E-Business

AirAsia BerhadInternet Usage of AirAsia in Reducing the Cost; Procedure in AirAsia’s Self-

Service from step to step; SWOT Analysis of AirAsia Low Cost Airlines

By:

Yulia Ratnasari

3124039

INTERNATIONAL BUSINESS NETWORKING PROGRAM

UNIVERSITY OF SURABAYA

2013

CHAPTER I

INTRODUCTION

BACKGROUND

Historically, people have been going abroad since the empire era with the aid of Silk

Road and Vasco Da Gama’s exploration sailing. Since then, the trend of going overseas keeps

increasing as one nation needs another in case of competitive advantage. For instance in

business, resource and development, lack of resources, and cheaper supply chains in other

country enhance the interaction with outsiders. While in individual, travelling and vacation are

booming especially for those who want to explore the world and those who are on holiday.

Generally, accommodation can be done through land, sea, and sky. Due to the advantages

of flights for instance faster and can arrive to any destination, flights are preferable. Hence,

airline business is appealing. In addition, invention of internet enhances the convenience in

ordering tickets which is known as self-service.

However, there was a mainstream that stated: flights are expensive. Today, cost can be

reduced as management changed its strategy. Focusing on quantity, AirAsia embed a notion

“Now Everyone Can Fly”. It is also one of the airlines which improve their service with

internet aid in the purchasing tickets procedure. This paper primarily focuses on my experience

in purchasing AirAsia tickets and AirAsia strategies in becoming the lowest cost airline.

AIRASIA IN BRIEF

AirAsia is Malaysian airlines which established in 1993 and started to operate in 1996.

AirAsia has achieved award of World’s Best Low Cost Airlines five times championship since

2009 Skytrax1 as evidence that it determines to attain the mission of making flights affordable to

everyone.2 Regardless of never winning the general World's Best Airline from Skytrax, its dream

emphasizes on the low-cost price. It also has association companies, AirAsia X, Thai AirAsia,

Indonesia AirAsia, Philippines' AirAsia Inc and AirAsia Japan. Attempting to give liberty and

ease in booking the tickets, AirAsia improves it Information and Communications Technology

(or in abbreviation ICT) by launching self-service through www.airasia.com.

1 http://www.worldairlineawards.com/main/reputation.htm non-profit basis World Airlines Awards through transparency surveys without any sponsorship and fully independent.2 http://www.airasia.com/my/en/about-us/awards.page

CHAPTER II

ANALYSIS

According to 2011 survey, 57% airlines tickets are purchased through its website; 22%

using travel booking website; while only 5% using conventional travel agent.3 I purchased

AirAsia tickets to Thailand in January 2013 for five days back and forth for the first time.

Previously, my family and I always booked it using traditional travel agent. Actually, there are

several online travel agents such as: http://www.tiket2.com, http://traveloka.com,

http://www.tiket.com, and so forth which also selling AirAsia ticket. The differences are the

airline website often offers promo tickets, also we must pay online travel agent’s fee. For

example, flights one way on August, 10 2013 start from 06:05 Surabaya to 09:40 Kuala

Lumpur’s price is AirAsia for 598,000 IDR; Traveloka.com 597,000 IDR; and Tiket2.com is

598,000 IDR. Despite the initial offering prices are average; at the end AirAsia’s price is 718,000

IDR include cabin, tax and fuel fee. While from Traveloka.com which offers two option without

and with partner’s fee, (in this case I choose without fee) the price is 742.309 IDR, which the

initial ticket’s fee suddenly marked up to 621,950 IDR. On the other hand, Tiket2.com offers the

highest price of 807,000 IDR as Tiket2.com’s ordering service is 89,000 IDR per ticket. In short,

self-service is cheaper using the official website airlines, while online travel agent can be used to

search desired flights and varieties of airlines accordingly.

I already knew that AirAsia’s Surabaya office is located at4 as a backup if the ordering

ticket through website is confusing. On the other hand, booking boarding pass online is easy,

especially with the aid of AirAsia’s Customer Relationship Management (CRM). AirAsia’s

strategies of CRM are promotional booking offers, news updates regarding to our flights, phone

reminder, flight change information, and the online customer service: AskAirAsia.

http://www.airasia.com/ask is an information center using a virtual cartoon stewardess with

balloon shape saying “Hi, I'm Lil' Miss Red. How can I help you today?” Bellow it, we can type

and search our issues and it will result to related question. Above Lil’ Miss Red, there are combo

boxes of: 1)About AirAsia; 2)Before You Fly; 3) While You Fly; and 4) After You Fly. Those

all contain all explanation about the flights which supposedly can be done by self-service.

3 Ronald J. Ebert. and Ricky W. Griffin., Business Essentials, 9th ed. (England: Pearson, Upper Saddle River, NJ: Prentice-Hall), page771 subtitle “The Online Travel Market”.4 Grand Circle Tunjungan Plaza 3 First Floor, Basuki Rahmat road 8-12

Moreover, there are Top 5FAQs in the right side of its homepage; real-time customer service

chat system named “Live Chat” which can be found at the bottom of the page next to e-Form

(sending feedback to AirAsia). However, if we want to use the Live Chat, we must pay attention

with the current time as it only available at 8am - 8pm (GMT+7) regardless of Malaysia’s public

holiday. The e-Form itself showing the concern of AirAsia to improve its service as we can

attach documents regarding to our complaint and there is a possibility that it can be refunded.

In using the self-service, open www.airasia.com from PC or mobile,

or it can be launched from mobile Web app to run on AirAsia’s service from

smartphone or tablets.5 Before installing the mobile apps, make sure that it is

officially established by AirAsia Berhad. https://mobile.airasia.com has

simpler version but since from the start, it is secured (shown by the http+s).

Basically, all of the procedure in booking as AirAsia has the same design

using all media. Next, you can sign up or log in, but actually it is not

required. By joining the membership, we can gain several advantages such as

receiving weekly news (opt-in); saving other’s contact information; pay easier as our credit card

is already saved; manage booking; and checking refund status. Additionally, AirAsia uses

factual approach rule-based data mining as the IP obtained will automatically change the

language and payment currency based on demographic location.6

Next, we have to determine our motive first, is it delivering package, flights ticket

purchasing or hotel reservation. While for seeking cheap flights ticket, AirAsia promotes its

tickets using online and offline marketing. For B2C models, AirAsia try to approach customers

and giving lastest promotion using flash in homepage (banner ad); and mobile commerce7

facebook.com/AirAsia also other Facebook pages specifically to regions and AirAsiax;

twitter.com/AirAsia or @AirAsia; youtube.com/AirAsia; blog.airasia.com; and Instagram

account @AirAsia. Additionally, AirAsia uses Google AdWords Ads service and also associate

with other travel agent website. While for the offline marketing, AirAsia uses television

advertising and newspaper ads. These mixing strategies of marketing is not only one to many;

5 Op. Cit, Ebert Grifin page 2266 Op. Cit, page 423.7 Op. Cit, page 355.

but many-to many by the aid of word of mouth spread easily through its Facebook and many

forums discussing AirAsia newest promo, such as: www.tripadvisor.com in AirAsia discussion.

Firstly, in the flights tab, for example I marked the return radio button (means back and

forth) instead of one way option. Then, the origin is filled by my current city which is Surabaya

(SUB); and the Destination with Singapore (SIN). In the departure and return date we just need

to click the small pop up calendar monthly form. The currency (profiling demographic) is IDR.

To make a comparison of the price, I purchase 1 adult, 1 kid (2-12 years old) and 1 infant (under

2 years old). Clearly show that either kids or infants are not allowed to travel alone as the

minimum order is 1 adult. However if we only need to add 1 kid or 1 infant, it can be helped by

Live Chat assistant. Then, we need to choose the suggested time of departure and return. If the

tickets are unavailable or sold out, there will be a gray notification “Hold On!”. In my example,

departure on July 15, 2013 from 07.30 SUB to 10.40 SIN with QZ-Indonesia AirAsia (plane

shown by green logo at the bottom of the time) with regular price Adult and Kid 604,000 IDR

per each; and infant 150,000 IDR. While for the return, on July 20, 2013 from 11.00 SIN to

12.20 SUB there are promo of adult and kid 780,000 IDR and infant 150,000; however the

regular price are more expensive by 99,000 IDR for kids and adult while the infant remain

constant. The flight operation legends (like in the ATLAS map) located bellows the ticket price

with explanation of each color. In the right side, Booking Summary will total all of the cost

which in this case 3,068,000 IDR include taxes and fees exclude dine and fuel fee. Don’t forget

to agree the check button of terms and condition of AirAsia before clicking continue.

Secondly, in guest details we need to fill up the title (Child, Ms or Mr); given and family

name; surname and email address. To speed up the process, we can log in using AirAsia account.

Baggage ads on, meals during flight, comfort kit of 75,000 IDR (contain 11" x 11.5" neck pillow,

nylon eye shade and 160cm X 100cm blanket

made from acrylic); red carpet privilege such

as fast

immigration, priority check-in and boarding and so on8, can be arranged here. We can order more

maximum two foods as there are also captain’s choice and quick bites. If we do not order food

online, we will not get 20% discount and served after online meal reservations are given during

flights. Also, the option menus are residual thus we can only choose those remaining menus.

Therefore, it is better to buy meals online. In this guest details, the booking summary will

calculate all of the add-ons including the insurance flights protection for kids and adults (in this

case to Singapore) 83,000 IDR per each and for infants is not eligible to protection plans9.

Thirdly, seats are arranged. AirAsia is fair airline for the first book will get the preferable

seats. There are two option, regular seat of 18,000 IDR and Hot Seat (bigger space) with red

colored shape of 95,000 IDR.

Fourhly, payment can be done using credit card or debit card; e-gift voucher and direct

debit. In credit card, we can use BIG Visa Card, Master Card, and Visa. Then, we have to fill the

DVV (Card Verification Value) three or four digits at the back of our card next to the place of

signature; Card issuer of the bank and it will directly charge processing fee of 108,000 IDR. I

always use Mandiri Credit Card Visa; and different bank and method has different payment

procedure and confirmation.Verification needed after the notice from Bank through mobile

phone, which is why the process reminds us to ensure our phone is on and there are signals

(Mandiri credit card payment). After entering the code with limited time, AirAsia will email us

after it being confirmed. When we use Call Cente, it can be paid using credit card and ATM.

Sixthly,

after the payment

has been

processed, the

flight Itinerary

will be displayed

on the screen and we can send it to our email. Below the barcode, the booking number will be

stated for example ‘C9YNNW’ which can be used to web check-in and re-print boarding pass.

The boarding pass will also contain the explanation of the time of baggage and boarding time.

For the self-check-in, it can be done in the kiosk machine, mobile online or web online. We can

8 http://www.airasia.com/my/en/at-the-airport/red-carpet.page 9 Goinsure AirAsia froom PT. Asuransi AIU Indonesia as the member of AIG (American International Group)

check in using URL http://checkin.airasia.com, then entering the departure place and also the

booking number. It can be done 7 days before flights up to 1 hour before (while for the long haul

is 4 hours before). When we use mobile online, we need to download the 2D barcode and show it

to the check in in the airport. While using web online, we are able to print the boarding pass

directly, able to change seat and purchasing another add ons. While for the kiosk check in, we

need to bring itinerary or our booking number. After find the kiosk machine, put the booking

number and confirm; or scan the itinerary. These self-check in methods is able to avoid service

fee of 30,000 IDR (10 MYR) using the counter check in. After doing self check-in, these are still

able to be done before departure: changing flight time, date and seat (48 hours before);

purchasing add ons (24 hours before); and adding baggage weights (4 hours before) using

AirAsia “Manage My Booking” in “Change/Upgrade Flight”. However, when the new flight is

cheaper, it will not be refunded; and route changing is not allowed. Lastly, bring the boarding

pass to the airport and go to the correct gate (30 minutes before; while for long haul 90 minutes)

then the flights go on.

After experiencing the AirAsia’s service; their strategies in reducing cost (LCC: Low

Cost Carrier) can be noticed because it is extremely basic. It has narrower space and aircraft’s

seats in order to have greater capacity of passenger. Also, AirAsia do not offer business class

wider seating; only standard economy flights and the hot seat. Their strategy of the “Low Fare,

No Frills” means AirAsia remove all extra service which are: meals and drinks (need to purchase

additionally); no television and audio; and no other seat facilities. So, in the departure’s

announcement is done in front of the aircraft and the safety demonstration is presented by the

stewardess without video system. Moreover, it has no air freight, short cleaning service and low

cost for maintenance. The seat cover is from leather that is why the cleansing is easier.

Summing up, AirAsia is one example of airlines which utilize internet to enhance it cost

efficiency as competitive advantages. Marketing and advertising, job vacancy10, CRM, booking

and payment are done using internet aid. Ease in using self-service can lead to high satisfaction

of the customer.

10 jobs.airasia.com

CHAPTER III

CONCLUSION

AirAsia utilize internet to reduce cost as it pursue to be the lowest cost airline. I will

analyze AirAsia in general and in the self-service implementation using SWOT analysis.

Firstly, AirAsia strength is in its cost which make “Now Everyone Can Fly”; but of

course not literally. Also, as it low cost already penetrated in worldwide, it has a broad customer

from high-end customer to the low-end. By the aid of self-service which is very convenience,

AirAsia can further reduce its cost without reducing customers’ satisfaction. Even there are

traditional agents to manage bookings to help those who cannot use internet. In addition, safety

is still on AirAsia priority; therefore it is safe and affordable.

Secondly, low cost also mean lower quality. Removing its frills and narrowing the seats

can be very uncomfortable for several passengers. Also, the amount stated on the promotion does

not include any VAT. Cancelation in flights and cheaper price in changing flights cannot be

refunded. While for the self-service, the time-out, expiration in opening web during ticket

bookings, sometimes is way too fast. Also, there are fluctuations of price and the online payment

is unable using ATM. However since 04/07/2013 (DD/MM/YY) it is resolved as all of ATM

Bersama, Alto, and Prima can be used as online payment (but still not for all banks)11

Thirdly, opportunities in expanding markets keep increasing as it won many awards

which prove the satisfaction of the passenger. AirAsia’s affiliations, branch in many countries

and support from airport partners can be financial and operational leverage in order to be sustain

in the market. Also, when technology is improved, so is AirAsia as it is up to date and maximize

the usage of technology. In short, the correlation of AirAsia and technology is positive.

Fourthly, threats: trend of increasing oil and gas price and unstable currency value can

make the price even more fluctuated. New LCC airline and the existing competitors are the basic

treath for every business. Also, disease spread and outbreaks can reduce traffic passenger.

11 http://www.merdeka.com/uang/gandeng-bank-permata-airasia-permudah-pembelian-tiket-via-atm.html