AirAsia was established in 1993 by DRB-Hicom, a Government-owned conglomerate. It started operations in 1996. Tune Air Sdn Bhd, Tony Fernandes’s company purchased this heavily indebted airline business from DRB-Hicom in 2001. AirAsia managed to become profitable and world renowned low-cost airline through visionary leadership and innovative business approach. Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International is AirAsia’s first and main base. AirAsia is renowned as Malaysian low cost airline and Asia’s largest low fare, no frills airline.
The airlines claims ‘No Admin Fee’, but has some fees for services which are free on other airlines. AirAsia slogan is ‘Now Everyone Can Fly’. Being the home of AirAsia, the LCCT is the budget terminal in KLIA, opened on 23 March 2006. The AirAsia subsidiaries are the likes of Thai AirAsia, Indonesia AirAsia, VietJet AirAsia and AirAsia RedTix. Meanwhile, AirAsia associate companies are AirAsia X, Tune Hotel and Tune Money. AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001.
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. AirAsia believes in the nofrills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. AirAsia’s vision is to be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares. Their missions are?
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To be the best company to work for whereby employees are treated as part of a big family
Create a globally recognized ASEAN brand To attain the lowest cost so that everyone can fly with AirAsia Maintain the highest quality product, embracing technology to reduce cost and enhance service levels They managed to make the low fare model possible through the implementation of the following key strategies.
Safety First: Partnering with the world’s most renowned maintenance providers and complying with the with world airline operations.
High Aircraft Utilisation: Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity.
Low Fare, No Frills: Providing guests with the choice of customizing services without compromising on quality and services.
Streamline Operations: Making sure that processes are as simple as possible.
Lean Distribution System: Offering a wide and innovative range of distribution channels to make booking and travelling easier.
Point to Point Network: Applying the point-to-point network keeps operations simple and costs low. .
TYPES OF INNOVATION
According to Kinicki and Williams, innovation is finding ways to deliver new or better goods or services. It means that every organization will not allow itself become complacent. According to Chell, innovation is also deemed as the creation of something new in the marketplace that alters the supply-demand equation. An entrepreneur creates a new demand in the market by recombining the factors of production to create something new. According to Kuratko and Hodgetts, there are four basic types of innovation.
i. Invention – the act of creating a new product, service or process that is totally novel or untried. For example the creation of telephone by Bell.
ii. Extension – the expansion or addition to existing product lines, services or processes. For example Samsung which is well-known for electric and electronic products, extending its business to automobiles.
iii. Duplication – process of replication of existing product, service or process. Duplication does not mean simply copying, but adding new features or improving competitiveness of the product, service or process.
For example the function of handsets is to enable us to talk with others anywhere. Today there are several extra features added to the functions such as MMS and WAP services. iv. Synthesis – process of combining separate parts or elements into a new whole formulation or application by taking into consideration several ideas or items that already exist. For example the combination of computer and network technologies has produces the Internet.
3. INNOVATION WITHIN AIR ASIA
In 2008, FastCompany. com voted AirAsia as one of the 50 most innovative companies in the world.
According to CEO of AirAsia, fostering a culture of innovation within the organization is a challenge and over the next few years, he will be seeking to study even more deeply the factors inherent in how one creates an environment that can foster innovation. Some of it is cultural; some of it is due to the environment we live in. In Asia, society is still largely hierarchical and conformist. Based on the four types of innovation, AirAsia implemented few them well into their organization.
3. 1 Invention AirAsia created AirAsia X, the world's first long-haul low cost airline.
3.2 Extension AirAsia expand its’ business by having Tune Hotel which is a five- star limited service hotel.
3. 3 Duplication Modeled after successful operations of United States’ southwest Airlines, AirAsia added a new feature to make its airlines more competitive such as the introduction of mobile booking and check-in.
The management of AirAsia team is 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 in United States 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).
INNOVATION’S IMPACT ON AIR ASIA
Tony Fernandes has created a culture of teamwork, equality and constant communication. The headquarters at Kuala Lumpur is staunchly open plan where none included the CEO have an individual office. This attempt to ensure all staff has a direct contact with each other thus enhanced the opportunities for innovative thinking and creative ideas.
Besides open-plan office, ideas are shared actively through the organizations. By using Intranet platform for forums and discussions, the staffs can gives ideas, suggestions and critiques to be shared throughout the company. Besides giving competitive salary packaging and encouraging culture, opportunities to develop talent by giving them training keeps the staff loyal to the company. There is not much emphasis of the organizational structure of the company because the CEO preferred to have a common feeling of unity among the staff.
Having a rigid structure will segregate people into different categories. AirAsia was very supportive and responsive in encouraging and listening to its employee for any ideas in reducing cost. This made the employees more productive and creative in doing their performance. With the help of AirAsia Academy, AirAsia has successfully created a low-cost airline mentality among its staff. Tony Fernandes as CEO of AirAsia 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. For example, AirAsia practices high rate aircraft utilization which signify that higher profit will be gained by the firm and also lower the cost as the distributed fixed cost get smaller. He also stressed that constant focus on innovation has been the airline’s main weapon against the economic downturn. 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. Tony Fernandes believe in innovation.
AirAsia is moving ahead compared to other airlines operators in term of innovative use of technologies. Customers can book their flights and check-in by using AirAsia’s web sites using technology gadgets such as computers, laptops, mobile phones and tablets. According to Shari, for low cost, short haul strategy, the management conferred with mechanics on how to coddle spare parts so they can last longer. To extend the landing gear usage time, mechanics advise pilots to take a shallow approach on landing. By doing such things, AirAsia was able to lower the cost on short haul.
It was because less part would be need to be replaced since AirAsia does not have its own maintenance, repair and overhaul. AirAsia provide a simple no frills flights which do not include meals and lounge facility, a lean ground staff, an online reservation system and high aircraft utilization at fares that are lower than traditional full-service airlines. It able to charge much cheaper ticket price for a flight compared to main line operators’ charge. Air Asia also pursue routes that the other airline operators do not covered and perceived as not practical.
AirAsia have maximized the use of technologies by implemented a system done in its marketing and sales activities such as revenue management system. This system helps AirAsia to optimize prices and allocate capacity to maximize expected revenues. The optimization is done on two levels, seat and route. Every seat is considered an opportunity to maximize revenue. Seats are available at various prices in different points of time. A reservation done at later date will be charged more than the one done earlier for the same seat.
By adjusting prices for routes that have a higher demand when compared to others. The effective method is to combine these levels for all flights, all routes so that both the seat and the route are effectively priced for all the flights. Since low-cost model for airlines was invented by Southwest, AirAsia decided to invent AirAsia X, the world's first truly long-haul low cost airline. By focusing on the low-cost, long-haul segment, in 2007 AirAsia X was established to provide highfrequency and point-to-point networks to the long-haul business.
AirAsia X’s cost efficiencies are resulting 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. AirAsia also use modern technologies to manage operations and to be directly accessible by its customers. Relying heavily on information technology, the company keep introducing innovative ways for booking and ticket sales. Internet booking and ticketless operations are the essence of the simplified process of booking and chekckingin.
By using online booking and payment facilities, AirAsia managed to record over RM130 million sales over the Internet alone. It also allows customers to pay for their telephone bookings using credit cards or cash at the designated banks. The ticketless service also lets customers bypass the hassle of collecting tickets. AirAsia focus on really understanding consumer needs and problems. By increasing the consumer insight, the company is able to develop new products that solve these needs and problems. For example, by applying customer suggestion to have multiple languages in AirAsia’s websites, half of their sales are via internet booking and it is steadily rising.
AirAsia have a multilingual website with seven languages. AirAsia also have an Internet-based real-time holiday package program that is GO Holiday. It also introduce Short Messaging Service (SMS) to enable customers to book seats, check flight schedules or obtain the latest updates on its promotions through mobile phones. With other airlines, counter check-in is free of charge. But AirAsia implement a fee for every conventional check-in.
For a free check-in, customers have to use mobile check-in and web check-in. The rationale behind this implementation is to promote better efficiency and be cost effective for an organization in term of human resources. Counter check-in charges will be part of ancillary revenue stream. Revenue via ancillary streams helps Air Asia offset the escalating jet fuel price, which has exceeded USD$110 per barrel. Instead of transferring the full cost of the jetfuel price hike to customers, AirAsia chose to counter the spike by aggressively growing their revenue through ancillary products and services.
AirAsia 2 : Self Check-in
For AirAsia’s agents who have access to AirAsia’s Internet-based real time inventory booking engine, they can make payment via a virtual AirAsia credit card. AirAsia spends more money in advertising by involving local celebrities to achieve high impact among its target segment, the younger set of customers. This strategy due to travelling among the younger generation and budget travels are becoming a popular trend. AirAsia has a high frequency and wide coverage of flight service. It’s quick turnabout time of 25 minutes is said to be the fastest in the region.
For a low-cost airline, turnabout time is an important element. The more time the planes are in the air, the more revenue can be earned. The fastest turnaround time in the world which is 25 minutes is due to innovative procedures and systems in AirAsia. The practice of free seating simplifies the coordination of the operation. Imagine in 25 minutes, the turnaround of an aircraft must take place. By simplifying the process where there are no different classes and free seating, the staff manages to complete the process in less than 25 minutes.
To handle the customer’s complaint about 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, AirAsia provided call centre to solve it. Other than aviation, Air Asia also extending their business and has come up with Tune Hotel which is a five-star limited service hotel. Despite its currently limited presence in Indonesia with only two hotels in Bali, Tune Hotels has joined the big boys' league when it was named among the Top 20 Indonesia Innovative Brands 2011 by the country's leading marketing communications magazine, MIX, in its May 2011 issue .
AirAsiaGo also is an expansion of AirAsia’s online services on www. airasia. com.
AirAsiaGos products (Packages, Hotel, Activities, Go Car, Go Hostel, Go Medic) are available online for purchase. AirAsia 3 : www. tunehotels. com
As the leading and largest low fare airline in the Asia, AirAsia has been expanding rapidly since 2001. AirAsia has been such a big phenomenon in airline industry especially in Asia. AirAsia is one of the airline company focused with the strategy how to reduce inefficiency and make it low possible fare in the world.
In a conclusion, innovation opens pathways that appear closed. Innovation provides opportunities to live your values, even as it improves a company’s bottom line. Only innovation -- be it in our business, our lives, our societies, our nations – can ensure that we overcome the personal, national and global challenges that we face daily. Air Asia believe in the no frills, hassle free, low fare business concept and feels that keeping costs low requires high efficiency in every part of business.
AirAsia was becoming an airline company that is chosen by so many customers from all walks of life. The best philosophy of AirAsia ‘Now Everyone Can Fly’ means to give an opportunity to all people including those in remote areas to flight with the lowest possible fare and making them can flight even they only have the less money. To reach the mission, AirAsia have to be very creative and innovative because it is almost impossible to accomplish it. A good entrepreneurship is very much needed.
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