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We proudly present to you…..

Please fasten your seat belts

Presented By:Apoorva Kulshreshtha (1003)Vipul Aurange (1005)Bhaswati Chakraborty (1007)Vishal Dhangar (1010)Paul Anto (1027)

Objectives

• To study what is actually bringing AirAsia to Indian markets and why it can sustain.

• To formulate strategies; which will help AirAsia (i) to get an edge over other Indian low cost airlines like Indigo, SpiceJet and (ii) serve un-catered market segment.

• To assess possible challenges AirAsia can face in India.

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Research Methodology

• Descriptive– Qualitative

• Secondary Research– Articles reviews, news, case studies– Report of DGCA, International Airport Transport

Association

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Indian Aviation Industry overview

• India is currently the 9th largest aviation market

• Handling 121 million domestic and 41 million international passengers

• More than 85 international airlines operate to India and 5 Indian carriers connect over 40 countries.

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Market size• Total domestic passengers carried by the scheduled domestic airlines between

January and May 2013 were 25.998 million, as against 25.808 million during the corresponding period of previous year thereby registering a growth of 0.74 per cent(DGCA)

• No-frill carrier IndiGo lead in terms of market share with 29.7 per cent of the pie, followed by Jet Airways-Jet Lite combine at 25.3 per cent, Air India Domestic at 19.2 per cent, Spice Jet at 17.5 per cent, and Go Air at 8.3 per cent for the month of July 2013.

• The air transport (including air freight) in India has attracted foreign direct investment (FDI) worth US$ 456.84 million from April 2000 to July 2013, as per the data released by Department of Industrial Policy and Promotion (DIPP).

Market Share

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About AirAsia India

• Indian-Malaysian low cost carrier• Announced on 19 February 2013, • The airline would be operated as a joint

venture between AirAsia holding 49% , Tata Sons holding 30% and Amit Bhatia taking up the remaining 21% in the airline.

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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.

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Key Strategies• Safety First

•High Aircraft Utilization

•Low Fare, No Frills

•Streamline Operations

•Lean Distribution System

•Point to Point Network

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PEST analysisPolitical• Open sky policy/ deregulation (+)• FDI limits(+)• Unstable government policies (-)

Economical• Growing middle class income (+)• Expected GDP growth (+)• Hike in average income (+)• Growth in tourism 9% (+)• Rising ATF price (-)• High airport fees (-)

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Socio – cultural• Growing middle class (+)• Domestic leisure travel (+)• Foreign tourist (+)• Status symbol (+)• Security issue and terrorism (-)

Technological• Modernized airports (+)• Greenfield airports (+)• Online ticket booking (+)• Video conferencing (-)

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PORTER’S 5 FORCE MODELThreat of entry – low• Requirement of local permit• No objection certificate from the aviation ministry and approval from foreign investment

promotion board• Enhancement of the minimum paid-up equity capital requirement

Power of suppliers – moderately high• Duopoly in market (Boeing and airbus) in aircraft market leaving low bargaining power with

airlines• Switch cost to other supplier is high• Limited supply of suppliers for ATF in India (4 players)

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Power of buyers – very high• Switching cost is minimal because multiple alternatives available. It is not difficult to move

from one airline to another or to switch to a substitute.• Penetration of internet helped customers to compare different prices of different airline

carriers and go for the best buy.

Threat of substitute – medium• Indirect substitutes are railways but not powerful as airline score highly in travel time• Technological upgradation like Video Conferencing

Rivalry among existing competitors – very high• Very little product differentiation in services• Intense competition due to many low cost carriers like indigo, spice jet, GoAir, jet airways etc.• High exit barriers• Intense price competition due to high fixed cost and low marginal cost.

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SWOT analysisStrength• Effective top management• Strong strategy and execution –plan on fuel hedging, buying low cost airbuses• Strong brand name and joint venture with TATA, reputed name in INDIA• Low cost model• Single type fleet• First to market with ICT collaboration• Multi skilled staff – seamless transition with workforce

Weakness• Limited human resource• Heavy reliance on IT

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Opportunities• Vast population• Enormous size and growing middle class• Can target one million people traveling by train

Threats• Rising fuel cost• Rising labour cost • Regulatory uncertainty of Indian govt

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Marketing and Sales

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PromotionChallenges:• Spreading awareness in untapped market.• Reaching to first time fliers and educating them.

Strategy:• Initially costly advertising• Following competitors.• Strategies to educate and attract first fliers.

Execution:• Movies & Music, football, tourism• Billboards near railway and bus stations• Tie ups with banks & hotels, social networking , mails & SMS

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MarketingChallenges:

• Low cost already boasted by airlines like Indigo, SpiceJet.• Hence creating a POD is necessary as well as difficult.• Failing to keep promise will harm the brand image.• Targeting untapped market would require educating the customer and hence cost

escalating.

Segmentation:Geographic, Demographic & Behavioral

Targeting:• Income groups of 1,50,000 to 6,00,000• Small & medium businessmen, migratory workforce, tourists• South India• Needful of traveling and not so cautious about extra services • Price oriented and safety conscious

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Positioning:• Positioning only on low cost will not be sufficient.• On-time and service: hygiene factors• Connectivity: differentiator or motivational factors

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SalesChallenges:

• Higher sales means higher occupancy rate.• To gain more first time fliers per year.• To gain more market share to be the market leader.• To choose cost effective yet profitable channels to sell.

Strategies:• Contracts with travel agents• Tie ups with tourism agencies• Contracts with organizations• Price reduction by 25% to 30% than competitors

Execution:• Deliberate distribution of sales targets• Sales focus on tier II cities• Separate targets to various channels according to channel and geographical

potential

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Finance

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Balance score card

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Finance perspectiveObjectives

Financial measure Targets

Initiatives

Revenue growth

Ticket revenue

Increase sales

Penetrating in other domestic routes

Cost reduction

Lesser cost expense

Decrease in cost

Maximize sister company partnership

Asset utilisation Lesser cost expense Increase in service Purchase of capacity new modern aircraft

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Customer perspectiveObjectives

Financial measures Targets

Initiatives

High customer satisfaction

Customer ranking

To strive for about 100% satisfaction

Feedback and complaints

Reinforce brand image

Customer ranking

Ranking improvement

Media marketing

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Internal business perspectiveObjectives

Performance measure targets Initiatives

Payment convenience

Payment methods

Increase in sales %

Payment kiosk

Flight meal

Customization of food menu

Increase % of food choices

Food choices varieties

Cost reduction

Operation cost

Decrease in oil consumption cost

Monitoring of international oil price change

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Objectives

 

Performance measure Targets

 

Initiatives

 

Employee retention and

productivity

 

Employee satisfaction

 

Increase in work efficiency and

satisfaction in both employees

and customers

 

Increase in salary and

retirement plan

 

Improvement in relationship

with labor union

 

  Decrease in attrition rate

 

Dropping the criminal charges

against labor union members

 

Innovation and Learning Perspective

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Hedging updatesFuel hedging: Foreign currency hedge up to 66% with a weighted average (based on loans pertaining to aircraft being deployed to India )

Working capital=current assets- current liabilities=610224-4828745=-4218521( negative working capital means that the service industry takes time to repay the debt)

Cost InitiativesSharklets on AircraftFuel Savings of approximately 3%Pushing for LCC Terminal

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Financial problemsATF Prices

Airport Charges

Restricted FDI

Cost Controls

Insurance

Predatory Action by Major Carriers

Undercapitalisation

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Measurement to calculate

Revenue per mile = Number of seats occupied * Number of miles * Price per seat

Available seat per mile = Number of seats available * Number of miles * Price per seat

Load factor = Revenue per mile / Available seat per mile

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Invest in joint ventures.

• Maintain international development across Asia in association with local budget

airlines.

• It would increase the airline’s offer.

Diversification

• Acquire new know-how in a view to offer more service to the consumer.

• E.g. To take over an online travel agency.

Future Plans

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Operations

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PROBLEMS

• Huge operating cost

• Capacity utilization

• Service level

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Target

• All fleets with LCC service.

• Bring capacity utilization upto 70-80%, NO delay & cancellation of flight.

• Earlier, AIR ASIA was planning routes having low Passenger Load Factor

(53%) .INCREASE PLF TO 65% i.e. industry avg. & then increase to 70-80%.

• Turn Around Targets :Not more than 30MINUTES for A320s

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Strategy• Fleet selection

• Reduction in cancellation, no frill service for LCC

• MRO (Maintenance, Repair and Operating expenses)

• Luggage

• Airbus-320, ATR-72 will be installed with single-engine

taxiing:

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Strategy• Shutting down of engines during delays: such as taxi queuing and

standing at the jet way.

• Flying at high altitude has lower air resistance so needs less fuel.

• Redesign hubs/schedules for less congestion—in the air and on the

ground.

• Interline operations agreement

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Human Resource Perspective

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Innovation

Responsiveness

Efficiency

Air Asia India’s competitive advantage is based on cost leadership

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Recruitment and Selection

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Experienced in dealing with the public

Physically fit with a good attendance record in previous position

Hard working, flexible & willing to operate on a shift roster

Over 18 years of age

Between 5'2 (1.57m) and 6'2 (1.85) in height with weight in proportion

Of normal vision (contact lenses acceptable)

Able to swim well

You must be in possession of a valid passport and have the right to work anywhere in the world

Fluent in English (both written and spoken)

Prepared to live within one hour's travelling time of any Air Asia base

Ready to meet the challenge of dealing with people and demanding situations

Friendly and outgoing with a lively personality

Prerequisites:

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ProcessCheck the

prerequisites Uniform checks

Water confidence test

Psychometric test and attend

a tea partyDirect Entry through outsourced Training

and Recruitment

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Training and Development

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•Outsourced Training and Recruitment •Multiple skill Training• Functional Training•Other Trainings• Job Rotation

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Managerial Judgment

Delphi Technique

HR Audit

HR PLANNING

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• “Efficiency" and "functional flexibility" as key components

• Ground crew can become flight attendants and vice versa

• Unit crewing• Operational efficiency

Work Organization

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Performance related pay structure

Incentives based on team work

Low Base Pay

Staff Incentive Policy

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Motivating Staff through reward and recognition

Varied job content

International accolade

Communication Fun at

work

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• A theoretical Framework for determiming the relationship between competitive strategies and Human Resources practices; Journal of Naval Science and Engineering 2010, Vol. 6, No. 3, pp. 76 – 87

• “Linking Corporate Strategy and HR Strategy: Implications for HR Professionals,” In R. Padaki, N.M. Agrawal, C. Balaji and G. Mahapatra (eds.) Emerging Asia: An HR Agenda, New Delhi: Tata McGraw-Hill, 2005, pp. 215-223

• http://www.caspianlearning.co.uk/Whtp_caspian_airlines.pdf• The lowest of low-cost carriers: the case of AirAsia; The

International Journal of Human Resource Management, Vol. 21, No. 2, February 2010, 197–213

• Reports of DGCA• Annual Report of Air Asia

Bibliography

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Thank You!

NOW EVERYONE CAN FLY