air asia - final
TRANSCRIPT
Case Study
Abi Sanni, Aly Remtulla, Kelsey Gamble, Kendra Jocksch, Nancy Moke
Presentation Overview
Company Overview
Problem
Company Analysis
Recommendation
Conclusion
Company Overview
Company Vision
“To be an airline that flies long-hauls with low fares with a corporate culture that is flexible
and functional.”
Company Overview
Prior to 2002
Tony Fernandes had a vision.
2004
Introduction of international
service
2007
Long-haul flights under AirAsia X
brand
2009
AirAsia recognized as a successful LCC
2002
AirAsia was re-launched with just 3 planes
2005
Adopted an ERP system
2008
4% ROA during recession
Future
Possibility exists to expand into
other areas
Company Overview
Key Success Factors
Single aircraft and single
classOutsourcing
Wireless delivery system
Human resource policies
Deregulation Tourism
Problem
Should AirAsia expand its long haul business and to what extent should AirAsia and AirAsiaX
be integrated operationally?
Problem
Advantages
New markets and growth
opportunities
Expansion of trunk routes
Increases market share
Disadvantages
Moves away from successful
LCC strategy
Difficulties with external factors
Loss of competitive advantage
Company Analysis
Structure of Operating Costs
Direct Indirect
Company Analysis
CompanyEBITDAR
(%)EBIT (%)
Net Income (%)
ROE (%)
Adjusted ROIC (%)
SouthWest 18 10 6 8 5.4
WestJet 25 15 7 14 4.2
AirAsia 31 18 17 17 6.2
Average 22 12 9 13 5.2
Source: AirAsia Presentation, CLSA Forum, Hong Kong, September 2007.www5.airasia.com/.../CLSA%20Investor%20Forum%20KL%2007.pdf – Malaysia
Company Analysis
Operating Expense (RM, millions)
AirAsia MAS
Staff costs 236.8 2179
Fuel costs 1389.8 6531.6
Maintenance Costs 345.1 1146.4
Total Operating Expenses 2966 15198.3
Cost per available seat kilometer (sen) 11.66 22.80
Source: Grant, Robert M. Contemporary Strategy Analysis. 7th ed. Wiley's Higher Education, 2010. P.632
Company Analysis
Long-Haul Flight AirAsia X MASAirAsia price
advantage
Kuala Lumpur-Londonround trip
US$433.96 US$683.68 36.5%
London-Kuala Lumpur US$433.96 US$530.35 18.2%
Source: Grant, Robert M. Contemporary Strategy Analysis. 7th ed. Wiley's Higher Education, 2010. P.633
Company Analysis
Capacity Utilization
Product Design
Economies of Scale and Learning
Input Goods
Production Technologies
Residual Efficiency
Company Analysis
Capacity Utilization
Quick turnaround
time
Single class seating system
Ticket fares on time value
Company Analysis
Food and beverage
sales
Ticketless airline
No refund policy
Product Design
Company Analysis
Single type of aircraft
Employee specialization
Economies of Scale and Learning
Company Analysis
Outsourcing Secondary airports
Non-union labor
Input Costs
Company Analysis
Distribution methods
Point to point network
Production Techniques
Company Analysis
Team-oriented
Employee bonuses
Open management
style
Residual Efficiency
Recommendation
A blending of brands
Go long-haul strategically
Remain one of the cost leaders
Questions?