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CEO OF AIR ASIA, TONY FERNANDES: NOW EVERYONE CAN FLY!

FILED UNDER: AIRASIA

I.

Introduction

The successful story of Air Asia started with Tony Fernandes when he approached the Malaysian government to
indicate his desire to start low-cost airline company. However, Malaysian government only allowed him to takeover a
heavily indebted government owned airline company. He believed this is a great opportunity to achieve his dream.
So, he took the risk and re-mortgaged his house and bought Air Asia with RM1 that tied him with RM40 million debts
in 2001. Hitherto, Air Asia has become the fastest growing and biggest low-cost airline company in Asia.

The purpose of this article is to analyze the strategies of Air Asia from three perspectives. First, I will explain the
strategy statement of Air Asia. It followed by the actual strategic positioning and strategic sweet spot of Air Asia.
Lastly, I try to explain the human capital resource and organizational resource from resource-based model.

II.

Three perspectives about Air Asia strategies

Perspective 1: Air Asia, can you say what is your strategy is?
Collis and Rukstad (2008) argued that companies must have clear, concise strategy statement to enable employees
absorbs it with ease and it become guidance. In turn, this will help company become industry leader. The strategy
statement consists of three basic elements which are objective, scope and advantage. That is, the strategy statement
must started with goals and reflect the scope of industry landscape. Furthermore, it must show the firms competitive
advantages in industry. The strategy also requires trade-offs to achieve the goals.

In this context, Air Asia has done a better job and creatively put vision, goals, strategies and business foundations
into a house picture which four strategies (i.e. safety, low fare, service and simplicity) are the main pillars. Goals (i.e.
high profit margins and sustainable growth) are located at the layer above pillars; vision (i.e. continue to be lowest
cost airline in every market we serve) is represented by theroof while four business foundations supporting the
strategy pillars which are low cost, efficiency, stimulate new market and strong cash flow. The house picture that
available in Air Asia website clearly shows that strategies are based on business foundations and will help company
to achieve goals (i.e. competitive advantages) to become who they want to be. In short, I can say that Air Asia
successfully provides succinct strategy statement through a house picture to employees. The house picture is shown
at Air Asias official website.

Perspective 2: Strategic Positioning and strategic sweet spot of Air Asia

Porter (1996) defined that strategic positioning allows company to gain continuous competitive advantage through
maintaining its distinctive activities. Company performs distinctive activities through (1) different activities and (2)
similar activities with different methods. Strategic positioning involves creating unique and valuable position that
stemmed from three distinct resources such as variety-based positioning, needs-based positioning and accessbased positioning.

I think that Air Asia adopts strategic positioning in aviation industry. The group CEO of Air Asia said that airlines have
to choose between short haul and long haul and stressed the importance of focusing firms value proposition to
customer. He asserted that he wanted to bring low-cost travel yet high quality travel experience to customers. He
determined to change the general perception that low cost is low class. This also shown in Air Asias vision which is
continue to be lowest cost airline in every market we serve.

The Air Asias competitive advantage is clear stemmed from three distinct resources suggested by Porter (1996).
First, it seemed that Air Asia exploits variety-based positioning which it serve many kind of customers with only
fulfill one of subset of their need low cost travel. For example, Fernandes said that Air Asia provides low cost travel
to different customers and everyone. He said that it is common to see women with diamonds sitting beside maids in
Air Asia flights. Second, Air Asia also fully utilizes the needs-based positioning which a well design activities to

serve different needs from various kinds of customer. Despite the fact that Air Asia is low fare and no frills airline, it
provides various choices to guests such as special prepared meals, snacks and drinks as well as the choice
of FLATBED in long haul flight (Annual Report 2009). The other products and services are E-gift Vouchers, Web
check-in, Xpress Boarding and Go-Insure Travel Insurance (Annual Report 2007). Third, Air Asia also adoptsaccessbased positioning which different kind of customers can access in various ways. The sales of air tickets are through
various means such as internet, travel agent, sales offices, call centre and airport counters (Annual Report 2007).
The percentage sales via internet are 70% and 75% in 2008 and 2009 respectively (Annual report 2008 & 2009). The
internet booking is available until 4 hours before the flights. Clearly, internet booking is the Air Asias way to provide
accessible ticket sales to customers and it also allows customers can choose the various extra products and service.

Porter (1996) argued that company shall deepen strategic positioning so that other competitors are difficult to
imitate. This also means company can gain sustainable competitive advantage in certain market segment in a longer
time horizon. Similarly, Collis and Rukstad (2008) also argued firms strategy statement must put firm in strategic
sweet spot which firm's value propositions meet customers needs while rival unable to compete in a particular
context (i.e. technology, demographics, regulation etc.).

Clearly, Air Asia has archived and deepens strategic sweet spot in aviation industry. First, Air Asia already gained an
advantage position in cyberspace (Annual report 2009). In 2009, Air Asia website has become number 1 travel
website in Asia, biggest e-commerce website in Asia and received 210 million page views. In social media, Air Asia
Facebook is ranked number 1 for corporate account in the transportation field in region with over 100,000 followers.
There are also 10,000 followers for Air Asia's Twitter. Second, Air Asia achieved better efficiency and financial
performance compared to peer groups (i.e. EasyJet, Ryanair, Southwest Airlines etc.) such as fuel consumed per 100
ASK, aircraft utilization, unit cost per ask and yield revenue per ASK (Annual Report 2007). Lastly, it is reported that
Air Asia is airline company that archive the best operating profit margin in 2007 and 2008 in the among all airline
companies in the world (Vasigh, Fleming & Mackay 2010).

Perspective 3: Air Asias resources and sustained competitive advantage

Barney (1991) found that firms strategic resources are key determinant for company to achieve sustained
competitive advantages under resource based model. The model is based on two assumptions as follow: first, firms
strategic resource is heterogeneous in industry; second, these resources are immobile across companies that cause
the heterogeneity continues to exist. Authors argued that there are four attribute of firms strategic resources enable
firm to sustain competitive advantages. First, resource must be valuable to capture opportunities and may overcome
threats. Second, the resource must be rare and not available to other competitors. Third, the resource must be
imperfectly imitable by competitors. Finally, the resource is unable to be substitute by other resource that owned by
competitors. The firm resources can be divided into (1) physical capital resource, (2) human capital resource and (3)
organizational capital resource (Barney 1991).

Here, I would like to focus on human capital resource. I think that the CEO Tony Fernandes is the most valuable
human asset in Air Asia. Fernandes has used unconventional strategies to achieve success. He transformed Air
Asia from a heavily indebted company towards highly profitable company. He embraced new significant change
concept in aviation industry, that is, culture, focus and discipline and emphasis efficiency is the utmost thing to
archive good profit.
Speaking from organizational capital resource perspective, Fernandes said that Air Asia got little bureaucracy which
allows company to try many innovative ideas and terminate the ideas when they are not workable in very short time.
He is also proud that Air Asia does not have complicated hierarchy structure that allows staffs have flexibility in doing
different

kind

of

jobs.

This

advantage

is

clearly

difficult

to

be

imitated

by

other

companies.

Related Posts:
1. STOCK REPORT: AIRASIA
2. CEO OF AIR ASIA, TONY FERNANDES: NOW EVERYONE CAN FLY! (CORPORATE STRATEGIES)
3. LOW COST AIRLINE IN CRISIS TIME AIR ASIA

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P O S T E D B Y S H I N K I AT 6 :1 1 AM
E M A I L T H I S B L O G T H I S ! S H A R E TO T W I T T E R S H A R E TO FAC E B O O K S H A R E TO P I N T E R E S T

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