AirAsia is Malaysian low-cost airline that gives both home and worldwide flights. AirAsia started operating on 18 November 1996, it pioneered low cost travelling in Asia. In 2001, the airline which was closely indebted was bought by Tony Fernandes’s company Tune Air Sdn Bhd. Under his cost, AirAsia has turn out to be one of the greatest low price airlines working in Asia today. Its primary hub is based in the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). As such, AirAsia customers tend to be from the lower to middle income inhabitants.
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Thai AirAsia and Indonesia AirAsia are subsidiaries of AirAsia and are based in Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively. Company Analysis
AirAsia target market section encompass three completely different but overlapping segments that had been segmented based on Geographic Segmentation, Demographic Segmentation and Psychographic Segmentation. AirAsia is targets mainly the Asian market, therefore the name AirAsia. As such, they do geographic segmentation by focusing their providers primarily in Asia.
Being a low cost airline, they’re targeting the low to middle revenue group (demographic) and the cost-conscious travellers (psychographic).
In order to seek out the present advertising challenges faced by AirAsia and to determine what are the possible solutions that they will implement, considering their alternatives and reap the benefits of their strengths, the TOWS evaluation mannequin (Threats, opportunities, weaknesses and strengths) shall be used. Threats | Opportunities |
* Intense competition (i.e. Tiger Airlines, Singapore Airlines) | * Asia’s center class growth * ASEAN Open Skies * Increasing oil price| Weaknesses | Strengths |
* Fair availability | * Well established model name * Low value leader in Asia |
What was as soon as a comparatively small market of low-cost airlines when AirAsia was first established, AirAsia not solely has to face indirect opponents such as non-budget airways (i.
e. Singapore Airlines), ferries (i.e. Kuala Perlis Langkawi Ferry Service Sdn Bhd) and buses (i.e. Aeroline, now they are also threaten with intense direct competitors similar to Tiger Airways and Jetstar Asia Airways.
Countries in Asia, similar to China and India, are up-and-coming large potential markets sooner or later. In China, there have been already one hundred thirty, 000, 000 shoppers just within the center class range in 2006. It is estimated to increase to 340, 000, 000 in 2016, a 162% progress from 2006 as shown in the graph below. This
is useful for AirAsia as it implies that their focused customers (low to middle income) will grow exponentially within the near future.
ASEAN Open Skies is an agreement, focused for 2015, to allow limitless flights between all of the ASEAN’s regional air carriers, both full providers and low-cost airlines. The rationale for the Open Sky agreement is to advertise competition in the airline trade. Due to its sturdy brand name and “low-cost” culture among its workforce, AirAsia is more likely to achieve from this settlement. The increasing oil prices may look like a menace to AirAsia, however being the low cost chief in Asia, this can truly be seen as a possibility for them as a substitute. This is as a result of excessive oil prices would affect all of the airways and never just AirAsia. Thus, AirAsia will nonetheless be the lowest costing amongst all of the completely different airlines. This could end in an increase in market share for AirAsia as prospects from the totally different airlines would relocate to AirAsia. Weaknesses
The availability of AirAsia flights is not good as full providers airline. While honest availability might look like a huge weak point that might have to be tackled and solved, it would be troublesome for AirAsia to remain cost chief if it provided complete support as it might result in elevated operational price. Strengths
AirAsia’s model name is nicely established within the Asian area. This was not only because of the fact that AirAsia the pioneered low price travelling in Asia, but also because of the intensive advertising & promotions they’ve done. Indonesia AirAsia and Thai AirAsia have successfully helped AirAsia to spread the brand throughout the regional beyond just Malaysia. Due to AirAsia Academy, which AirAsia’s regional coaching academy located in Malaysia, it has helped to create a low-cost airline mentality among their workforce. It is due to this workforce that AirAsia has turn out to be the low-cost airline leader in Asia in terms of total value. In the table on the next page, it particulars the distinction when it comes to price per available seat kilometres (ASK, which is the total variety of seats out there on scheduled flights multiplied by the variety of kilometres these seats were flown), between AirAsia and the other competitors. Its reveals that AirAsia has a large advantage over the competitors on this area.
Looking by way of the company analysis, the largest advertising problem presently faced by AirAsia is to stay competitive and protect their market share within the increasingly aggressive market of low-cost airline. Recommendations
I. Tap into the rising Asian Market
For AirAsia to remain competitive and not solely protect their market share however expand it as nicely, it’s critical that AirAsia taps into and take benefit of the growing Asian Market. They can do this by adopting the next methods.
Market Challenger Strategies
The market challenger strategies are a set of strategies that an organization can make use of to achieve market share and becoming the chief eventually (Kotler and Armstrong, Principles of Marketing, latest 2010, thirteenth edition). AirAsia can use these methods, particularly, frontal, flank, bypass and guerrilla attack, to make itself standout from the relaxation of the rivals and hopefully acquire a bigger market share of the growing Asia middle earnings population. Attacker
(3) Encirclement attack
(4) Bypass attack
(2) Flank attack
(5) Guerrilla attack
Frontal attack refers to whenever you attack the weakness of one other company’s product. In the case of AirAsia, they need to assault their rivals by way of their costs. Due to the reasons listed above, AirAsia has become the low price leader in Asia. It is unlikely for his or her rivals to have the power to full by means of value alone in the long run. Thus, AirAsia ought to use their comparative low costs to problem their competitors directly. The limitation to this form of attack is that AirAsia has to maintain up that low value advantage that they’ve.
This signifies that they have to invest a big portion of their capital into their analysis and growth section to guarantee that they are flying at the lowest price attainable. One way AirAsia can further scale back their operational price is by standardizing their aircraft. As proven within the desk in the following page, AirAsia has at present 5 various sorts of plane, starting from the Airbus A320-200 to the Airbus A350-900. However, if AirAsia was to reduce back this to only two to a few different sorts of plane it might result in a drastic drop in price, as economies of scale comes into impact after they buy and keep the identical type of plane Staff value additionally scale back, as they solely need to know the way to handle a quantity of forms of aircraft, this results in training time being reduced and ultimately decreasing operational value.
Flank attack refers to attacking opponents at their weak factors or blind spots. One of the issues lacking in the low-cost airlines in Asia right now is the ability to travel lengthy distance on the identical low worth provided for the short duration trips. AirAsia already has AirAsia X, which supplies this lengthy haul flight services, however, their destinations are limited as they solely go to the more well-liked nations such as London or Sydney. For that cause, one of many methods AirAsia may implement is to kind an alliance with low-cost airlines exterior of Asia like Virgin Blue. This technique will be additional explained later within the report. Bypass Attack:
This type of assault refers to diversifying into unrelated products or markets neglected by the opposite competitors. One of the methods AirAsia might diversify is by providing affordable accommodations at their locations. These accommodations may be supplied by Tune Hotels which is an related firm personal by Tony Fernandes, who can be the CEO of AirAsia. Travellers will see this as a price added service as not only would they have the power to get an inexpensive form of transportation but a spot to stay as nicely. The limitation of offering lodging is that it is financially infeasible to arrange a hotel in any respect of their present flight locations. As such, it will be better to start off by providing this service only at location the place it would be difficult to get low cost lodging, for examples in the metropolis areas of Japan. And as the corporate grow additional, it could start to expand on the placement where these hotels will be supplied.
AirAsia can apply guerrilla assaults by launching small, intermittent hit-and-run attacks to harass and destabilize the chief. AirAsia can use
promotions for short intervals of time to attempt to steal clients from their opponents. One such example is when AirAsia had a 48 hours promotion between 28 Sept – 29 Sept 2009, the place they provided a 20% low cost on all seats, flights and locations. This is a very useful kind of attack for AirAsia due to their low cost benefit, as they’re in a position to maintain promotions, particularly discounted value promotion, longer than their competitors with a decrease misplaced in profit. The limitation of providing promotions is the reduction within the profit margin once they give discounted costs. However, this adverse impact could be minimized by putting the promotions at strategically moments, similar to only when opponents are providing promotions. Alliance with Virgin Blue and America
As talked about under the flank assault section, one of the methods AirAsia can assault their competitors is by offering a more extensive flight network outside of Asia. While AirAsia X is at present filling in this market of long haul flights for AirAsia, it is nonetheless not comprehensive sufficient and ought to be developed additional. Virgin Blue and Virgin America are low cost airlines operating in Australia and America respectively. By partnering with them, AirAsia would have the power to lengthen their locations into Australia and America. For instance, if a Malaysian traveller wished to go to Los Angeles, he would first take an AirAsia route to journey from Kuala Lumpur to Washington, DC, after which take a Virgin America flight to Los Angeles. The rationale for selecting Virgin America is because America is considered one of the prime locations in terms of worldwide vacationer arrivals as seen in the table under, which is in a position to only enhance with the rising Asian economic system. By becoming a member of along with Virgin America, AirAsia can capitalize on this present excessive human visitors circulate going to America.
While Australia does not fall under the top 10 worldwide vacationer arrivals nations, AirAsia ought to nonetheless give attention to the Asia to Australia route. This is because as China and India develop there might be a huge enhance within the number of international travellers, a majority of which would be made up of individuals that have by no means travelled outside the Asia area and even their nations. Thus, these folks, eager to style a culture completely different from Asia but do not need to travel to a distant location corresponding to America or Europe on their first journey, would select to go to Australia. The benefit of this strategy is that it will not only goal the Asian market segment who wants to journey to locales outside of Asia but in addition cater to the market phase exterior of Asia that wants to journey to Asia. The limitation of this strategy is that AirAsia would have to first form an alliance with low price airliners in those regions, which might be a tough process as confirmed by the already long list of failed airline alliance corresponding to Air Canada/ Continental Airlines and Saberna/Air France (Nigel Evans, David Campbell, George Stonehouse, Strategic management for journey and tourism, 2003)
Take advantage of the ASEAN Open Skies agreement
As talked about above, one of many issues AirAsia can do to remain aggressive sooner or later is to prepare for the ASEAN Open Skies settlement. With open skies within the ASEAN region, it will be imply that more routes are available for the airways. For AirAsia, this means that they would be able to fly to extra locations while taking shorter routes as they would not be faced with restriction from the countries in the ASEAN area from flying over them. The shorter routes implies that flights will take a shorter time to complete, frills such as providing meals could no longer be wanted and the frequency of AirAsia flights could be improve because the turnover fee is larger.
Thus, they might have the ability to scale back operational price, which translates to decrease prices, hence making AirAsia extra attractive to the consumers. The limitation to this strategy is that the Open Skies settlement applies to all airlines in the ASEAN area, that means that AirAsia would face even harder competitions when the settlement starts in 2015. However, because of the robust brand image and low price leader advantage AirAsia has, in the event that they were one of many “early movers”, they could grab a huge portion of this market. II. Capitalize on the company business
AirAsia have seen a recent increase in the numbers of corporations (almost double the last 3 years, as seen in the following web page table) buying and selling all the way down to low price airlines, this could possibly be due to the global economic downturn. As such, AirAsia should also be focusing on increasing their share in this corporate business market as this market tends have a extra constant source of demand unlike tourism which is seasonal and simply affected by external components, corresponding to in the case of the swine flu.
AirAsia’s seats offered to company shoppers: 2006 to 1Q09
To capture this market AirAsia might start offering a rewards program. AirAsia may supply perks which are earned according to the amount of enterprise a company does with them. For instance discounted pricing or with the more regularly fliers, some extent system whereby the businesses might earn free flights if they amassed sufficient mileage. The limitation of this technique is that AirAsia would have to incur a lower revenue margin as they would now be selling at lower discounted costs. However, the professionals far overweight the cons in the case of AirAsia. Once again due to being the low value leader in Asia, the rewards program provided by AirAsia would doubtless be essentially the most engaging in comparability with the opposite competitors as they’ll offer higher perks, therefore they may easily turn out to be the market leader within the corporate flying market, making up for the decrease profit margin per seat by pure quantity.
To recap, the principle marketing challenge going through AirAsia in the meanwhile is the intense competitors that exist in the low price airline business. The strategies that AirAsia can implement to remain competitive are two pronged, to faucet into the Asian center earnings class and concentrate on the company businesses. They can capitalize on the Asian market by using market problem methods, standing out from the remainder by attacking their rivals. Finally, they will take benefit of the company businesses by offering a form of loyalty programme that might make it extra attractive for corporations to use AirAsia. Ultimately, the reason why the above methods would work is due to the low value chief benefit that AirAsia has. In order to survive in this market, AirAsia has to guarantee that they preserve their low price altitude.