AIRASIA BERHAD MARKETING PLAN

Airasia Berhad

Contents

Introduction Vision & Mission Market Profile Analysis - PEST Analysis - Competitive Analysis - Market Demographics Porters 5 Forces Market Segments and Market Positioning Marketing Mix Analysis Summary

OVERVIEW OF AIR ASIA

Airline Industry
Airline Industry in Malaysia
National Carrier Malaysian Airlines System (MAS) Low cost carrier Air Asia Sdn Bhd

Airlines Industry in Malaysia

MAS

Air Asia

Other Foreign Airlines

AirAsia

AirAsia Sdn Bhd (AirAsia) Low cost airlines in Malaysia Also known as low fare and no-frill started the operation in Dec 2001 Joint Venture with
1. 2.

Thailand Thai AirAsia Indonesia Indonesia AirAsia

Flies over 71 destinations (started with 6 in 2002 and currently 71 destinations) AirAsias new destinations (products) :
Singapore Goldcoast Hangzhou

Mission
To continue to be the lowest cost short-haul airline in every market we serve, delivering strong organic growth through offering the lowest airfares at a profit.
Cost-efficiency, low complexity and profitability are always the cornerstones of building a strong business. While a strong foundation does not guarantee a solid house, it is the only basis upon which to build. AirAsia will not just be number one in size; it will be number one in the minds of consumers. This is the passion of AirAsia and trust me, we will never lose sight and passion of being the best

Dato' Tony Fernandes CEO, AirAsia Berhad

Business Portfolio

Tagline : Now everyone can fly Major Milestone Operating in LCCT Countries Thai, Indonesia, Macau, China, Philippines, Cambodia, Vietnam, Myanmar Aircraft Boeing 737, Airbus A320 Ancillary products Go Holiday, GoInsure, Snack Attack, AirAsia Credit Card, Gift card

Business Portfolio

1. 2. 3.

Key Strategies:
Low fare, no frills Frequent flights Guest convenience Nationwide call centre Ticketless service Easy payment channels Internet booking Reservations and sales offices Safety first Cost optimization operations

4. 5.

LCC Penetration in Asia

PEST ANALYSIS

Political

Politic stability no strikes, wars people free to plan their traveling Diplomatic relationship with other countries Government policy All government and GLC business trip to engage with MAS Government approval for domestic and international routes and hubs

PEST ANALYSIS
Economic

Fuel price increase low profit margin for AirAsia (USD100++ per barrel) Good economic growth in Malaysia (2006 GDP 5.9% 2007 GDP 6.0% (forecasted) Per capita income RM19764 per annum in 2006)
(sources from EPU)

Peoples spending power increased Business growth for AirAsia Hospitality and Tourism Malaysia This programme has boost AirAsia growth Economic interest of selected destinations Example: i) Hangzhou - on the east coast of China and very close to Shanghai (known for tremendous business) ii) China highest population rate potential for AirAsias passenger growth

Continued

International business expansion a) Foreign franchise business all sectorsF&B, clothes, education, telecommunication, engineering maid and labor services

b)

This increased traveling needs.

PEST ANALYSIS Social

Peoples Awareness and exposure towards holidays & travel Emphasis in education abroad education Migrating to different countries seeking different living environment and culture Consumers sensitivity towards sales and promotion - easily attracted with the tagline Now everyone can fly

PEST ANALYSIS
Technology New technology in aircraft sector Air bus technology

IT world

IT serves as middleman Online booking and ticketing Ease consumer convenience Offered in 6 languages

SWOT Analysis
Strength
1.
2.

3.

4.

5.

6.

Low cost significantly lower than those of other operators Online/sms booking first airline in the world to introduce SMS booking Management high level of integration Go holiday program guests can book holiday packages online in real time Promotion Manchester United, packages, credit card Largest customer for Airbus A320 in Asia Pacific

SWOT Analysis (continued)

Weakness
1. 2. 3. 4.

Food has to be purchased on the flight Limited service/ticketing counters Still outsourcing cargo to third party LCCT not comfortable

SWOT Analysis (continued)

Opportunities
1.

More expansion to longer routes

Asia, Australia, Europe

2. 3. 4.

Holiday packages Rising numbers of internet users Wide market

Local International (Asia, Australia, Europe)

SWOT Analysis (continued)

Threats
1.

2.

3.

4.

5.

Increase in oil price Government regulations Safeguard of National carrier Restricted access of some routes (KL-Singapore, KL-Ho Chi Minh Rising airport cost Airport tax Sensitive to market Quality issues Public perception towards low cost carrier Internet accessibility low in rural areas

COMPETITIVE ANALYSIS

PORTERS 5 FORCES

Industry Competitors

Local competitor Malaysian Airlines System (MAS), Firefly and MAS Wings (MAS subsidiary) International competitor Singapore Airlines, Garuda, Cathay Pacific, Thai International Airways Other Low Cost Airlines competitor Compass, Tiger Airways, Cebu Pacific, Jetstar Asia Airways, Impulse, Virgin Blue Airlines

Asias Largest Airlines

Other LCC Airlines

Passenger Traffic Projection

Continued

Potential Entrants

Airlines has high entry barriers and high exits barriers Licensing is a major barrier for this industry Threat of entrants is High due to the high cost to leave the industry during economy downturn. JV and partnership is recent trend of threat for this industry

Continued

Buyers

Local population (Malaysian) Southeast Population Indonesia, Thailand, Singapore and all the destination that AirAsia engaged with. Buyers can switch easily to other airlines

no switching cost Buyer has the power

However the low cost is the weapon for AirAsia to retain their customer base. Package and promotion keep holding customers. Loyalty programs Air Asia Credit Card

Continued

Suppliers

Air Bus the main supplier for AirAsia AirAsia has fewer type of aircraft to cut cost in training.

Oil Price main concern is being cost effective Oil Hedging

(Fuel hedge - making advance purchases of fuel at a fixed price for future delivery to protect against the shock of anticipated rises in price)

Airports Malaysian Airport Bhd

Supplier has bargaining power.

Continued
Suppliers: 1) GE Engineering service engine maintenance USD 20Million 2) VolvoAero aircraft engine and aircraft frame parts leasing agreement USD 3million 3) ST Aero airline engineering components USD 7 million However Airasia can negotiate with suppliers : a) Bulk orders to enable competitive pricing b) Enhancing supply chain

Airbus Delivery Schedule

MARKETING STRATEGY
Leanest Cost Structure Maximise Shareholders' Value Safety

Passion for Guests' Satisfaction

Transparency Human Capital Development

Objectives
Exercises 30 Options, Increase 20 firm orders and Acquired 50 Options. Among them :

50 aircraft delivered over a period of four years

September 2009 till September 2013

Increases passenger growth projection

FY2010 FY2011 FY2012 FY2012 to 15% to 25% to 25% to 25%

Possibility of selling seven owned Boeing 737300 Maintain youngest fleet for Asian airlines Aids cost reduction efforts for future years

MARKET SEGMENTS
Market segmentation varies for each product but typically targets price oriented customers through their slogan Now everyone can fly
AirAsias philosophy of low fares is aimed to make flying affordable for everyone. AirAsia also aims at making travel easy, convenient and fun for its guests

Full Market Coverage Products offered to customers cover all areas of a budget traveler Experiential marketing The customer experiences the entire brand of Air Asias products right from its unique internet booking, self-check-in, boarding and in-flight services.

Geographic Segmentation

Air Asia targets the market segments who travel by air the least and mainly focused on 3rd world countries in Asia.

Demographic Segmentation
18 - 24 years
Budget Travel Studies

25 - 40 years
Budget Travel Work and career Family

Age and Life Cycle

41 - 55 years
Work and Career Family Budget Travel

> 55 years
Budget Travels Family

Market Positioning

Air Asia aims to position itself as the one stop lowest cost flight, hotel and holiday package in every market they serve
To achieve this :

Benchmark against another successful LCC (Ryanair) High quality manpower (Air Asia Academy) Strong Branding Switching to 100% Airbus Efficient distribution that drives cost savings Efficient route network Dominating ASEAN with highest market share and flight frequency Domestic rationalization 48% market share in 2006 Low Cost Airports Effective cost management

Operating Strategy

The Essentials AirAsias operations are based on the following key strategies: Low fare, no frills Fares are significantly lower than those of other operators. This service targets the guests who will do without the frills of meals, frequent flyer miles or airport lounges in exchange for fares up to 80% lower than those currently offered with equivalent convenience. Guests instead have the choice of purchasing food and drinks on board through their Snack Attack range of food and beverages on board the flights.

Frequent flights AirAsias high frequency service ensures guest convenience is met. The airline practices a quick turnaround of 25 minutes, which is the fastest in the region, resulting in high aircraft utilization, lower costs and greater airline and staff productivity.

Operating Strategycontd

Guest Convenience
Guests can make bookings through a combination of the following:

Nationwide call centre - 180 lines and takes an average of 6,000 calls daily. Ticketless service A low cost alternative to issuing printed tickets. Easy payment channels - Easy to Book, Easy to Pay & Easy to Fly approach to enable their guests to pay for their telephone bookings by credit card or by cash at any Alliance Bank branches. Internet booking As Asias first online airline, available in 6 languages is a hassle free alternative to queuing up at counters and agent offices. Reservations and sales offices - Available at airports and town centers for walk-in customers. Authorised travel agents AirAsia also introduced a direct B2B engine to its agents. The internet-based real time inventory booking engine is the first in Asia. The agents make immediate payment via a virtual AirAsia credit card, developed through one of its strategic partners, Alliance Bank. Improving customer service - Customer feedback options available at the website www.airasia.com in 6 languages

Marketing Mix Strategy

Product 1) Flight Services To introduce 15 to 20 routes every year (Domestic and International) Kuala Lumpur - Hangzhou Kuala Lumpur - Guangzhou Kuala Lumpur - Singapore Kuala Lumpur - Yogyakarta Singapore - Phuket Currently 71 routes with 50 aircrafts, 6 bases and potential new bases

Marketing Mix Strategy

Product 2) Ancillary Product a) Go Holiday Package b) GoInsure c) Gift Cards d) Snack Attack e) AirAsia Credit Card

Product Expansion Plans

Domestic Market Domestic Flights International Flights ASEAN Market International Market

Long Haul Flights

Ancillary Products

Marketing Mix Strategy

Place 1. Internet sale

The bulk of sales (65%) are done via the airlines website, whereby the fares are paid using a credit card. This is the most cost effective distribution channel
Growth of Internet Booking
80% 70% 60% 50% 40% 30% 20% 10% 0% Year 2003 Year 2004 Year 2005 Year Year 2006 Year 2007

Percentage

Marketing Mix Strategy

Place 2. Travel agents

Agents make immediate payment via a virtual AirAsia credit card, developed through one of its strategic partners

3.

Sales office
AirAsia only has a few sales offices and only establish a call centre if they are confident the sales derived from the centre will be worth it

Marketing Mix Strategy

4.

Call centers

Ticket sales can be done via telephonically; this is a simple and cost effective method First airline to offer comprehensive booking system via wireless devices

5.

Mobile phone

Product Life Cycle

Airasia is currently in the Introductory and Growth phase of the PLC. Most of the product offerings, promotions and advertising revolve around building a strong Brand Image and Brand Awareness. Spending is focused on product distribution, promotions, improving quality and lowering costs.
Lower Price for new routes New market segments : Asian and international market

MAS

Promotions and Distribution

Offering lower prices in a limited time offer Customer loyalty through alliances with credit cards Offering free products for early bookings Aggressive and creative advertising campaigns Now Everyone Can Fly

Brand Equity Model

1.

Brand loyalty

Loyalty programs (credit cards)

2.

Brand awareness

Aggressive advertising / promotions / campaigns

3.

Perceived quality

Consistent pricing and on-time flight departure, frequent flights, convenience

4.

Brand Associations

F1, Manchester United, Tune Hotels

Marketing Mix
Price

Air Asia flight ticket pricing based on minimum conditions. Based on time-value relationship for seats (early booking ensures cheaper fares) Bottom tier targets price oriented customers, mid tier targets the captive market and is also where the costs are recovered. Top tier targets customers who are desperate to fly and is where profits grow.

Impact of LCC
When an LCC was introduced in Malaysia, competitors were forced to lower their fares. Difference is that Airasia fares remain low and lowest. Airasia passenger growth was 11% between 2002 and 2005 in Malaysia

Conclusion

First LCC company in the world to utilize wide-bodied aircrafts for long-haul flights Airasia is currently the domestic Leader in LCC operations Their products are highly price sensitive Their strategies for marketing are on track to becoming an LCC Leader in the International Market