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THE RISE OF TONY FERNANDES AND AIRASIA IN MALAYSIA1

SHAHRIL EASHAK ISMAIL Monash Asia Institute, Monash University, Caulfield East Vic 3145, Australia Email: seism1@student.monash.edu

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This paper was presented to the 18 Biennial Conference of the Asian Studies Association

th

of Australia in Adelaide, 5-8 July 2010. It has been peer reviewed via a double referee process and appears on the Conference Proceedings Website by the permission of the author who retains copyright. This paper may be downloaded for fair use under the Copyright Act (1954), its later amendments and other relevant legislation.

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The Rise of Tony Fernandes and AirAsia in Malaysia This article discusses the emergence of Tony Fernandes and AirAsia. At first, when AirAsia was relaunched as a Low-Cost Carrier (LCC) under the leadership of Fernandes, no one thought the airliner would survive, let alone become a symbol of the liberalisation of the aviation industry in Southeast Asia. Second, Fernandes, a Malaysian Indian of Portuguese Malaccan descent – obviously not a Bumiputra2 - was able to thrive as an entrepreneur in an environment where the government gave top priority to Bumiputra entrepreneurs. These issues are discussed in this paper.

Malaysia’s New Economic Policy (NEP) The Malaysian Government has played a significant role in Malaysia’s rapid economic growth. After the independence in August 1957, the economy shifted from agriculture to industrialisation; an import-substitution strategy was adopted to reduce dependency on primary sector and simultaneously diversify the economy. By the late 1960s, with the exhaustion of import substitution, the Malaysian government made the transition to exportoriented industrialisation.

The May 1969 election and ensuing race riots resulted in the increased state intervention, with the government introducing policies to address the uneven distribution of wealth between the three main ethnic groups in the country, namely the Bumiputra, Chinese and Indians. The government believed that disparities in income levels could be reduced by providing an environment that support entrepreneurial growth, especially for Bumiputra. Hence, in 1970 New Economic Policy (NEP) began.

Despite the NEP, it is a general belief in Malaysia that when it comes to entrepreneurial endeavours, the Chinese are the experts, and, to a certain extent, the Indian community (Othman, Sulaiman, Zainudin, & Hasan, 2008, p. 2). In contrast, Bumiputras are alleged not to have a tradition of entrepreneurship. Ever since the British occupation, Bumiputras were

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Bumiputras, directly translated to “Sons of the soil” refers to ethnic Malays and other

indigenous groups.

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usually employed in government service. The NEP sought to change all these by the following policies: 1. Awarding large government contracts to Bumiputra companies. 2. Requiring new listings on the Malaysia stock exchange to have an initial 30 per cent Bumiputra equity ownership. 3. The allocation of at least 30 per cent of government contracts for public and private works to Bumiputra contractors. 4. Requiring all private companies to offer employment opportunities to Bumiputras. 5. Ensuring that a minimum of 60 per cent of government procurements, contract work and other related projects be awarded to Bumiputra entrepreneurs. 6. Making government finance available for the exclusive use of Bumiputra business people.

The Malaysian government claimed that the NEP fulfilled its goals since the nation was acknowledged as one of the ten fastest-growing economies in the world from 1970 to 1990, a period that coincided with the NEP’s implementation. This conclusion was in agreement with the research on Malaysian economic development3 conducted by the Harvard Institute for International Development (HIID) and Institute of Strategic and International Studies in Kuala Lumpur (ISIS Malaysia) (Snodgrass, 1996, p. 1). Despite this and the new policies that superseded the NEP since 1990, the affirmative action programme remains controversial. Indeed, many people believe that the NEP continues to define current government development policies in Malaysia. Critics of the NEP believe that the policy was only partially successful in, for example, reducing socio-economic disparity and encouraging the arrogance of Bumiputras (Anshar, 2008). Research by the Australian Government’s Department of Foreign Affair4 (2005, p. xiii) was also critical about the alleged business restrictions that the NEP encouraged – it criticised that these were counterproductive and may even have thwarted the development of a vibrant and resilient business community. 3 4

The research looks into the Malaysian economic development from 1970 to 1990. Malaysia: An Economy Transformed (2005). This report on the Malaysian business

environment prepared by The Economic Analytical Unit (formerly the East Asia Analytical Unit) is part of the Department of Foreign Affairs and Trade and is responsible for publishing reports analysing major trade and economic issues of relevance to Australia.

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The Entrepreneurial Tony Fernandes If the NEP was restrictive of non-Malay entrepreneurship, how was it possible that Fernandes, a non Bumiputra could emerge as the most celebrated entrepreneur in Malaysia? My research suggests that the NEP did not stifle entrepreneurship and that Fernandes is not the only successful non Bumiputra business person in Malaysia. This is a complex debate, and my doctoral thesis seeks to address it in greater detail. But in this paper I will outline some of the considerations that need to be taken into account in explaining how and why Fernandes rose to become one of Malaysia’s millionaires. Fernandes was born on 30th April 1964 into a family that had no prior knowledge or experience of business; his father was a physician from Goa (India) and his mother was a music teacher of Malaccan-Portuguese descent. In other words, Fernandes came from an Indian-Malaysian family of professionals; the new middle class that emerged in Malaysia from the 1960s. Like many other middle class families, the Fernandes had sufficient wealth to send Fernandes to study in England.

Fernandes, at the age of 12, went to London in 1976 to study at Epsom College and attended the London School of Economics in which he graduated in 1987 with a degree in accounting (BusinessWeek, 2009). In total, he spent some 11 years in London, a painful separation from his parents who could not afford to pay for his flights back to Malaysia. It was this experience, according to Brown5 (2010) that gave him an insight into the benefits of perhaps developing cheap international carriers. However, at this stage his career path did not take him into the airline business.

Upon graduation from the London School of Economics Fernandes took the normal route of working in accounting jobs. Fernandes worked briefly at Virgin Communications, a television division of the Virgin Group of companies. What did Fernandes learn from Virgin? 5

Kevin Brown is a journalist for the Financial Times. He was appointed Asia regional

correspondent for the Financial Times in September 2009, based in Singapore. Prior to this role, he was Asia news editor. Previously, he was the personal finance editor of the Financial Times.

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The main benefit was the experience of working in a global company, acquiring insights into the running of an international business, and developing an impressive resume which worked in his favour in being appointed to the position of Senior Financial Analyst at Warner Music International6 in London. At Warner, Fernandes showed strong business acumen. He started in 1989 as Senior Financial Analyst, and by 2001, when he resigned from Warner, he was the Vice President, ASEAN region. Within 12 years at Warner he was promoted four times; that is on average he was promoted every three years.

Fernandes’ time at Warner Music was significant because it was during this period that Fernandes matured and transformed himself from being a mere accountant into a strategist with an analytical mind. Commentators such as Ionides7 (2004) believed that Fernandes’ ability to think strategically, and understand his environment from a macro perspective, was the reason why Fernandes felt compelled not to be part of Warner’s ill-fated merger with America Online Inc in 2001. This incident was said to be the catalyst for Fernandes’ decision to switch careers after 12 years with Warner. A word of caution is needed: the early history of Fernandes’ emergence as an entrepreneur is based on the business press and journals. As part of my doctoral work I will be examining these issues in greater detail, and therefore reserve the right to correct the narrative as it currently stands.

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Warner Music International is part of the Warner Music Group which is the third-largest

business group and family of record labels in the recording industry. Warner Music Group also has a music publishing arm called Warner/Chappell Music, which is currently one of the world's largest music-publishing companies.
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Aviation analyst Nicholas Ionides is Singapore Airlines Vice President of Public Affairs.

His appointment came into effect on 4 May 2009. In 2010, Mr Ionides, 37 is the Singaporebased Managing Editor (Asia) at Reed Business Information, publishers of Flight International and Airline Business Magazines and the Air Transport Intelligence and Flightglobal news websites. He was the aviation editor for Hong Kong’s South China Morning Post newspaper before coming to Singapore.

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State Own Enterprise, Privatisation and Picking Winners Initially, Malaysia’s industrialisation involved the state taking on the role of entrepreneur. Many state owned enterprises (SOEs) were established, including during the NEP period. But evidence emerged during the 1980s of the poor development of these and their disappointing performance. However, these problems were obscured by high profits from some SOEs such as Petronas8. According to the work of Adam and Cavendish (1995) cited by Jomo and Tan (2010, p. 9), during the period 1980-1988, about 40 per cent of Malaysia SOEs were either ‘sick’, or ‘weak’, indicating the existence of unprofitable companies. The Malaysian government under the leadership of Tun Mahathir Mohamad9 was aware of the poor performance of the Malaysian SOEs required action. One of the ways that was used to make SOEs more competitive was to encourage privatisation from 1983 onwards.

Despite privatisation, Malaysia’s industrialisation through the implementation of exportoriented strategy remained inspired by the economic and technology development of Japan and Korea (Abdullah & Muhammad, 2008, p. 2). The Japanese and Korean models brought together the state and private sectors in a special relationship to encourage rapid industrialisation in the national interest. By privatising SOEs, Mahathir hoped to model Malaysia’s industrialisation and economic growth on the Japanese experience. Chalmers Johnson (1982), attributed Japan’s post-war industrial growth to the Ministry of International Trade and Industry’s (MITI) interventionist role in influencing corporate decision making. The industries identified as ‘industrial winners’ by MITI, were to receive support from the Japanese government. In Japan’s case, government leadership was the driving factor of the economy with the private sector as a willing follower.

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Petronas, short for Petroliam Nasional Berhad, is a Malaysian-owned oil and gas company.

Wholly owned by the Government, the corporation is vested with the entire oil and gas resources in Malaysia. The discovery petroleum reserves in 1973 and the creation of government oil company Petronas the following year (August 17, 1974), increased the Malaysian government’s ability to spend, and hence, SOE expansion.
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Tun Mahathir Mohamad was Prime Minister of Malaysia throughout 1981 to 2003.

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This interpretation of Japan’s rapid industrialisation has been discussed by scholars. For example, Chalmers Johnson10 emphasised in his work the special role that the Japanese state, via MITI, played in post-war Japan. The government took on developmental functions by targeting industries for privileged government support. Johnson (1982, pp. 305 - 306) believed that credit for the post-war Japanese miracle should go primarily to conscious and consistent government policies. In Japan, MITI was one of the most powerful agencies in the Japanese government. Its duty was to use state intervention in a manner that conformed to the needs of the market. Mahathir wanted Malaysia to emulate the Japan’s achievement in picking winners, and one example of this was the establishment of Malaysian Airlines.

Malaysia Airlines Malaysian Airlines was established in 1937 under the name of Malayan Airways Limited. After Malaysia gained its independence from Britain in 1957, the airline changed its name to Malaysian Airways. It changed its name again in 1966 to Malaysia-Singapore Airlines as a result of a joint ownership by the governments of Malaysia and Singapore. In 1972 when both countries decided to create their separate airliners, Malaysia-Singapore Airlines became Malaysia Airlines System. Fifteen years later the airline management decided to rename the airline again, and from 1987 on it is known as Malaysia Airlines (MAS) (MalaysiaAirlines, 2010).

In setting up the national airliner the government acted as the entrepreneur. But Mahathir believed that the government would benefit more if part of MAS could be privatised. By picking the aviation industry as a winner, the Malaysian government would support MAS, which in essence became a mixed state-private sector company. In 1985 MAS was privatised with the government holding a 42% stake. According to Zainal Abidin (2005, p. 3), even

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Johnson’s book MITI and the Japanese Miracle, on the Japanese Ministry of International

Trade and Industry was the preeminent study of the country's development and created the subfield of what could be called the political economy of development. He coined the term "developmental state." As a public intellectual, he first led the "Japan revisionists" who criticised American neoliberal economics with Japan as a model; their arguments faded from view as the Japanese economy stagnated in the mid-90s and beyond.

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though the government did not own the controlling stake in MAS, it held the so-called “golden shares”, which gave it veto rights on major decisions.

Malaysian Airlines, however, has not always been a ‘winner’. With the Asian Financial Crisis in 1997, the airliner suffered losses as high as MYR 260 million. By 2002, MAS recorded five years of consecutive losses and was burdened with approximately USD $2.4 billion worth of debt. In mid 2002, a rescue plan was drawn up and the government became the entrepreneur again by establishing a new holding company, Penerbangan Malaysia (PMB), which took control of MAS’ fleet and assumed all its liabilities. By this process, MAS was remoulded into an SOE (ZainalAbidin, et al., 2005, p. 12).

The history of MAS shows that despite strong government support, the airliner was not immune from financial trouble. It is also well known, that the global aviation industry is a volatile business. Entering this industry is not, therefore, an obviously rational decision. Moreover, the Malaysian government already had a commitment to MAS – the national carrier. However, this knowledge was not a hindrance to Fernandes who was determined to enter into the aviation industry. An interview by Done (2007) indicated that at a stopover in London, Fernandes saw Stelios Haji-Ioannou11, the founder of easyJet Airline12, on television explaining a Low-Cost Carrier model, and Fernandes felt it could work in Southeast Asia. In the following section, I explain how and why Fernandes entered the aviation sector.

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Sir Stelios Haji-Ioannou, born 14 February 1967, is a Greek Cypriot serial entrepreneur

best known for setting up EasyJet, a low-cost carrier airline. Haji-Ioannou started EasyJet when he was 28.
12

easyJet Airline Company Limited is a British Low-Cost Carrier headquartered at London

Luton Airport. The airliner was established in 1995.

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AirAsia AirAsia was originally established by the Malaysian government as a sister airliner to the major national carrier MAS. It was founded in 1993 by a government-owned conglomerate DRB-HICOM13 and began operations in late 1996. Prior to 2002 MAS was virtually a monopoly operator in the Malaysian domestic aviation market. Being a SOE, it had tremendous government support; this also meant that in most cases the national objectives over-rode commercial considerations. However, the government was more committed toward MAS operations. Perhaps this was why AirAsia failed year after year to bring in profits, even though AirAsia was set up as a sister airliner to cater domestic routes normally not serviced by MAS.

By the time Fernandes came into the picture with the idea of developing a Low-Cost Carrier in 2001, AirAsia was a shell of a company with a massive debt of USD $37 million. Why would Fernandes enter this market and insist on meeting Mahathir in order to persuade Mahathir to give him a license?

Initially, Fernandes intention during the meeting with Mahathir in June 2001 was to get the prime minister’s official endorsement to be a new operator in the Malaysian aviation industry. Journalists such as Pesek (2003) and Ranawana (2001) believed that the Prime Minister saw this meeting as an opportunity for the government to offload the failing AirAsia, which the government was trying to do so for two years .

At the time of the meeting, Fernandes had already registered a company in Kuala Lumpur called TuneAir (in May 2001). It is interesting to note that his three partners, Kamarudin Meranun, Dato’ Pahamin A Rajab, and Abdul Aziz Abu Bakar, were Bumiputras. Did

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DRB-HICOM was the result of a merger between two companies, DRB and HICOM in

1996. The Heavy Industries Corporation of Malaysia Berhad (HICOM) was incorporated in 1980. The Malaysian company plays an integral role in the Manufacturing, Assembly and Distribution within the automotive industry. Diversified Resources Berhad (DRB) incorporated in 1990, has diversified business in the automotive industry, property development and infrastructure, and services.

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Fernandes perhaps try to make himself popular with the government by having Bumiputra partners?

It was reported in the Economist (2009) that at this meeting Mahathir agreed to allow Fernandes and partners to start a new Low-Cost Carrier. But instead of issuing a new license, Mahathir suggested that TuneAir could acquire an airline license by taking over AirAsia. The exact role of Mahathir in this arrangement remains to be analysed in my doctoral thesis, but clearly the needs of the government and the ambition of Fernandes were a good match at this time. An agreement was drafted in September 2001. For a token sum of MYR 1 (about USD $0.26 at the time) TuneAir purchased AirAsia which comprised of two ageing Boeing 737300 jets, and took over of 50% of net liabilities, or around MYR 40 million (USD $11 million) worth of debts (Prystay, 2001). On the 8th December 2001, TuneAir officially acquired 99.25 per cent equity of 51.68 million shares from DRB-HICOM, and took over AirAsia (Li, 2003).

AirAsia’s resurgence Different from the conventional Asian carriers at the time that focused on affluent business travellers, the remodelled AirAsia targeted millions of Asians, many of whom had never flown and wanted inexpensive basic transportation. This fits well with its slogan ‘Now everyone can fly’.

As a Low-Cost Carrier, AirAsia was actually imitating the highly successful Ryanair. Cost cutting measures included the use of a single type of aircraft, online ticketing to eliminate travel agents commission, charging for in-flight meals, reducing turnaround time on the ground, and ensuring frequent flights. It came to no surprise that Connor McCarthy Ryanair’s former Director of Operations served as an adviser to Fernandes (AirAsia, 2006, p. 31). Setting fares as low as USD $0.99, AirAsia commenced its first flight as a Low-Cost Carrier on January 2002 (AirAsia, 2006, p. 10). The following table summarises the key developments in AirAsia from the time of Fernandes’ takeover in 2001 to 2006.

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Table

Summary of key developments in AirAsia from 2001 to 2006

Time September 2001 8 December 2001 th Event TuneAir purchase AirAsia for a token sum of MYR 1. TuneAir officially acquired 99.25 per cent equity of MYR 51.68 million shares from DRB-HICOM.

January 2002

AirAsia took its first flight as a Low-Cost Carrier on 15 January 2002, and it served six destinations.

Year ended 30 June 2002 Year ended 30 June 2004

AirAsia had carried 611,000 passengers. AirAsia served 26 destinations and had carried 2.8 million passengers.

Year ended 30 June 2006

AirAsia served 65 cities and had carried 9.3 million passengers.

Source: Data collated from AirAsia website (www.airasia.com).

Despite the well known contours of AirAsia re-emergence as set out in Table 1, much yet needs to be explained. The financial details of how AirAsia dealt with the debt that it inherited from the Malaysian government is one area that I am currently researching. Another question is the degree to which AirAsia is successfully competing with other regional LowCost Carriers in Southeast Asia. I have started to analyse the balance sheets of AirAsia and also plan to speak with financial experts to test the wide spread assumption that Fernandes is now running a profitable enterprise, a remarkable revival of the loss making SOE that he took over from the Malaysian government. These subjects are the focus of forthcoming research papers by me.

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Conclusion The word ‘entrepreneur’ is derived from the French entreprendre which literally means ‘to undertake’, as in accepting a challenging task. This gives us the picture of the entrepreneur as a risk-taker and innovator who, when successful, contributes to creating economic value (Peredo & McLean, 2006, p. 58). In what sense is Fernandes an entrepreneur? Does he fit the character of an entrepreneur? Can the theories of Schumpeter and others help us to better understand him as a business person?

From the above review of the rise of AirAsia in the context of Malaysia’s long history of state control of industry, it seems that Fernandes was very much a risk taking entrepreneur. But exactly how Fernandes’ entrepreneurial talents compare with the earlier history of state ownership of AirAsia is something that only further research for my doctoral thesis will reveal. This case study is not only about private versus state sector development in Malaysia but it is also a narrative about the openings that have been available to non Bumiputra business people in Malaysia during the last three decades.

Bibliography

Abdullah, S., & Muhammad, A. (2008). The Development of Entrepreneurship in Malaysia: State Led Initiatives. Universiti of Malaya. Adam, C., & Cavendish, W. (1995). Privatizing Malaysia: Rents, Rhetoric, Realities. In K. S. Jomo (Ed.), Early privatizations (pp. 219 - 235). Boulder, CO.: Westview Press. AirAsia (2006). AirAsia Corporate 2006 Annual Report. Kuala Lumpur. Anshar, A. (2008). Dewan Dispatches: The NEP question – locked, loaded and planted. Brown, K. (2010, March 28 2010 ). A driven man at the controls. The Financial Times Retrieved April 11 2010, from http://chutzpah.typepad.com/slow_movement/asia/. BusinessWeek (2009). Anthony Francis Fernandes - Background. BusinessWeek. Chalmers, J. (1982). MITI and the Japanese Miracle: The Growth of Industrial Policy, 19251975. Stanford, California: Stanford University Press. Commonwealth Of Australia (2005). Malaysia, an economy transformed (Report). Canberra: Department of Foreign Affairs and Trade, Economic Analytical Unit. Done, K. (2007, October 28 2007 ). AirAsia chief spreads his wings. The Financial Times. Economist (2009, March 21 2009). Cheap but not nasty. Economist, Vol. 390, p72-72.

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Ionides, N. (2004, April 1 2004). Fernandes: Man of the moment. Airline Business. Jomo, K. S., & Tan, W. S. (2010). Privatization And Re-Nationalization In Malaysia: A Survey Retrieved 4 October, 2010, from http://www.jomoks.org/research/pdf/IPD_Privatization_Renationalization.pdf Li, K. S. (2003, December 20 2003). Fernandes pilots AirAsia to greater heights. Business Times. Retrieved April 12 2010, from http://www.goanvoice.org.uk/supplement/TonyFernandes.htm#2. MalaysiaAirlines (2010). Our History Retrieved May 12th 2010, 2010, from http://www.malaysiaairlines.com/au/en/corp/corp/info/history/our-history.aspx Othman, N., Sulaiman, M., Zainudin, N., & Hasan, Z. (2008). Entrepreneurial Acculturation in Malaysia: Efforts and Achievements. Munich Personal RePEc Archive(MPRA Paper No. 8980). Peredo, A. M., & McLean, M. (2006). Social entrepreneurship: A critical review of the concept. Journal of World Business, 4(1), 56-65. Pesek Jr, W. (2003, July 9 2003). The Richard Branson of Asia Shakes Things Up. The Manila Times. Retrieved April 12 2010, from http://www.goanvoice.org.uk/supplement/TonyFernandes.htm#2. Prystay, C. (2001, December 10 2001). Tune Air Founder Goes Against the Odds To Establish a Low-Cost Asian Airline. Wall Street Journal, p. p1. Retrieved April 12 2010, from http://ezproxy.lib.monash.edu.au/login?url=http://proquest.u mi.com/pqdweb?did=94126849&sid=1&Fmt=3&clientId=16397&RQT=30 9&VName=PQD. Ranawana, A. (2001, November 30 2001). No Fear Of Flying. AsiaWeek. Snodgrass, D. R. (1996). Successful Economic Development in a Multi-Ethnic Society: The Malaysian Case. Harvard Institute for International Development. www.airasia.com. Retrieved January 20, 2010, from www.airasia.com ZainalAbidin, M., Wan Mohd Nawawi, W. K., & Kamarudin, S. (2005). Strategic Directions for ASEAN Airlines in a Globalizing World:Ownership Rules and Investment Issues Retrieved April 28, 2010, from http://www.aseansec.org/aadcp/repsf/docs/04-008FinalOwnership.pdf

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...Airline industry heavily as in other country. In Government regulations of the Malaysian domestic and international aviation industry significantly affect financial performance of Air Asia. All aspect of Air Asia’s domestic airline operations in Malaysia, including slots allocation granting of rights under Malaysia’s air service agreements (“ASAs”) and insurance of AOCs, are subject to regulation by DCA. Aviation activity is managed by the organization within the MOT called DCA. The objective of DCA is to ensure direct service provider operates the air transportation (aviation) system is always safe for passenger. The growth of the AirAsia’s strategy is obtained by increase the flight’s frequencies to the market that is currently serves and expanding market’s number that is serves. The growth strategy can be success depends on additional traffic right that is obtained to suitable airports located in targeted geographic markets of AirAsia. Ministry of Transport and Malaysia Airports (MAHB) decided to increase the airport tax by RM7 and RM14 with the approval of government at the five airports which is Langkawi International Airport, Penang International Airport, Kuching International Airport, Terminal 2, Kota Kinabalu International Airport and the low-cost carrier terminal (LCCT) at KLIA. Air Asia is not happy with the Ministry of Transport and Malaysia Airports (MAHB) decision and trying to ignore as it can increase their cost and some more it makes the flight ticket’s......

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...Introduction Air Asia has successfully been xpositioned itself in the market as one of the leaders in the airline industry in Asia with its technical strategies. It has a route network that spans through over 20 countries and is one of the low cost aviation services in Asia. The Business level strategy adopted by air Asia is cost leadership strategy. To gain its market share they focused on specific markets like domestic services, short and long haul regional services and selling their products below the average industry prices. Air Asia adopted a number of actions to compete in the industry. It launches the values added services which are to provide ticketless travel and implement a free seating policy. In 2007 air-Asia became the first airline in Malaysia to offer internet checking services that allowed all the passengers to print their own boarding passes and pay extra money to board first. So, by doing this the passengers can choose their seats easily. In addition, they can also pre-book their checked baggage and meals. This paper describes Air Asia’s each xstrategies that maintain its effective control of low cost/focus business level strategy. Air Asia’s structure, cultures and systems that are used to create loyalty of the customers and satisfied them to lead the organisation to be profitable. SWOT analysis is conducted to focus aspects of Air Asia and business sector. It also evaluates the current business, future prospects and the economic climate. Porter's five......

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Air Asia

...airlines in the world. Having dominated Southeast Asia and entered China and India, AirAsia was poised to solidify its place as a top budget airline and one of the most consistently profitable globally. AIRASIA X Airasia X subsidiary of Airasia was founded in 2 November 2007 it’s a long-haul, budget airline based in Malaysia. The airline Airasia, is the international operation of the brand Airasia which is Asia's largest low-cost carrier. (LCC) The Airasia X is also affiliated to Virgin group and Air Canada. Focusing on the low-cost, long-haul segment - AirAsia X was established in 2007 to provide high-frequency and point-to-point networks to the long-haul business. AirAsia X's cost efficiencies are derived from maintaining a simple aircraft fleet and a route network based on low-cost airports, without complex code-sharing and other legacy overheads that weigh down traditional airlines without compromising on safety. Guests continue to enjoy low fares, through cost savings that we pass on to our guests. AirAsia X's efficient and reliable operations are fully licensed and monitored by Malaysian and international regulators, and adhere to full international standards. AirAsia X is committed in offering X-citing low fares, X-emplary levels of safety and care, and an X-traordinary in-flight and service experience to all our guests - spreading the amazing AirAsia experience to X-citing destinations in Australia and Greater Asia. AirAsiaX was setup in 2007 with 20% of......

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...Air Asia Case: Q 1) Comment on business level strategy adopted by Air Asia? How has Air Asia achieved cost leadership?  Answer 1) High aircraft utilization: Air Asia uses the aircraft in very high frequency and high turnover of flights; these add value to customer convenience and enable low cost. Air Asia has the fastest turnover in its region; is 25 minutes. a) Low fare no frills: Air Asia does not have frequent flyer miles program and private airport lounge. No free foods and beverages even snack in flight, additional meal and service required passenger to pay more. b) Point to point network: All Air Asia both short-haul (4 hours or less radius) and medium to long-haul are non-stop flight, by doing that; save human recourses cost, facilities cost, airport cost, etc. c) Air Asia changed all existing old aircraft Boeing B737 with Airbus A320, which has more capacity, more efficient fuel-consume and cost-efficient. d) By utilizing homogeneous aircrafts, the company is able to save human resources cost and reduce spare part stocks. These strategies have brought Air Asia as the lowest-cost airline in the world, with a cost/ASK (available seat kilometer) of US3.67. This great achievement was achieved without compromising safety. Air Asia’s highest priority is safety of all the operations. To keep the aircraft in best condition Air Asia partnered with the best maintenance provider. e) Air Asia R&D not only works on the aircraft utilization but also...

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...9/25/13 Air Asia Assignment - Term Papers - Haixzzz Get Access to over 1,148,422 More Essays. Upgrade Your Account Now. Upgrade Essays Book Notes AP Notes Citation Generator More | Hi ilaanabila Search essays Home » Business & Economy Air Asia Assignment By haixzzz, september 2011 | 9 Pages (2048 Words) | 2984 Views| | | Upgrade to access full essay This is a Premium essay for upgraded members Air Asia A. Introduction 1. Objective and scope This paper will analyze the internal and external environment of Air Asia and will look into how it uses Management Information System ( MIS ), specifically its online reservation system to gain competitive advantage. And also discuss why and how important is MIS to Air Asia in running its business. 2. The Important of MIS Low Cost Carriers (LCC) business model is based on no frills service. This means that cost savings is a critical success factor in their operations. Air Asia is no different. And Aie Asia uses MIS to runc this LCC business model. So, what is MIS? MIS is the useful information to support management in an organization so that we get what we want. And MIS tool in Air Asia is the Air Asia booking system. In the competition in the airline business, booking system is the advantage for Air Asia. “The early you book the tickets, the cheaper it will be.” This early booking promotion kills two birds with one stone. It gives customers opportunity for cost savings and encourages a lof of people to......

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...As stated in the chapter 4, in the section of business model reconstruction had explained enough on how Air Asia make their name available to customers and they can enjoy the profit without abandon the existing name which is Malaysia Airlines. Herewith, what can be explained is it still the same organization, but they changed the business to the new ones which just focusing on the new while they are not abandoning the existing business and bring in new business which there was no one as the first mover? Business model reconstruction can be explained as whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. Malaysia Airlines are once a privilege to fly where the firm applies entrepreneurial thinking to the design or redesign of its core business models in order to improve operational efficiencies or otherwise differentiate itself from industry competitors in ways valued by the market. And now, Air Asia are been introduced to everyone where the business come out with a new business model of Now Everyone Can Fly that lower the cost that are not necessary. To fly, it is obviously not a need but a want. Air Asia introduced a low cost concept which enhanced travelers to easily travel without stressing their mind about money just for the accommodation which include ticketless travel, online ticket sales, no......

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...and high turnaround of flights, both of which add to customer convenience and greater cost efficiencies. Its turnaround of 25 minutes is the fastest in the region. In AirAsia there are no frequent flyer miles or airport lounges in exchange for lower fares. Guests have the choice of paying for in-flight meals, snacks and drinks. In addition, a decision was made in December 2004 to convert the existing fleet of ageing Boeing B737s with the higher capacity yet more fuel-efficient, reliable and cost-efficient Airbus A320s. As a result, today, the Group boasts the largest and newest A320 fleet in the region. Innovative use of technology has played a key role in AirAsia’s success story, beginning with online booking. It was the first airline in Asia to go ticketless -in March 2002 - allowing guests to pay for their bookings by credit card over the phone. Over the years, it has built on its IT platform to increase the ease of customer transactions as well as provide greater savings to the Group. In 2010, AirAsia unveiled its latest IT booking innovation in the form of New Skies, which allows customers to better manage their online bookings. With the advent of the social media, tools such as Facebook, Twitter and blogs have become integral to the Group’s customer relationship initiatives. AirAsia is, in fact, recognised as the most popular airline in the region on Facebook in terms of fan base. AirAsia is ultimately a people’s airline. This is mirrored in numerous acts of generosity......

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...Tony did not have any experience in running an airline, nor had any capital to start one, he raised money by mortgaging his house and using up his savings. He also brought-in three of his associates that is Datuk Pahamin A. Rajab, Abdul Aziz Abu Bakar and Kamarudin Meranun to start a low cost airline in Malaysia. Tony with the three as mentioned formed a partnership and set up Tune Air Sdn Bhd and bought AirAsia for a token sum of RM1.00 with RM40 million worth of debts. AirAsia was remodeled into a low cost carrier and by January 2002, their vision to make air travel more affordable for Malaysians had taken off. Tony turned the company around, producing a profit in 2002 and launching new routes from its hub in Kuala Lumpur, undercutting the former monopoly held by the national airline operator, Malaysia Airlines with promotional fares as low as RM1.00 (US$0.27). In 2003, AirAsia opened a second hub at Senai International Airport, Johor Bahru and launched its first international flight to Bangkok. Valued at RM2.3 billion, AirAsia is today an award winning and the largest low cost carrier in Asia. From a two aircraft operation equipped with Boeing 737-300, AirAsia currently boasts a fleet of 78 aircraft that flies to over 60 domestic and international destinations. This airline now provides more than 500 domestic and international flights daily from six hubs domestically located at Low Cost Carrier Terminal (LCCT) at KLIA, Senai International Airport in Johor......

Words: 4099 - Pages: 17