirAsia Company are more focused in the competition of the cost among an airplane industry. AirAsia as an industry company which is more focusing in the low cost carrier airplane industry need to consider to make the lowest possible cost to compete with the other competitors in their airplane industry. To achieve the lowest possible cost, AirAsia Company has some strategy to achieve it. On the next section, I would like to discuss about AirAsia business strategy: how to implement and achieve it.

3.0 AirAsia Business Strategy: how to implement and achieve it.

On this section, I would like to discuss about AirAsia business strategy. On the previous section, it more focused about the importance of strategic management for AirAsia Company and what is the current issue in AirAsia Company that was happening. On this section, would be involved with the question, why AirAsia stressed to be low cost carrier in airline industry. And than what is AirAsia SWOT analysis and how AirAsia solves the current issues in their company.

3.1 Why AirAsia stressed to be low cost carrier in airline industry

Datuk Tony Fernandez as CEO of AirAsia Berhad said his philosophy is very clear: before a business can grow, it needs to have its costs under control. It must be cost-efficient and profitable, and it must create value. Costs that do not add value must be contained, reduced and even eliminated. I have been asked by various people, “How much lower can your cost reduce? You’re already the lowest in the world!” My direct answer is if we do not strive to be more efficient and choose to be complacent – our days are numbered. This is a continuous task we have to face head on year on year; it is the critical ingredient to operate a successful business[11].

Based on the Datuk Tony Fernandez said, AirAsia can be growing in the airline business if they can control their cost. The cost that they have to running there must be efficient and reliable. Everything that can make inefficiencies must be reduced and possibly to eliminate. What a Datuk Tony Fernandez said is very strong opinion about their company to running their business. AirAsia can be possibly competing with another airplane industries if they can make efficiencies to reduce cost and make the low possible fare than another airplane industries.

Furthermore, based on the environmental scanning performed, the demand for low cost carrier (LCC) industry will keep growing rapidly. The LCC industry attractiveness and profitability will attract many full services airlines to launch its version adding the degree of rivalry in this industry. As the implication, AirAsia, current market leader of LCC in Malaysia, Thailand, and Indonesia, will face competition from both existing and new players. In order to sustain its competitive advantage, AirAsia needs to leverage its competency in creating cost advantages across multiple value chains[12]. Based on that statement, AirAsia need to make a consideration and more stressed to be lowest cost carrier in the airline industry. The demand for lowest cost carrier is will be growing rapidly, it can be the great opportunity for AirAsia Company to run their business.

In addition, AirAsia business strategy also centered on cost leadership. According to Porter’s generic strategies (1985), one of the generic strategies is the cost leadership[13]. The cost leadership in AirAsia Company is already approving because AirAsia more focused and concentrated in the lowest cost carrier in airplane industries. AirAsia wanted to be a leader in the lowest cost for run their business. AirAsia builds and sustains its competitive advantage by providing services at a price that simply lower than competitors price. Operation effectiveness and outstanding efficiency are the two main characteristics of low cost business including in AirAsia.

Moreover, AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. Efficiency creates savings that are then passed on to guests so that affordable air travel can become a reality. Through AirAsia philosophy of ‘Now Everyone Can Fly’, Air Asia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. As Air Asia continuously strives to promote air travel, AirAsia also seek to create excitement amongst their guests with they range of innovative and personalized service.

In conclusion, with there believes to make a low possible fare for to the customer, AirAsia was becoming an Airline company that is chosen by so many customers. The best philosophy of AirAsia ‘now everyone can fly’ means to giving an opportunity to all the people to flight with the lowest possible fare and making them can flight even they only have the less money.

In conclusion, the reason why AirAsia more stressed to be low cost carrier in airline industry because:

  1. AirAsia believes to compete in the airline industry, it must be cost-efficient and profitable, and it must create value. Costs that do not add value must be contained, reduced and even eliminated.
  2. Demand for low cost carrier (LCC) industry will keep growing rapidly.
  3. And than the best philosophy of AirAsia ‘now everyone can fly’ means to giving an opportunity to all the people to flight with the lowest possible fare.

The lowest possible fare that AirAsia was implementing is the best strategy that they are used to compete with their rivals in the airplane industries. AirAsia believes with the lowest fare that they are offering to the customer, they can attract customer more than their rival in the airplane industries.

In addition, to achieve the lowest possible fare in the low cost carrier airplane industry, AirAsia also need to make analysis about their SWOT (strength, weakness, opportunity, and threat). On the next part, I would like to discuss about the AirAsia SWOT analaysis

3.2 AirAsia SWOT analysis

Strengths, Weaknesses, Opportunities and Threats Analysis are one of the important things in a company. This SWOT analysis is for identifying the internal (strength and weakness) and external (opportunities and threats) factor for AirAsia Company to achieve their goals and objectives to be low cost carrier company in airline industry. To be successful in the company management, a company needs to consider the company ability and how to integrating it with the as well as main factor in the internal and external factor. The main factor in the internal and external factor can be identified with SWOT analysis. On this section, I will identify one by one the strength, weakness, opportunities and threats in AirAsia Company. The purpose of this analysis are for identify the internal and external factor that AirAsia need to consider to be low cost carrier in airplane industry. These are the strength, weakness, opportunities, and threat in AirAsia.

  1. Strengths
  • Air Asia has a very strong management team with strong links with

governments and airline industry leaders.

This is partly contributed by the diverse background of the executive management teams that consists of industry experts and ex-top government officials. According to Johnston (1996), without the protection of national airlines brought about by deregulation, building alliances as strategy became necessary for many airlines to stay competitive and gain access to a global market too huge for any existing airline to dominate[14]. The strong links with the government and airline industry leaders is one of the strength of AirAsia Company.

For example, Shin Corp (formerly owned by the family of former Thai Prime Minister – Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and capture a sizeable market in Thailand. And also, with their strong working relationship with Airbus, they managed to get big discount for aircraft purchase which is also more fuel efficient compared to Boeing 737 planes which is being used by many other airlines

  • The management team is also very good in strategy formulation and execution.

` The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe. They are Ryanair’s operational strategy (no frills, landing in secondary airport), Southwest’s people strategy (employee comes first) and Easyjet’s branding strategy (linking with other service providers like hotels, car rental).

  • AirAsia’s brand name is well established in Asia Pacific.

Besides the normal print media advertising & promotions, AirAsia’s top management also capitalized on promotions through news by being very “media friendly” and freely sharing the latest information on Air Asia as well as the airline industry. Their partnership with other service providers such as hotels and hostels, car rental firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) has created a very unique image among travellers. Alliance with Galileo GDS (Global Distribution System) that enables travel agents from around the world to check flight details and makes bookings have also contributed to their string brand name.

Air Asia’s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) has successfully “elevated” the brand to become a regional brand beyond just Malaysia. The links with Manchester United (one of the world’s most famous football teams) and AT&T Williams Formula One team have further boosted their image to a greater extend beyond just the this region

  • AirAsia is the low cost leader in Asia.

With the help of AirAsia Academy, AirAsia has successfully created a “low-cost airline mentality” among their workforce. The workforce is very flexible and high committed and very critical in making AirAsia the lowest cost airline in Asia.

  • The excellent utilization of IT

The excellent utilization of IT have directly contributed to their promotional activities (email alerts and desktop widget which was jointly developed with Microsoft for new promotions), brand building exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well keep the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent fees

  1. Weaknesses
  • Air Asia does not have its own maintenance, repair and overhaul (MRO) facility.

It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low. It is a competitive disadvantage not to have its own MRO facility

  • AirAsia receives a lot complaint from customers on their service.

Examples of complaints are around flight delays, being charged for a lot of things and not able to change flight or get a refund if customers could not make it. Good customer service and management is critical especially when competition is getting intense.

  1. Opportunities
  • There are 2 major events that are taking place now or going to take place in

less than 6 months from now.

First, is the ever-increasing oil price. Second, is the “ASEAN Open Skies” agreement that has been reached. The increasing oil price at the first glance may appear like a threat for AirAsia. But being a low cost leader, AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline’s customers. However, there will be also some reduction in overall travel especially by casual or budget travelers.

Second, is the “ASEAN Open Skies” allows unlimited flights among ASEAN’s regional air carriers beginning December 2008. This will definitely increase the competition among the regional airlines. However, with the “first mover” advantage as well as its strengths in management, strategy formulation, strategy execution, strong brand and “low-cost” culture among its workforce, this agreement can be seen as more of an opportunity.

  • There is also some opportunity to partner with other low cost airlines.

As Virgin to tap into they exist strengths or competitive advantages such as brand name, landing rights and landing slots (time to land).

  • The population of Asian middle class will be reaching almost 700 million by 2010.

This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia.

  1. Threats
  • Certain rates like airport departure, security charges and landing charges are beyond the control of airline operators

This is a threat to all airlines especially low cost airlines that tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore.

  • AirAsia’s profit margin is about 30% and this has already attracted many competitors.

Most of the full service airlines have or planning to create a low cost subsidiary to compete directly with AirAsia. For example, Singapore Airlines has created a low cost carrier Tiger Airways.

  • Users’ perception that budget airlines may compromise safety to keep costs low.

In conclusion, the SWOT analysis that AirAsia have is on of the major component to make AirAsia more strength in their business and can make they are able to compete with the same low cost carrier airline industry.

After I’m discussed about the SWOT analysis, I would like to discuss about the AirAsia strategy to solve the current issues: How AirAsia can be a leader in the lowest cost carrier in the airplane industry.

3.3 AirAsia business strategy to solve the current issues

Regarding to the airplane industries issues that is low cost carrier was becoming an important issue if AirAsia want to compete with other airplane industry that is involved with low cost carrier business.

The strategy that AirAsia was implementing to make they are being a successful in low cost carrier and can compete with other competitors in this field of business are:

  1. Maximized IT and implementing E-commerce in AirAsia business

Nowadays, E-commerce is becoming a business tool. E-commerce also has become a vital strategic management and allows a company to sell products, advertise, purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share information. In total, electronic commerce is minimizing the expense and cumbersomeness, improved products, and higher profitability[15]. According to this statement, E-commerce can change the way of doing business nowadays. E-commerce becomes a major success to Airplane Company to make effectively and efficiency in their business.

AirAsia is one of the airplane companies, which is implementing E-commerce and maximized their information technology usage to make the efficiency and effectively in their company and make possible low cost carrier in their business. According to Pultorak (2004), when the business strategy and IT are aligned, the IT infrastructure can continuously sense the changing business needs and respond by provisioning or redeploying resources to match the demands of the business[16].

Moreover, to maximize their IT, AirAsia implemented current IT such as yield management system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system[17]. Lets we discuss the current IT that AirAsia implemented one by one.

Yield management system as revenue management system it understands, anticipates, and reacts to the behavior of customer to maximize revenues for the organization. In this system, AirAsia used it to takes into account the operating costs and aids AirAsia to optimizes price and allocate capacity to maximize expected revenues.

The optimization is done on two levels in AirAsia:

v    Seat (Every seat is considered an opportunity to maximize revenue.

Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier – for the same seat)

v    Route (By adjusting prices for routes/destinations that have a higher demand when compared to others).

The effective method however is to combine these two levels for all flights, all routes so that both the seat and the route are effectively priced for all the flights.

As a result, by using this yield management system, AirAsia can understands the behavior of their customer and offering the effectives and efficiency strategy and also can allocate capacity to maximize the expected revenue. By this system, AirAsia can make efficiency to know their customer using IT technology with lowest cost.

Furthermore, the other system that AirAsia implemented is customer reservation system (CRS); it is an integrated web-based reservation and inventory system. It includes Internet; call center, airport departure control and more. It is a direct sales engine that effectively eliminates the middleman (travel agents) and the sales commissions that need to be paid to them.

By using this system, AirAsia can reduce the cost and eliminates the middleman (travel agents) and the sales commission to pay them. After that, this system are very customer friendly because the entire customer if want to buy or make a reservation a ticket directly via online, and no need to come to the ticket counter. In conclusion, by using this system effectively, efficiency, customer satisfaction, fast and secure in buying a ticket already met. It means the lowest cost can possibly achieve.

And than, the last system that AirAsia used in maximized IT to meet the lowest cost during their business activities is the implementation of enterprise resource system (ERP). From the view of managers in a company, the emphasis is on the word planning; ERP represents a comprehensive software approach to support decisions concurrent with planning and controlling the business[18].

Based on the definition, ERP is the system that integrated comprehensive software to make the IT system is more effectively and efficiently. By implementing this package AirAsia is looking to successfully maintain process integrity, reduce financial month-end closing processing times, and speed up reporting and data retrieval processes, (Microsoft Malaysia)[19]. In addition, it is a system focusing on capturing transactions in daily operations and helping AirAsia to save its operational costs as well as to increase the efficiency and integrity in its operation (Microsoft Press Pass, 2005)[20]

As a result, the system that AirAsia implemented by using strategy to maximized the IT system (yield management system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system) can be a great strategy to make AirAsia more effective and efficiency and possibly able to reduce the cost and eliminated inefficiency in their business.

  1. Operation effectiveness and outstanding efficiency

One of the AirAsia strategies to solve the current issues/problem in the lowest carries competition among the LCC airline industry is to make operation effectiveness and outstanding efficiency. How AirAsia implemented this strategy to make operation effectiveness and outstanding efficiency? To make this strategy successfully implemented:

  • AirAsia move from the traditional business into modern business by implementing E-commerce and maximize the information technology (IT) in their business.

The implementation of E-commerce can reduce the cost of travel agents, and less of ticketing paper cost.

  • AirAsia also choose the route by adjusting prices for routes/destinations that have a higher demand when compared to others.
  • And than AirAsia also trying to reduce by using better maintenance management.

According to Gloker (2002), by using the better maintenance management, AirAsia can save large proportion of its maintenance cost contributes approximately 9% to the overall cost of an airline[21].

In conclusion, those are the Air Asia strategy to make Operation effectiveness and outstanding efficiency in their business. With this strategy, AirAsia can achieve their goals and objective into the lowest carrier airplane in the world.

  1. Implemented outsourcing in their business

To make the lowest carrier in airplane industry, AirAsia also face with challenged to make a decision in terms of efficiency in their business how it will acquire the system. AirAsia have two options in this strategy: in house building or outsourcing. In the strategy that AirAsia used and implemented, AirAsia more preferred to used or implemented outsource system in this strategy. The decision in outsourcing has several benefits such as cost, competency, control, and also competitive advantage.

By implemented outsourcing in their business strategy will provide:

  • Cost benefits to AirAsia because it can be eliminated in more resource consumption (time financial).
  • And than for the competency, AirAsia competency is not in IT. By implemented outsourcing in the IT field, AirAsia also can reduce cost in IT system activities which is can make possible more cost in their business.
  • After that, by using outsourcing, AirAsia can easily to control all the system that is outsourced to another vendor or company. The control in this strategy also gives benefits because AirAsia function only to be a controlled a system that is AirAsia used.
  • By using outsourcing, AirAsia also can reduce risk, and it can make AirAsia not spend their financial to cover the risk factor in this strategy.
  • The implementation of outsourcing also can give competitive advantage in AirAsia because the strategy can be greater rather than created by AirAsia itself.

Furthermore, some of outsourced example that AirAsia did are in AirAsia computer reservation system (CRS) by Navitaire Open Skies Technology Company, and than implementing enterprise resource planning (ERP) by Microsoft Corporation, and also implementing AirAsia X. By implemented outsourcing more better than in house operation, because it can give more lowest cost, reduce risk, more effectively and efficiently, and also can easily control by AirAsia and than more fast in AirAsia company.

4.0 Conclusion

The competition among airplane industries is very tough. Each Of Airplanes Company in the world trying to conduct some strategies to compete with another competitor in their industry. To compete with their competitor in the business environment, a company needs to make a strategy to achieve their long terms objective and can be successful for doing their business. The strategic management becomes important due to the following reason such as globalization to survival their business, and than e-commerce become the critical success to the company nowadays. a company needs to consider the company ability and how to integrating it with the as well as main factor in the internal and external factor.

How AirAsia can be a leader in the lowest cost carrier in the airplane industry? To be a leader in the low cost carrier, firstly, AirAsia need to consider about their strategic management. The reason why need to consider strategic management because the first reason is because the airline industry is a unique and complex industry. The second reason, the strategy that AirAsia need is not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, the third reason because a globalization and implementing E-commerce.

The current issues in AirAsia Company are more focused in the competition of the cost among an airplane industry. AirAsia as an industry company which is more focusing in the low cost carrier airplane industry need to consider to make the lowest possible cost to compete with the other competitors in their airplane industry.

How AirAsia can solve the current issues to be a low cost carrier leader in airplane industry? The first is to identify and analyze the SWOT analysis, and than to solve the current issues with some strategies such as Maximized IT and implementing E-commerce in AirAsia business, Operation effectiveness and outstanding efficiency, and the last one is implemented outsourcing in the AirAsia business.

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Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and Commerce University of Melbourne: 9.

Vollman, Thomas E, Berry, W.L, (2005). Manufacturing planning and control for supply chain management. Fifth edition. McGraw-hill .p-109

Microsoft (2005) Budget Airlines in Asia Pacific Fly High on Microsoft Business Solutions. Retrieved from http://www.microsoft.com/malaysia/press/linkpage4285.asp on 20th October 2005

Gloker, et.al. (2002), The Airline Industry More Than Just Transportation


[1] Chan, D. (2000). “Air wars in Asia: competitive and collaborative strategies and

tactics in action.” Emerald management and development 19: 473

[2] Chan, D. (2000). “The development of the airline industry from 1978 to 1998 A strategic global overview.” management development 19(Emerald journal ): 489

[3] Chan, D. (2000). “Air wars in Asia: competitive and collaborative strategies and tactics in action.” Emerald management and development 19: 473 – 488.

[4] Chan, D. (2000). “Air wars in Asia: competitive and collaborative strategies and tactics in action.” Emerald management and development 19: 484.

[5] http://www.scribd.com/doc/2516371/Strategic-Management

[6] http://www.scribd.com/doc/2516371/Strategic-Management

[7] Rhoades, D. L. and B. W. Jr (2005). “Strategic imperatives and the pursuit of quality in the US airline industry.” managing service quality 15(Emerald journal): 344.

[8] Haddad, C. (2003), “Catch him if you can”, Business Week, September 15, pp.93-4

[9] Chan, D. (2000). “Air wars in Asia: competitive and collaborative strategies and tactics in action.” Emerald management and development 19: 483.

[10] Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and Commerce University of Melbourne: 3.

[11] http://www.airasia.com

[12] Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and Commerce University of Melbourne: 8.

[13] Porter, M.E. (1985). “Competitive Strategy: Creating and Sustaining Superior Performance.” New York: The Free Press.

[14] Johnston, H. (1996), “Partnership Up in the Air”, Asian Business, August, p.53

[15] http://www.scribd.com/doc/2516371/Strategic-Management

[16] Pultorak, D. (2004, July). Beyond Alignment. Business and IT Sunchronization.

Retrieved from http://us.foxit.net/download/beyond_align.pdf 22nd October 2005

[17] Kho, C., S. H. Aruan, et al. (2005). AirAsia- Strategic IT Initiative. Faculty of Economics and Commerce University of Melbourne: 9.

[18] Vollman, Thomas E, Berry, W.L, (2005). Manufacturing planning and control for supply chain management. Fifth edition. McGraw-hill .p-109

[19] Microsoft (2005) Budget Airlines in Asia Pacific Fly High on Microsoft Business Solutions. Retrieved from http://www.microsoft.com/malaysia/press/linkpage4285.asp on 20th October 2005

[20] Ibid

[21] Gloker, et.al. (2002), The Airline Industry More Than Just Transportation.

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  1. November 29, 2009 at 4:18 am | #1

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  2. catatanraufmendunia
    October 8, 2010 at 3:41 am | #2

    dear miss jennifer gan,

    if you have a complaint regarding your luggage lost. please directly inform to AIR ASIA company. i don’t have any capacity to help you in this situation. i wish air asia will give a feedback immediately, and wish u’ll find your luggage soon.

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