Team Airasia has its tagline which says “Everyone can fly” . They are working harder towards their tagline and Mr. Mittu Chandilya, the new CEO of AirAsia India is doing certain that he and his squad would travel for that excess stat mi to carry through the dream of get downing the air hoses in India.
Mr. Tony Fernandes who is the co-owner of AirAsia is reportedly excited every bit good as informed about the day-to-day developments of the air hoses to be started in India. But is the route truly clear as he sees. The competition that Airasia faces from Indigo and Air India is immense. Though it has the ticket of low cost air hose, would the Indians truly prefer Airasia over the other participants? , is a large inquiry in forepart of the large caputs involved in the launch. The current economic system of India though is non encouraging, but decidedly the route for bright hereafter is in front. Airasia has a history of being successful in most of the Asiatic states where the operations are ongoing. Will the Indian market welcomes it in a warm manner?
AirAsia is a low cost bearer headquartered in Kuala Lumpur, Malaysia. It was established in 1994, and started its operations in 1996. The house was to a great extent indebted and was bought by Tony Fernandes in 2001, for a monetary value of 1 ringgit. Fernandes turned around the company, and since 2002 ; the company has been doing net income.
In 2004, AirAsia entered the Thai market. By the terminal of 2006, the company has unveiled a five-year program of spread outing in Asiatic market. The program was to heighten and beef up the path web, along with spread outing farther into Vietnam, Southern China, Indonesia and China.
External environments prefering the entry into South East Asia:
The South East Asiatic market had immense chances for the air power sector. AirAsia banked on these chances, and it had a great impact on the success of the company
- Demography: South-East Asia has a big human ecology with a good GDP.
- Fiscal crisis: the eruption of fiscal crisis in 1997 shaped the demand for a low cost bearer in the Asiatic markets.
- Liberalization: South Asiatic states had liberalized their air power markets.
- Geography: the land and sea conveyance was much developed in the South Asiatic states. Hence, low cost air hose had immense potency.
- Addition in figure of concern travellers: The economic systems of South Asiatic states was turning at really fast gait. On certain paths which connected capital and commercial metropoliss, the figure of flyers was increasing. Further, there was a growing in urbanisation, therefore, an addition in demand.
The New Business Model since 2001 ( Malayan markets ) :
In 2001, apart from the regular charter services, the company was runing a brace of leased 737-300s, which were winging between Kuala Lumpur and four other finishs. AirAsia targeted people who had ne’er flown and wanted less expensive and quicker conveyance. AirAsia commenced its line with the ticket line “Now Everyone Can Fly” . [ 1 ] The basic scheme adopted by the company was to supervise it costs on a day-to-day footing. The thought was based on the doctrine of former CEO of General Electric, Jack Welch. He said that in old economic system monetary value was determined by adding costs and coveted net incomes ; but in new economic system the net incomes are determined by subtracting costs from the monetary value.
The air hose believed to hold following strengths in its scheme:
- No frills service and individual category
The air hose offered merely a individual category i.e. economic system category, and there were no frills provided. Therefore, the costs of inflight amusement, airdrome sofas etc. we’re non charged. They had no trueness plan.
The pricing was done based on expected demand and clip of booking. The menu construction was divided into 12 grades, depending on the clip of booking. In add-on, the purchased seats were non-refundable, and charge was applied for rescheduling.
- High use and efficiency
AirAsia customized the Boeing 737-300. It added 16 extra seats to increase the place figure to 148. It started its operations early around 7 A.M. where normal air hoses took around 45-120 proceedingss for turnaround ; it took merely 25 proceedingss to make so. It planned its paths and agenda in such a mode that each bearer was used for 12-13 hours ( in comparing to 8 hours industry norm ) . The staff at AirAsia was required to make multitasking, which once more helped in cut downing the costs. [ 2 ]
- Low fixed costs
Through dialogue, AirAsia obtained aircrafts at a lower rental rates. The care contracts costs, airdrome fees, and insurance fees were besides less in comparing to what rivals were paying.
A big portion of the employees pay was based on his or her public presentation. Pilots were given inducements to maintain flight times and operation times at lower limit. Cabin Crew was rewarded for few foliages and promptness. Engineers were given allowances as acknowledgment of their proficient makings. AirAsia besides improved its efficiency by puting in necessary engineering. It took the subscription on annual footing, instead than traveling for the purchase of the complete package.
- Low distribution costs
The company did non publish tickets, the seats were sold via cyberspace, nomadic phones SMS, gross revenues office etc. , this helped in maintaining administrative costs in cheque. Seatings sold via cyberspace were discounted in comparing to the seats sold via other mediums. The company did non acquire off wholly with the travel agents. It established a web of its registered and preferable agents known as ‘Sky Agents’ . This installation was a good option for those clients who did non hold registered histories with AirAsia. These agents maintained a pre-paid history, which the clients could utilize. AirAsia did non give any committee to these agents, nevertheless, the agents were free to bear down the clients for the service provided.
- Single type of aircraft
AirAsia used merely 737-300s for its operations. They even customized it by increasing figure of seats by 16. Single type of aircraft reduced the care costs, as trim parts stock list required was lesser.
- Leveraging on regional media coverage
The company’s success attracted a batch of media attending, and therefore, media itself did extra stigmatization for the company.
- Minimal fuel costs
It used the hedge the fuel purchases. The operating flights carried the minimal possible fuel, and purchases were made from the locations where the fuel was cheapest. The pilots were trained to utilize the fuel efficaciously, as they flew the bearer to optimum tallness in minimal clip, and so follow directly line way to the finish. The weight of the aircraft was besides kept to minimum by extinguishing unneeded tonss.
- Low cost terminuss
The Kuala Lumpur International airdrome developed in 2005 did non hold furnishings for any other terminuss and were designed to provide to multitudes. This helped in faster motion of the riders.
- Use of engineering
IT was to a great extent used for determination devising intent. Analytics and tendencies were used in finding the monetary values for the tickets.
Entering Tai Market:
AirAsia entered the Thai market in 2003 by organizing an confederation with Shin Corporation, which was exclusive accountant of Thailand’s orbiter operator. Tony Fernandes has 49 % interest in the trade, along with managerial controls ; ( 50 % interest is with Asia Aviation and 1 % with AirAsia CEO Tassapon Bijleveld ) [ 3 ] . The scheme was labeled as “Branchizing” . In this system although the chief ownership lies with the company with whom the confederation is formed, it pays direction fees to AirAsia for utilizing its trade name name and systems. This manner of enlargement helped AirAsia as it was easier to set up the bearer with local ownership. In add-on, it enabled the company to procure air travel freedom from the authorities. This scheme of branchizing has proved really successful for the company. ( See Exhibit 1 )
The chief scheme in Thai markets was to:
- Laterality on markets: The air hose aimed at figure one places on both domestic paths and Indo China paths
- Optimum path web: the air hose planned the most comprehensive paths and increased the frequences on this path.
- Expansion in the Thai market: the company leveraged on the Thailand tourer industry. Further, Thailand had unfastened skies agreement, which helped in adding more finishs in the plan. [ 4 ]
Since 2011, Thai AirAsia has funded its operations independently. The debt up boulder clay that clip was funded by the grosss from Malaysia. The move has enabled each AirAsia to bring forth its ain hard currency flow. [ 5 ]
AirAsia India is a joint venture between AirAsia BHD ( with 49 % interest ) , Tata Sons ( with 30 % interest ) and Telstra trade topographic point ( with 21 % interest ) . The company targets “first clip travelers” , as told by Mr. S. Ramadorai, the president of AirAsia India. [ 6 ]
The air hose would run point-to-point flights majorly from the Tier-II metropoliss of India. The big focal point is on southern markets and so subsequently travel up bit by bit. [ 7 ] The company has decided to do hubs merely in smaller metropoliss as operating costs are lower in these metropoliss. This measure would besides enable lower fuel revenue enhancement.
The low cost of the bearer would pull first clip flyers and the full households to wing.
The point-to-point flight would hold comparatively smaller draw as good, i.e. around 60-90 proceedingss.
In its statement of purpose, it has mentioned that air hose is be aftering to setup line Stationss in 10 metropoliss across western and southern India [ 8 ] . This would connote that the air hose is be aftering to construct likely path web in these metropoliss every bit good. Line Stationss are locations where pre departures, theodolite cheques and hebdomadal reviews are done.
The launch is expected in the month of March or April 2014. The launch would be introduced with dramatically low monetary values which would pull the clients. [ 9 ]
To look into the challengers, Fernandes has ensured that the company is good capitalized to last a monetary value war. He has built his concern theoretical account in such a manner that he is able to offer the lowest monetary values in the market. Any rival, who would dispute the monetary values of AirAsia, would ache itself more. [ 10 ]
A standard step of cost of winging a place full or empty for JetLite is 7.5 cents, SpiceJet 6.4cents and for AirAsia it is 4.4 cents. [ 11 ] With high frequence and high turnaround of flights, the company has been able to be cost effectual. In India, the company would be runing as a thin organisation with 20 employees per aircraft.
AirAsia India has launched a “free seats” run, in which the riders would be able to go from 5 May’ 14 to 31 Jan’ 15 at a zero base rate menu. The monetary value of the tickets would get down at Rs. 500 including revenue enhancements. [ 12 ]
The air hose is engaging pilots from smaller air hoses as, delayed operations has led to lose its pilots to rivals. This was majorly due to take down salary offers. The air hoses would now hold to develop the new pilots to wing their airbuses. [ 13 ]
General Strategy observed:
The company aimed at a growing rate of 25 % -30 % per annum. [ 14 ] In order to accomplish this, a batch of variegation was brought in. few illustrations are:
- Puting up of in house providing department- bite onslaught
- Travel Holidays- strategic concern unit
- Buying of hotels
As a regulation, company starts with lower limit of four frequences to any finish and so increases the frequences with demand. Exhibit 2 shows the operating statistics of the company from 2001 to 2005.
Exhibit 1: [ 15 ]
The International Journal of Human Resource Management, Vol. 21, No. 2, February 2010, 197–213