Airasia Berhad

AIRASIA BERHAD AIRASIA BERHAD MARKETING PLANMARKETING PLAN

Contents Introduction

Vision & Mission

Market Profile Analysis

- PEST Analysis

- Competitive Analysis

- Market Demographics Porter’s 5 Forces Market Segments and Market Positioning Marketing Mix Analysis Summary

OVERVIEW OFOVERVIEW OF

AIR ASIAAIR ASIA

Airline Industry

Airline Industry in MalaysiaNational Carrier – Malaysian Airlines System (MAS)

Low cost carrier – Air Asia Sdn Bhd

Airlines Industry in Malaysia

MAS Air AsiaOther 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. Thailand – Thai AirAsia2. Indonesia – Indonesia AirAsia

Flies over 71 destinations (started with 6 in 2002 and currently 71 destinations)

AirAsia’s 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 FernandesCEO, 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

Key Strategies:1. Low fare, no frills2. Frequent flights3. Guest convenience

Nationwide call centre Ticketless service Easy payment channels Internet booking Reservations and sales offices

4. Safety first5. Cost optimization operations

LCC Penetration in Asia

PEST ANALYSISPEST 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

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)

People’s 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 AirAsia’s

passenger growth

PEST ANALYSISPEST ANALYSIS

International business expansion

a) Foreign franchise business – all sectors-

F&B, clothes, education, telecommunication, engineering

b) maid and labor services

This increased traveling needs.

Continued

Social People’s Awareness and exposure – towards holidays & travel Emphasis in education – abroad education Migrating to different countries – seeking different living

environment and culture Consumer’s 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

PEST ANALYSIS

SWOT Analysis

Strength1. Low cost

significantly lower than those of other operators 2. Online/sms booking

first airline in the world to introduce SMS booking 3. Management

high level of integration4. Go holiday program

guests can book holiday packages online in real time 5. Promotion

Manchester United, packages, credit card6. Largest customer for Airbus A320 in Asia Pacific

SWOT Analysis (continued)

Weakness1. Food has to be purchased on the flight

2. Limited service/ticketing counters

3. Still outsourcing cargo to third party

4. LCCT not comfortable

Opportunities1. More expansion to longer routes

Asia, Australia, Europe

2. Holiday packages3. Rising numbers of internet users4. Wide market

Local International (Asia, Australia, Europe)

SWOT Analysis (continued)

Threats1. Increase in oil price2. Government regulations

Safeguard of National carrier Restricted access of some routes (KL-Singapore, KL-Ho Chi

Minh3. Rising airport cost

Airport tax4. Sensitive to market

Quality issues Public perception towards low cost carrier

5. Internet accessibility low in rural areas

SWOT Analysis (continued)

COMPETITIVE COMPETITIVE ANALYSISANALYSIS

PORTER’S 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

Asia’s Largest Airlines

Other LCC Airlines

Passenger Traffic Projection

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

Continued

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 to 15%– FY2011 to 25%– FY2012 to 25%– FY2012 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”AirAsia’s 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 Asia’s 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

Age and Life Cycle

18 - 24 years•Budget Travel•Studies

25 - 40 years•Budget Travel•Work and career•Family

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

AirAsia’s 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 AirAsia’s 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 Strategy…cont’d 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 Asia’s 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

Product1) 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

Product

2) Ancillary Product

a) Go Holiday Package

b) GoInsure

c) Gift Cards

d) Snack Attack

e) AirAsia Credit Card

Marketing Mix Strategy

Product Expansion Plans

DomesticMarket

InternationalMarket

ASEANMarket

Ancillary Products

Long Haul Flights

Domestic Flights

International Flights

Marketing Mix Strategy

Place

1. Internet sale The bulk of sales (±65%) are done via the airline’s website,

whereby the fares are paid using a credit card. This is the most cost effective distribution channel

Growth of Internet Booking

0%10%20%30%40%50%60%70%80%

Year2003

Year2004

Year2005

Year2006

Year2007

Year

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tag

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Place2. 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

5. Mobile phone First airline to offer comprehensive booking

system via wireless devices

Marketing Mix Strategy

Product Life CycleAirasia 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 ModelBrand Equity Model

1.1. Brand loyalty Brand loyalty

Loyalty programs (credit cards)Loyalty programs (credit cards)

2.2. Brand awarenessBrand awareness

Aggressive advertising / promotions / campaignsAggressive advertising / promotions / campaigns

3.3. Perceived qualityPerceived quality

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

4.4. Brand AssociationsBrand Associations

F1, Manchester United, Tune HotelsF1, Manchester United, Tune Hotels

Marketing MixPrice 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 LCCWhen 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