Clement Ong Keita

Ivy WongZhang Cen

We proudly present to you…..

Please fasten your seat belts

Have you flown with AirAsia yet?

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Corporate Profile• Established in 1993 and commenced operation on 18 November 1996.

• 2 December 2001, it was purchased by former Time Warner executive Tony

Fernandes’s company Tune Air Sdn Bhd from the ownership of HICOM Holdings

Bhd for the token sum of only RM1, and with only 2 Boeing 737-300 aircraft

together with RM40 million in debt.

• AirAsia Berhad is a Malaysia-based low-cost airline.

• The largest low-fare, no-frills airline and a pioneer of low cost travel in Asia.

• AirAsia is proud to be a truly ASEAN (Association of South East Asian Nation)

carrier.

• Operates scheduled domestic and international flights to over 400

destinations spanning to 25 countries.

• Had flown over 100 million guests upon the core believe that ‘Now Everyone

Can Fly’.

• Main terminal hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur

International Airport (KLIA).

• AirAsia’s associates companies- AirAsia X, Thai AirAsia (TAA), Indonesia (IAA)

and Malaysia AirAsia (MAA), and VietJet AirAsia.

• Previously known as FlyAsianXpress Sdn Bhd.

• Focusing on the low-cost, haul segment.

• Established in 2007 to provide high-frequency and point-to-point networks to

the long haul-business.

• AirAsia X is spreading its wing to exciting destinations such as Australia, China,

India, Middle East and Europe.

AirAsia X

Tune Hotels

• Limited service hotel chain founded by AirAsia CEO Dato’s Tony Fernandes.

• Its hotel operates in Kuala Lumpur, Kota Kinabalu, Kuching, Penang, LCCT

Sepang and Westminster, London.

The Star Highlights of…Air Asia Founder & CEO- Dato' Sri Dr. Tony Fernandes

• Malaysian, aged 48.

• Appointed Group Chief Executive Officer of the Company in

December 2001.

• Financial Controller at Virgin Communication London (1987- 1989).

• Senior Financial Analyst at Warner Music International London (1992-

1996).

• Regional Managing Director, ASEAN (1996-1999).

• Vice President, ASEAN at Warner Music South East Asia (1999-2001).

• After graduating in London School of Economics, he worked with

Virgin Atlantic and Richard Branson became his boss and mentor.

• Under his leadership, AA broke even within a mere 12 months and

cleared its debt.

• Outperform Malaysia’s national carrier MAS, in terms of size,

revenue, profit and popularity.

Vision StatementTo be the largest low cost airline in Asia and serving the 3

billion people who are currently underserved with poor

connectivity and high fares.

Mission Statement• 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 Air

Asia.

• Maintain the highest quality product, embracing technology

to reduce cost and enhance service levels.

Key Strategies• Safety First

• High Aircraft Utilization

• Low Fare, No Frills

• Streamline Operations

• Lean Distribution System

• Point to Point Network

Achievements: Year

20

03

-2

01

0

Internal Capabilities

• Foster a dependency on Internet technology, eg. online booking, online

checking (flight status, promotions).

• Investment in the AirAsia Academy.

• Dynamic environment between employees.

• No communication barriers between employers and employees, friendly.

• “Employees before customers”.

• Aggressive marketing tactics, massive advertising, promotional packages

etc

• Employees motivation- rewards free flights for their staff.

• Offer customers the ticketless concept.

• Low operating cost- wages, airport fees, short ground waits due to simple

boarding processes.

• Keeping cost low- uses one type of aircraft, Airbus.

Welcome to Air Asia Internet Homepage!

AirAsia Electronic Ticket Ordering Process

External Capabilities

• Partnerships- with Vietnam-Malaysia cooperation forming VietJet AirAsia.

• Strong branding strategy: AT&T Williams F1 team, Manchester United, Asean

Basketball League (ABL), EPL Referees, Oakland Raiders, NFL, The Amazing Race

Asia, Monsoon Cup 2006, etc.

• First landing of Air Asia X greeted by Prince Andrew from Kuala Lumpur to

Standsted, London.

• Linking with Virgin Airlines- landing right in overseas.

• Look for suppliers with good quality on certain prices, build long-term

relationship.

• Airports have low cost terminal hub.

• CSR, recently involve in providing flight services for evacuation of Malaysian

students in Egypt.

COMPETITVE ADVANTAGE OF AIR ASIA

1- Usage of one type of aircraft

Economies of scale

Cost can be cut by 50%

Small inventories ( cube-square rule, power of purchasing)

Reduce time on employees training and learning curve

ASK: Available seat kilometers, which is the total number of seats available on scheduled flightsmultiplied by the number of kilometers these seats were flown.

Cost per ASK: Total operating expenses (excluding finance costs and taxation) divided by ASK. In theairline industry, this is comparable to ‘unit cost’.

Air Asia.com, 2009

2- Synergy between the AA management and the employees

Management support and motivate employees to work and creativity

Competitors find it hard to follow

3- Productive and Skillful employees

Employees create tips to help in procedures and save time, costs. example: the one type concept

4- Limited passenger service

Food and beverages are not included , transportation from the airplane to the airport not includes etc ….

Airport tax

Air Asia.com, 2009

5- Frequent, Reliable schedules

7- High aircraft utilization

Space are well used in the airplanes to provide more site

No first class

8- No Fuel Surcharges Policy

despite hike in oil prices.

Fuel surcharge of RM20 will only be made if oil price is $100 per barrel

6- Short haul ( point to point ), often secondary airports

Less cost for the company

Air Asia.com, 2009

COMPARISON This diagram compare Air Asia with other company in terms of cost per unit.

Air Asia was the Best Low-Cost Airline for 2010

Air Asia.com, 2009

Too much to know? Stay Tuned… We will be back!

Video link.

Financial Performance

(Annual Report 2009)

•Operating profit margin at 29.1%

•Strong deposits, cash and bank balances of RM746 million

•Despite a economic downturn period, AirAsia revenue for the year

jumped 9.71% to RM3.1 billion and recorded a profit of RM506 million.

Note

Group Company

2009RM’000

2008RM’000

2009RM’000

2008RM’000

Revenue 4 3,132,901 2,854,970 3,072,049 2,815,262

Operating expenses- Staff costs- Depreciation of property, plant and equipment- Aircraft fuel expenses- Maintenance, overhaul, user charges and other related expenses - Aircraft operating lease expenses- Travel and tour operating expenses- Gain/(loss) on unwinding of derivatives- Provision for loss on unwinding of derivatives- Other operating expensesOther incomeOperating profit/(loss)Finance incomeFinance costsProfit/(loss) before taxationTaxation- Current taxation- Deferred taxationNet profit/(loss) for the financial year

51125678899

(306,002)(447,644)(927,795)(410,583)(107,251)(53,524)

22,457-

(92,188)102,383

(236,793)(346,954)

(1,389,841)(307,205)(92,649)(37,945)

(678,503)(151,713)

(46,570)81,545

(304,551)(447,637)(927,795)(410,583)(107,251)

-22,457

-(90,543)102,383

(235,773)(346,946)

(1,389,841)(307,205)(92,649)

-(678,503)(151,713)(44,627)

81,545

912,75484,505

(374,971)

(351,658)35,245

(552,785)

908,53984,462

(374,971)

(350,450)35,245

(552,782)

622,288(11,186)

(104,835)

(869,198)(3,769)

376,404

618,020(11,186)

(104,835)

(867,987)(3,769)

376,404

(116,021) 372,635 (116,021) 372,635

506,267 (496,563) 501,999 (495,352)

(Air Asia Press Release Q3 2010)

•Revenue: RM988 Million (34% growth year-on-year from RM740 million)

•Profit after Tax: RM327 million

•Had been described as outstanding performance

• Looking forward to 2011 → driving down the costs → raising the yields → increase productivity → expand the route network

Strengths Weaknesses Strong brand recognition, marketing approach and awareness

Strong management team consists of industry experts and ex-top government officials( all the board of directors have outstanding portfolio

Low cost operations (ticketless, online booking, online check-in, quick turnaround of 25 minutes, low fares and no frills)

Using single aircraft fleet (reduce the maintenance and training costs)

Enter and focus on potential market (lower and middle income group)

Multi-skilled and well-trained staffs to enhance the efficiency

Service resource is limited due to low costs

Government interference and regulation on airport deals

Non-central location of secondary airports

Heavy reliance on outsourcing

Complaint from customers regarding the current overcrowded LCCT (handled about 17 million passengers instead of its capability to handle 15 million passengers)

Opportunities Threats Long haul flight to approach undeveloped market (Air Asia X to Europe)

Expansion to new routes based on low cost philosophy (exploit growing markets like China, India)

Higher fuel costs means less profitable competitors may be forced out of business

Partnerships with Virgin airline to use existing strengths (brand recognition, landing rights)

Differentiate from old LCC model (include customer service and operation as full service airline)

Entrance of other low cost couriers (Firefly, Tiger Airways)

Accident and disaster affect customer confidence (Example: an aircraft skidded off the runway while landing at KCH International Airport on Jan 2011)

Aviation regulation and government policy (barriers in new routes expansion)

Full service airlines start cut costs to compete (MAS offered discounted fares with meals and comfortable seats)

BIG SALE: 1,000,000 seats up for grab now!

Air Asia RM1 Promotion

Special Day Promotions

Passport of love – Fly with your loved ones this Valentine’s

~ Does not meet every customer’s demand for convenience in terms e-ticketing. (Eg. Not possessing any related card services for transaction, emergency booking (before 24 hours fight)

Problems Faced by AirAsia

~ Problems with crowded seating~ Problems with the long distance walk between the airplane stop and the terminal entrance.

Recommendations:

• Failure of internet system

• Leverage competency in creating cost advantage across multiple

value chain.

• Emphasis on more effective safety & security to avoid accidents.

(Eg. demonstrations and procedures for passengers, avoid crash

landings)

• Punctuality should be their main concern especially AA wants to

penetrate into the business travelers market.

• Arrangement of seating should be organized.

In summary,

Video link.

Thank You!

NOW EVERYONE CAN FLY