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Company Profile

AirAsia - The Story So Far

The leading low fare airline in the Asia - AirAsia has been expanding rapidly

since 2001, to become an award winning and the largest low cost carrier in Asia.

With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international

destinations with 108 routes, and operates over 400 flights daily from hubs

located in Malaysia, Thailand and Indonesia. To date, AirAsia has flown over 55

million guests across the region and continues to spread its wings to create

more extensive route network through its associate companies, Thai AirAsia and

Indonesia AirAsia. AirAsia believes in the no-frills, hassle-free, low fare business

concept and feels that keeping costs low requires high efficiency in every part

of the business. Efficiency creates savings which are then passed on to guests

so that affordable air travel can become a reality. Through our philosophy of

‘Now Everyone Can Fly’, AirAsia has sparked a revolution in air travel with more

and more people around the region choosing AirAsia as their preferred choice of

transport. As AirAsia continuously strives to promote air travel, we also seek to

create excitement amongst our guests with our range of innovative and

personalized service.

Our Vision

To be the largest low cost airline in Asia and serving the 3 billion people who arecurrently underserved with poor connectivity and high fares.

Our Mission

To be the best company to work for whereby employees are treated as part

of a big family

Create a globally recognized ASEAN brand

To attain the lowest cost so that everyone can fly with AirAsia

Maintain the highest quality product, embracing technology to reduce cost

and enhance service levels

Our Values

We make the low fare model possible through the implementation of the

following key strategies,

• Safety First:

Partnering with the world’s most renowned maintenance providers and

complying with the with world airline operations.

•

High Aircraft Utilisation:



Implementing the regions fastest turnaround time at only 25 minutes,

assuring lower costs and higher productivity.

• Low Fare, No Frills:

Providing guests with the choice of customizing services without

compromising on quality and services.

•

Streamline Operations: Making sure that processes are as simple as possible.

• Lean Distribution System:

Offering a wide and innovative range of distribution channels to make

booking and travelling easier.

• Point to Point Network:

Applying the point-to-point network keeps operations simple and costs,

low.

AirAsia X - The Story So Far

Introduced in January 2007, AirAsia X focuses on the low-cost, long-haul

segment and is based on the high frequency, point-to-point networks to long-

haul services business. Covering destinations between four and eight hours in

flight duration from Kuala Lumpur, AirAsia X compliments AirAsia's current

extensive route network.

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 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 exciting destinations in Australia,

China, India, Korea, Japan, Middle East and Europe.

AirAsia X’s destination network are connected to AirAsia’s extensive network of

105 routes, covering ASEAN countries and China, which provides seamless

connectivity for guests.



AirAsia AirAsia X

ConceptLow cost short haul,

no-frillsLow cost long haul, no frills

Flying

Range

Within 4 hours flying

time from departing

city

More than 4 hours flying time from

departing city

AircraftAirbus A320 with 180

seatsAirbus A330 with more than 330 seats

Seat

TypeSingle seat

Economy seat and Premium(previously

known as XL) seat

Seat

Option

Free seating with

Xpress Boarding

option

Assigned seating with advance seat request

option

In-flight

Dining

Wide range of light

meals and snacks

available for purchase

onboard the aircraft

Pre-ordered full meals are available

including Asian, Western, Vegetarian and

Kid's Meal. Light snacks are also available

for purchase onboard

Company Overview



It brings me great pleasure to welcome you to our

investor relations web section. For our existing

shareholders I say "Thank You" for your confidence

and support. And for you prospective investor; keep

reading and I hope you discover that the AirAsia

success story is nothing more than a combination of

focus on consumer needs, dedicated staff, hard

work, getting the basics right, cost control and the

passion to be the best!

We focus on really understanding consumer needs

and problems. By increasing our consumer insight,

we are able to develop new products that solve

these needs and problems.

For example, it was because of our guest 's suggestion that we decided to have

multiple languages in our websites - something of which we are eternally grateful.

It might seem like a simple suggestion, but the results are phenomenal. To date,

over half of our sales are via internet booking and it is steadily rising.

My philosophy is very clear: before a business can grow, it needs to have its costs

under control. It must be cost-efficient and profitable, and it must create value.

Costs that do not add value must be contained, reduced and even eliminated. I

have been asked by various people, "How much lower can your cost reduce? You'realready the lowest in the world!" My direct answer is if we do not strive to be more

efficient and choose to be complacent – our days are numbered. This is a

continuous task we have to face head on year on year; it is the critical ingredient to

operate a successful business.

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. So, we will continue to be dedicated

to cost-efficiency and expansion. It is a message that is well understood by each

AirAsia employee and I am proud to say this is our culture.

To the consumer, a strong AirAsia brand is a sign of dependability and leadership,

giving added confidence and assurance. 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



Investor Relations

Organizational Structure

The following chart shows the corporate structure and principal operating

companies for AirAsia.



Directors Biography

Dato' Abdel Aziz alias Abdul Aziz bin Abu Bakar,

Malaysian, aged 56, was appointed as Non-Executive Director

of the Company on 20 April 2005 and on 16 June 2008, he was

re-designated to Non-Executive Chairman. He is also the

Chairman of the Nomination Committee. Prior to this, he

served as an Alternate Director of the Company to Dato’

Pahamin Ab. Rajab since 11 October 2004. He also served

earlier as a Director of the Company from 12 December 2001

to 11 October 2004.

He is currently the Non-Executive Chairman of VDSL Network Sdn Bhd. He is also

the Chairman of PAIMM (Academy of Malaysian Music Industry Association) and

PRISM (Performance and Artists Rights Malaysia Sdn. Bhd.), a music performers

collection body. From 1981 to 1983 he was Executive Director of Showmasters

(M) Sdn Bhd, an artiste management and concert promotion company.

He subsequently joined BMG Music and was General Manager from 1989 to 1997

and, Managing Director from 1997 to 1999. He received a Diploma in Agriculture

from Universiti Pertanian Malaysia in 1975, his BSc in Agriculture Business from

Louisiana State University, USA in 1978, and an MBA from the University of

Dallas, USA in 1980.

Dato' Tony Fernandes was appointed as Group Chief

Executive Officer of the Company in December 2004. He was

Financial Controller at Virgin Communications London from

1987 to 1989, Senior Financial Analyst at Warner Music

International London from 1989 to 1992, Managing Director at

Warner Music Malaysia from 1992 to 1996, Regional Managing

Director, ASEAN from August 1996 to December 1999 and Vice

President, ASEAN from December 1999 to July 2001 at Warner

Music South East Asia.

Tony was actively involved in developing the Malaysian music industry and

received the title "Setia Mahkota Selangor'' from His Royal Highness King of

Malaysia Sultan Salahuddin Abdul Aziz Shah in 1999 in recognition of his

contributions and was also the recipient of the "Recording Industry Person of the

Year 1997'' by the Recording Industry Association of Malaysia. In addition, he



was awarded the International Herald Tribune award for the Visionaries &

Leadership Series in 2003 for his outstanding achievement with AirAsia, and was

named "Malaysia CEO of the Year 2003'' by American Express and the Business

Times. Tony was recently awarded "Emerging Entrepreneur of the Year Malaysia

2003'' in the Ernst & Young Entrepreneur of the Year Awards in 2004. He was

admitted as an Associate Member of the Association of Chartered Certified

Accountants in 1991 and became a Fellow Member in 1996.

Dato' Kamarudin Meranun was appointed as Director of the

Company on 12 December 2001. In January 2004, he was

appointed as Executive Director, Corporate Finance and

Strategic Planning of the Company. Prior to joining the

Company, he worked in Arab-Malaysian Merchant Bank from

1988 to 1993 as a Portfolio Manager, managing bothinstitutional and high net-worth individual clients' investment

funds. In 1994, Kamarudin was appointed as an Executive

Director of Innosabah Capital Management Sdn Bhd, a

subsidiary of Innosabah Securities Sdn Bhd.

Kamarudin then acquired the shares of its joint venture partner of Innosabah

Capital Management Sdn Bhd, which was later renamed Intrinsic Capital

Management Sdn Bhd. Kamarudin received a Diploma in Actuarial Science from

University Technology MARA (UiTM) and was awarded the "Best ActuarialStudent'' by the Life Insurance Institute of Malaysia in 1983. Kamarudin received

a B.Sc. degree with Distinction (Magna Cum Laude) majoring in Finance in 1986

and an MBA in 1987 from the Central Michigan University .

Conor Mc Carthy was appointed as Director of the Company

on 21 June 2004. He is currently the Managing Director of

PlaneConsult.com, a leading aviation business solutions

provider, which has clients including low fare airlines, full-

service carriers and airports. Prior to establishing

PlaneConsult.com, Conor was the Director of Group Operations

at Ryanair from 1996 to 2000. While he was with Ryanair, the

airline underwent a successful initial public offering on

NASDAQ and the Irish Stock Exchange.

Before his role with Ryanair, Conor was the CEO of Aer Lingus Commuter. Prior

to that, he was General Manager/SVP level in the Marketing and Strategic



Planning areas. He spent 18 years with Aer Lingus in all areas of the airline

business from Engineering, Operations and Maintenance to Commercial

Planning, Marketing and Route Economics to Finance, Strategic Management,

Fleet Planning and General Management. Conor joined Aer Lingus as an

Apprentice Avionics Engineer in 1978 and subsequently won a scholarship

through which he graduated in 1986 with a First Class Honors degree in

Engineering from Trinity College Dublin.

Independent Directors

Datuk Leong Sonny alias Leong Khee Seong was

appointed as Independent Director of the Company on 8

October 2004. He was the Minister of Primary Industries from1978 to 1986 and a member of Parliament from 1974 to 1990.

Prior to this, he was a substantial shareholder of his family's

private limited companies, involved in general trading. He was

the Chairman of the General Agreement on Tariff and Trade's

Negotiating Committee on Tropical Products (1986 to 1990)

and was the Chairman of the Group of 14 on ASEAN Economic

Cooperation and Integration (1986 to 1987). Datuk Leong

graduated with a degree in Chemical Engineering in 1964 from

the University of New South Wales, Australia.

Fam Lee Ee an advocate and solicitor of the High Court of

Malaya, was appointed as Independent Director of the

Company on 8 October 2004. He is currently the senior partner

of Messrs YF Chun, Fam & Yeo. He has been Trustee of

Yayasan Pejati since 1996. He also serves as a director of Tiong

Nam Logistics Holdings Berhad since March 2002 and M-Mode

Berhad since September 2004. Fam received a BA (Hons) fromthe University of Malaya in 1986 and an LL.B (Hons) from the

University of Liverpool, England in 1989.



Dato' Mohamed Khadar Bin Merican was appointed

Independent Non-Executive Director of the Company on 10

September 2007. He is also a member of the Audit Committee

of the Board. He has had more than 20 years’ experience in

financial and general management. He has been an auditor

and a management consultant with an international accounting

firm, before joining a financial services group in 1986. Between

1988 and April, 2003, Dato’ Khadar held several senior

management positions in Pernas International Holdings Berhad

(now known as Tradewinds Corporation Berhad), a company

listed on the Main Board of Bursa Malaysia Securities Berhad,

including as President and Chief Operating Officer.

He was the first President of the Malaysian Association of Hotel Owners. He

currently manages his own financial consultancy practice. He is a member of

both the Institute of Chartered Accountants in England and Wales and the

Malaysian Institute of Accountants. He is also presently a Director of RHB Bank

Berhad, RHB Investment Bank Berhad (formerly known as RHB Sakura Merchant

Bankers Berhad), RHB Insurance Berhad and ASTRO All Asia Networks PLC.

Datuk Alias Bin Ali, was appointed Independent Non-

Executive Director of the Company on 23 September 2005. Heis also a member of the Audit, Remuneration and Nomination

Committees of the Board. Prior to this, he had a long and

distinguished career with the Government which began soon

after his graduation from the University of Malaya in 1970. He

started as an Administration Trainee Officer in the Statistics

Department. He subsequently joined the Prime Minister’s

Department as Administration Development Officer.

Whilst still with the department, he completed his Master in BusinessManagement and assumed the position of Head of Department (Consultancy) at

the National Institute of Public administration (INTAN) in 1975. Over the next 15

years with the Government, he held various senior positions in several Ministries

and Department including as Deputy Director of Training (Operations) in the

Public Services Department, Under Secretary (Establishment and Services) in

the Ministry of Works and Director of Industrial Development Division in the

Ministry of Trade and Industry. He moved back to the Prime Minister’s

Department in 1990 as Cabinet Under Secretary. In June 2000, he was appointed



Secretary General of the Ministry of Health, a post he held until his retirement in

March 2004. He received a Master in Business Management from the Asian

Institute of Management, Philippines in 1975 and a Bachelor of Economics

(Honours) from the University of Malaya in 1970. He is also presently a Director

of Integrated Rubber Corporation Berhad, FIMA Corporation Berhad, Mentakab

Rubber Company Berhad, CCM Duopharma Biotech Bhd. and Melati Ehsan

Holdings Bhd.



Strategy

Our Vision

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.

Leanest Cost Structure

• Efficient and simple point to point operations

• Attracting and retaining hardworking and smart people

• Passion for continuous cost reductionMaximise Shareholders' Value

• Resilient profit growth through our lower cost base

• Expansion of the AirAsia network in a prudent and disciplined

manner

• Invest and enhance the AirAsia brand to increase investors' returns

Safety• Comply with the highest International Aviation Safety Standards

and practices

• Keep operations simple and transparent

• Ensure the security of our People and GuestsPassion for Guests' Satisfaction

• Maintain simplicity in every application

• Practice the unique and friendly AirAsia experience at every

opportunity



• Recognise the linkage between guests' satisfaction and long-term

success

Transparency

• Transparency in decision-making and information sharing

• Optimum disclosure - higher than industry norms

• Timeliness in disclosing information

Human Capital Development

• Invest in both hard and soft skills

• Recognise all our People as contributors to our success

• Reward excellence and individual contributions

• Maintaining one brand across the Group

Ownership Structure

According to the register, the Group had as of 12 November 2009, a total of

approximately 21,969 shareholders.

Distribution Table According To The Number of Securities Held In Respect of Each

Type of Security as of 12 November 2009.

Number of

Shareholder

% of

Shareholders

Number of

Shares

% of Issued

Share Capital

Less than 100 58 0.3 1,363 0.0

100 - 1,000 6,062 27.6 5,576,391 0.2

1,001 - 10,000 13,012 59.2 56,041,858 2.0

10,001 - 100,000 2,378 10.8 66,507,784 2.4

100,001 to less than

5% of issued shares456 2.1 1,469,211,850 53.3

5% and above of

issued shares3 0.0 1,160,277,334 42.1

Total 21,969 1002,757,195,58

0

100

Major Shareholders

As of 12 November 2009, about 26% of the total share capital was owned by

TuneAir Sdn Bhd. AirAsia is a substantially owner managed company, the

cumulative ownership by the board of directors constitutes approximately 28% of



the share capital.

Shareholder nameNo. of shares

owned

% Share

capital

Tune Air Sdn Bhd 715,458,382 25.95%

Employees Provident Fund Board 313,341,200 11.36%

Genesis 165,808,552 6.01%

Nomad Investment Partnership 138,400,000 5.02%

Lembaga Tabung Haji 86,633,430 3.14%

PUBLIC 1,337,554,016 48.51%

Total 2,757,195,580 100.0%

Last Updated: 24 November 2009

Analyst Recommendation

All opinions, estimates or forecasts and recommendations regarding the company's

performance made by contributing analysts are theirs alone and do not represent

opinions, forecasts or predictions by the company or its management. AirAsia does

not ascribe their validity and therefore won't be held liable for analyst's

recommendations.



Recommendation

Summary

Buy 11

Neutral 3

Sell 4

Total 18

Price Target Summary

Mean Target 154

Median Target 156

High Target 210

Low Target 109

# Contributors 18* Last update: 25

November 2009

Name Company RecommendationPrice

Target

Last

Update

Chin Lim Morgan Stanley Neutral 135 25 Nov

Benard Chin ECM Libra Buy 167 23 Nov

Raymond Yap CIMB Buy 190 23 Nov

Paul Dewberry Merrill Lynch Buy 195 23 Nov

Anuar Aziz Credit Suisse Buy 180 23 Nov

Angeline Tan TA Securities Buy 210 23 Nov

Liong Chee How Kenanga Research Buy 166 23 Nov

Wong May Pearl Affin Buy 144 23 Nov

Ajith UOB Buy 167 23 Nov

Kong Heng Siong Alliance Research Buy 156 23 Nov

Juliana Ramli DBS Vickers Neutral 110 23 Nov

Khair Mirza Maybank Neutral 135 23 Nov

Ng Sem Guan OSK Research Sell 128 23 Nov

Joshua Ng RHB Sell 123 23 Nov

Michelle Foong Deutsche Bank Sell 109 23 Nov

Hafriz Jeffry AmResearch Buy 196 9 Oct

Norly Hashim CLSA Buy 190 22 Sep

Chin Lim Morgan Stanley Neutral 135 14 Aug

Damien Horth UBS Sell 110 13 Aug

Vince Ng KAF Buy 200 12 Aug

Ratings for Recommendations:

The definitions for analysts' recommendations may vary depending on the

brokerage, but, in general, they may be defined as:

Buy: over the next twelve months, analysts expect this stock will outperform the

average total return of the stocks in the analysts' coverage universe.

Neutral: over the next twelve months, analysts expect this stock will perform in line



with the average total return of the stocks in the analysts' coverage universe.

Sell: over the next twelve months, analysts expect this stock will underperform the

average total return of the stocks in the analysts' coverage universe.

Consensus

Consensus earnings estimates

Figures in RM million 2009F 2010F 2011F

Revenue (Average) 2,904 3,369 3,837

Revenue (max) 3,263 3,819 4,398

Revenue (min) 2,706 3,009 3,216

N. Income

(Average)480 521 560

N. Income (max) 745 776 1,027

N. Income (min) 365 208 0

# contributing

analyst18 18 16

Last update: 25 November 2009

Comments

Consensus are updated on a continuous basis. Last update shows when estimates

or forecasts for one or several contributing analysts have been updated. None of

the analysts' estimates are older than four months.

Airline 101

ASK Available seat kilometers, which is the total number of seats available

on scheduled flights multiplied by the number of kilometers these

seats were flown. ASK will generally be used as the denominator

when calculating ‘unit cost’

RPK Revenue passenger kilometers, which is the number of paying

passengers carried on scheduled flights multiplied by the number of

kilometers those seats were flown

Load factor RPK divided by ASK



Breakeven

load

factor

Revenue per RPK divided by Cost per ASK

Block

hours

The time between the departure of an aircraft and its arrival at its

destination, as recorded in the aircraft flight log

Aircraftutilization

The amount of time that an aircraft spends in the air carryingpassengers

Cost per

ASK

Total operating expenses (excluding finance costs and taxation)

divided by ASK. In the airline industry, this is comparable to ‘unit cost’

Revenue

per ASK

Total revenue divided by ASK

Revenue

per RPK

Total revenue divided by RPK

Sector

length

The length of the journey flown by the aircraft

Sector

flown

Number of times a sector is flown

Bilateral Air Services agreement between to governments

Seat Pitch The distance between one seat and the same point on another seat

directly in front or behind

First

freedom

The freedom to fly across another state without landing

Third

freedom

The freedom to put down in another state revenue passengers, mail

and freight taken on in the state of airline registration

Fourth

freedom

The freedom to take on in another state revenue passengers, mail

and freight destined for the state of airline registration

Fifth

freedom

rights

The freedom that enables airlines to carry passengers to one country,

and then fly on to another country (rather than back to their country

of origin)

Sixth

freedom

The privilege for an airline registered in one state to take on revenue

passengers, mail and freight in a second state, transport them via the

state of registration, and put them down in a third state

Seventh

freedom

The privilege for an airline registered in one state to take on revenue

passengers and freight to a second state and to put them down in a

third state without the journey originating, stopping or terminating in

the state of registration

‘A’ checks The basic inspection and routine servicing conducted on an aircraft

every 250 hours flown to ensure that the aircraft is in an air-worthy

state to continue flying



‘C’ checks The maintenance performed on an aircraft approximately every 11

months

‘D’ checks The complete overhaul performed on an aircraft approximately every

seven years

Light

maintenance

Daily routine checks on the aircraft, including daily pre-flight checks

and overnight checks, as well as ‘A’ checks

Heavy

maintenan

ce

The ‘C’ and ‘D’ checks performed on a aircraft

Aircraft

push back

The act of pushing an aircraft back from a gate or away from other

aircraft at parking areas, to allow for an aircraft to begin taxiing under

its own power

Flight Profile

Idle Takeoff Climb Cruise Landing

Exhaust gas

temperature (°C)466 1,026 809 696 459

Fuel burn rate (liters /

minute)15 108 87 47 27

Thrust (lbs) 1,222 47,000 19,975 4,418 3,337

There are generally five phases in every flight. Each phase is unique and has exerts



The maximum cruising speed of the Airbus A320 is 903 kmh, but the aircraft

typically flies at an economical cruising speed of 840 kmh. Before the aircraft can

reach cruise mode, significant amount of time is required to climb to the suitable

cruising altitude and not to mention time taken before being allowed to take-off

and land. Therefore, flight journey time is not necessarily proportional to the

distance travelled. The table above depicts the average speed of a typical flight

versus the stage length.

Facts that figure

•

Every 3 minutes, an AirAsia aircraft is either taking off or landing somewhere in

Asia.•

Our aircraft flies an average of 2.8 million kilometers each year; that’s an equal

distance to the moon and back, four times over.•

Our pilots and cabin crew travel 500,000 kilometers every year; roughly circling

the Earth 13 times.•

Our aircraft consumes approximately 14 million litres of fuel each year.

•

Our aircraft makes contact on the tarmac approximately around 13,000 kilometers

every year, about half the distance a normal passenger car puts in every year.

BUT, our aircraft will require 16 tyre changes every year.

What Is Low Cost?

In this section, we address the following subjects:

History of the LCCHow LCC can offer such low fares?Why can’t the full service carriers match LCC fares?How low cost fares are structuredCommon misconceptions on LCC

History of the Low Cost Carrier (LCC) back to top

The LCC boom began about 36 years ago when Southwest Airlines roam the skies

of USA. Rollin King and Herb Kelleher got together and decided to start a different

kind of airline with four set of principles: fly one type of aircraft to keep down

engineering costs; keep overheads down; turnaround aircraft as quickly as

possible; and abandon loyalty or air miles schemes. They began with one simple

notion:

“If you get your passengers to their destinations when they want to get there, on

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time, at the lowest possible fares and make darn sure they have a good time in

doing so, people will fly your airline.”

And you know what? They were right. Southwest Airlines is now the third largest

airline in the world in terms of number of passengers carried and also one of the

most profitable airlines in the world. Southwest Airline’s success spruced upinterest in the LCC concept to all corners of the world. LCC now commands

approximately 30% market share of the domestic USA traffic. In Europe, the LCC

phenomenon spread much later with Ryanair in 1991, but the growth has been at

a much faster pace. Southeast Asia embraced the LCC concept last, but the

growth trajectory is the fastest. The LCC concept continued to spread throughout

the world with WestJet in Canada in 1996, Virgin Blue in Australia in 2000, GOL in

Brazil in 2001, AirAsia in Malaysia in 2002, Kulula in South Africa in 2003 and Air

Deccan in India in 2004.



The reason for the success of the new low cost carriers is very simple - move the

maximum number of passengers at the minimum of cost. The concept of LCC isbased on the idea that people would fly a lot more often if it were more affordable.

LCC airline’s main mission is to make air travel the most simple, convenient and

inexpensive form of transportation in the world. The fare differential between the

full service carriers (FSC) and LCC can be as high as 40%-60% cheaper.

How LCC offer such low fares? back to top

The key to delivering low fares is to consistently keeping cost low. Attaining low

cost requires high efficiency in every part of the business and maintainingsimplicity. Therefore every system process must incorporate the best industry

practices.

The key components of the LCC business model are the following;

1. High aircraft utilization

Aircraft is kept flying as much as possible, the first flight starts as early in the

morning commercially possible and the final flight typically ends at midnight. A

fast turnaround is critical to ensure time spent of the ground is minimal – anairline makes money when the aircraft is flying, not when the aircraft is parked.

AirAsia’s turnaround time is 25 minutes; compare that against 1 hour for a FSC.

On average, AirAsia’s utilization per aircraft is 12 block hours per day, a FSC might

do about 8 block hours per day.

2. No frills

The underlying business for a LCC is to get a person from point A to point B.

Everything else is considered to be luxury item or “frill”, of which can be acquired





for a small fee. Among many of the frills that AirAsia has do away are;

• No free food & beverages. Why give away something that you don’t

appreciate? Passengers are most welcome to purchase food & drinks at an

affordable price from the cabin crew.

• Free seating. There is no assigned seating. Passengers receive a generic

boarding pass and they will have to take any of the available seats.

• Ticketless airlines. Less hassle for the customer, who doesn't have to worry

about collecting tickets before traveling, and cost-effective for the airlines

(paper, printing, distributing).

• No refund. Airlines waste a lot of money when passengers do not show up

for a flight due to refunds and rescheduling. Whether a passenger shows up

or not, the cost of flight to the airline is the same. LCC are unforgiving to no

show passengers and do not offer refunds for missed flights.

• No loyalty programme. We believe our customers are loyal to our low fares,

so who needs frequent flyer miles programme then.

3. Streamline Operations

Making the process as simple as possible is the key of a successful LCC.

• Single type of aircraft. Pilots, flight attendants, mechanics and operations

personnel are specialized in a single type of aircraft, which means, among

others, that there is no need for costly re-training of staff, for maintaining a

stock with parts for different types of aircraft, for knowledge and skills in

order to operate and maintain different types of aircraft with their own

characteristics, or for new work requirements.

• Single class seating. There is only one class seating, i.e first class, and

passengers are free to sit where they choose. Should you want to have the

privilege to choose your seats, you can by purchasing Xpress boarding.

• Standard Operating Procedures. SOPs are important to ensure same level of

competence among all the staff. This way we can ensure the homogeneity

of service throughout the company.

4. Basic Amenities

• Secondary airports. Low cost carriers mostly fly to and from airports that

are not necessarily the busiest, for example, London - Stanstead rather than

London - Heathrow. These are often referred to as secondary airports.

Operating from so called secondary airports is cheaper than from the bigger

major airports and they are also a lot less congested and “turnaround

times” for aircraft are a lot shorter. For instance, to minimize fees AirAsia fly



into Clark Airbase which is 70km away from Manila as appose to flying into

Manila Ninoy Aquino airport.

• Business Lounges. Forget about it.

5. Point to point network

Point to point network. LCC shuns the hub-and-spoke system and embraces the

simple point-to-point network. Almost all AirAsia flights are short-haul (3 hour

flight or less). No arrangements have been made with other airline companies on

connecting flights, on possibilities of flight transfers, nor on having the luggage

labeled and passed through from one flight to another.

6. Lean Distribution System

Distribution costs are something that FSC most often ignore. Very often, FSC relies

on travel agents and from their posh sales office. Furthermore, FSC always blows

the budget by complicating their distribution channels by integrating their

systems with multiple Global Distribution Systems. LCC will keep their distribution

channel as simple as possible and will cover the whole spectrum of the clientele

profile. For example, AirAsia can cater to the most sophisticated European traveler

via internet and credit card sales. And at the same time, AirAsia has an

established system to sell our tickets to the most remote and technology deprived

locations, such as in Myanmar.

• Internet Sales. 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.

• Sales office. AirAsia only has a few sales offices. We only establish a call

centre if we are confident the sales derived from the centre will be worth it.

Furthermore, we are not fixated with having our sales office in the posh side

of town.

• Travel agents. LCC avoids reliance for sales via travel agent as much as

possible. This means that the airlines do not pay any commission to a travel

agent, which would otherwise have been reflected in the fares. Also, as they

do not use travel agents, they do not use, nor participate in the world wide

reservation systems and thus save costs, which again are reflected in their

pricing.

• Call centres. Ticket sales can be done via telephonically; this is a simple and

cost effective method.

Why can’t the full service carriers match LCC fares? back to top





LCC adopts a simplistic fare structure based on time value relationship for seats.

Generally speaking, the earlier you book the cheaper the fare will be. There are a

total of 12 fare buckets; each fare bucket is priced accordingly to our specification.

The first few tiers are targeted to value conscious passengers, but they can only

get their hands to those extremely cheap tickets if they book way ahead of time.

The mid tier buckets targets the captive market. Ones the revenue collected is

sufficient to cover all the operational cost of the flight, the system will then move

on to the top tier fare bucket. This is when prices start to creep up and our profit

grows.

This is yield management from the perspective of a LCC. Want cheap fares, book

early. If you book your tickets late, chances are you are desperate to fly and

therefore don’t mind paying a little more. Conversely, a FSC will do things totally

apposite; they try to charge as much as they can early on and drop their fares in

the last minute due to fear of flying empty seats.

Yield management is an exhaustive process that combines elements of science,

psychology, market dynamics and most of the time basic common sense. Our

yield management team continuously stress test the fare buckets in order to get

the maximum revenue for every flight. Achieving the best mix (fare over load

factor) is a never ending process and is a continuous learning process.

Common misconceptions on LCC back to top





When talking about LCC, some quarters will react with cynical and sometimes

preposterous views. We've been asked before if a passenger must stand in a flight

due to lack of seats or there will be chickens in the flight. Such misconceptions are

not surprising, given the fact that scheduled, low-fare flights are a relatively new

phenomenon in the world. We list down below some of the most common

misconceptions with regards to the LCC:

i. Are the aircraft safe?

Absolutely! The number one priority for AirAsia is safety, and that’s a trait

that we never compromise. AirAsia complies with the highest international

standards and procedures.

ii. Are they flying old planes?

We are rejuvenating our fleet with brand new Airbus A320 aircraft. Going

forward, we will have the youngest fleet of any airline in Asia.

iii. Do they have well trained and qualified personnel?

Yes. Our cabin crew is among the best trained and best paid.

iv. What service can one expect?

A service that will get you from point A to B, safely, comfortably and on time.

v. Do they fly on time?

Our on time performance is now above industry average. And it is

continuously improving as we induct more brand new Airbus A320 aircraft

into our fleet.

vi. Do I have to stay through weekends to get the best fares?

No such nonsense. Our tickets are point to point and fare is based on

demand for a particular flight. There are no ridiculous restrictions to get the

cheapest fare; you just have to be faster before anyone else snaps it up

first.

vii

.Do LCC really offer the cheapest fare at all times?

Yes. Our business model stipulates that our fare must be at least 20%

cheaper than a competing FSC at all times. Anything less, in our view, will

steer passengers to our competitors.



Industry resources

The following companies and organizations provide useful data regarding our

industry.

International Society of Transport Aircraft Trading (ISTAT)

ISTAT is the organization that accredits all the aircraft appraisers; it serves as the

official voice for the entire commercial transport aircraft secondary marketplace.

ISTTAT also establishes and promotes standards for many aspects of the purchase

or sale of commercial transport aircraft, including appraisals and a code of ethics.

www.istat.org

Avitas

AVITAS is a full-service aviation consulting firm for all facets of the aviation

industry. AVITAS is renowned as one of the leading advisor to airlines, financial

institutions, maintenance facilities, manufacturers, government agencies and law

firms.

www.avitas.com/index.jsp

Airfax

Airfax is an aviation market letter provides up-to-date, accurate and

comprehensive information on the worldwide availability of commercial transport

aircraft. Airfax produces two market letters; "Jet Transport Aircraft” and “Regional

& Commuter Aircraft” which provides information for turboprop and regional jet

aircraft.

www.airtrading.com/stats.htm

Boeing

Boeing is the second largest aircraft manufacturer of the world. Our current fleet

comprises of Boeing 737-300. Follow the link below for information regarding the

aircraft, industry overview, technical specifications and industry outlook.

www.boeing.com/commercial/cmo/flash.html

Airbus

Airbus is the market leader of commercial aircraft manufacturing. Our future fleet

comprises of the latest Airbus A320 family. Follow the link below for information

regarding the aircraft, industry overview, technical specifications and industry

outlook.

http://www.istat.org/

http://www.avitas.com/index.jsp

http://www.airtrading.com/stats.htm

http://www.boeing.com/commercial/cmo/flash.html

http://www.istat.org/

http://www.avitas.com/index.jsp

http://www.airtrading.com/stats.htm

http://www.boeing.com/commercial/cmo/flash.html



www.airbus.com/media/gmf.asp

General Electrics Aircraft Engines

GE is the world’s leading producer of large and small jet engines for commercial

and military aircraft. Our current fleet of Being 737-300 utilizes engines from GE.

www.geae.com/

Performance Statistics

At AirAsia, we strive to give our guests the highest standard of

service at the lowest fares. But this is never done at the expense

of the safety of our guests. Because we know that the quality of

our service will affect our guests, we make every effort to ensure

that they measure up to your expectations and value for your

travel plans.

In accordance with industry standards, an 'on-time' departure is

one that departs from the designated bay no more than 15

minutes from the scheduled departure time.

http://www.airbus.com/media/gmf.asp

http://www.geae.com/



http://www.geae.com/



FAQ

FAQs

Questions and answers from various sources are regularly posted here. Do not

hesitate to call us or send an email should you have further questions.

Q: Where does AirAsia stock trade under and what ticker?

A: AirAsia is traded on the Bursa Malaysia under the ticker AIRASIA and code

number 5099. You can locate us via Bloomberg and Reuters under the ticker

AIRA MK Equity.

Q: I am interested to buy AirAsia shares. Where can I buy them?A: AirAsia shares can be bought or sold via most major banks or stockbrokers.

AirAsia does not sell or buy shares from the public and you have to purchase

shares via stockbrokers or banks. AirAsia shares are traded on the Bursa Saham

Kuala Lumpur under the ticker AIRASIA or our code number 5099.

Q: I am interested in your financial reports, company information, and

anything relating to your marketing strategy. What can you send me?

A: As a matter of policy, we do not produce information packs. All the relevant

information can be found here in our website. Please click on the menu‘Reports’ and you will access all our financial reports. The website also provides

comprehensive information such as press releases, management profile,

history, industry overview among many other things.

Q: Is AirAsia Syariah compliant?

Yes, we are accredited by the KL Syariah Index . Our business is principally

transporting people to destinations; we do not serve alcohol, pork or distribute

any pornographic related materials. Using the Dow Jones Islamic Index (DJIX) as



a benchmark, we conform to all the financial screen and basic principles in

order to be accredited as a Syariah compliant business.

Q: What is AirAsia’s dividend policy?

A: AirAsia does not pay dividends nor do we foresee paying dividends in the

near future. The business is in the early stages of development and capital is

required to be reinvested for the future’s well being. We believe this will

ultimately yield the most beneficial returns when viewed on a long-term basis.

Q: Does AirAsia have any frequent flyer mile program?

A: No. It is too expensive for us and our fares are already the lowest in the

industry.

Q: How do you manage to offer such a low fare? Can you make a profit?

A: We will not be doing business if we are not profitable and in fact, we are

among the most profitable airline company in the world. The details of the

business model are explained comprehensively in our reports and

presentations.

Q: Are your planes safe?

Of course AirAsia is safe. Saying otherwise is like claiming the world is square.

AirAsia is safe, with a planeful of humour too; we will have it no other way! And

no, having a ball of a time on a soaring plane does not mean compromising

safety. Give us more credit; AirAsia is a lot smarter. We realize that in keeping

you safe, we keep ourselves safe.

Q: Are you going to add more routes?

A: We constantly look for opportunities and ways to expand our network.

Assuming plane delivery is in schedule and our on-going discussions with

multiple Government agencies yield favourable results, we aim to introduce

between 15 to 20 routes in every year. Most of these routes will be cross-

connecting our existing destinations and hence improve the network spread.

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