AirAsia was founded in 1993 by Malaysian government as a second airliner to the major national air company MAS (Malaysian Airlines) and AirAsia started operating after three years on 18th November 1996. During the following 5 years, AirAsia failed every year to bring profit, therefore AirAsia had a great debt of about USD $ 37 million in 2001. However, this time is the time when the real story of the largest low-cost airlines began. In 2001, Dato’ Sri Dr Tony Fernandes with partners Dato’ Pahamin Rejab (former chairman of Air Asia), Dato’ Kamarudin Meranun, and Dato’ Aziz Bakar purchased the AirAsia from Malaysian owner HICOM Holdings Berhad (now known as DRB-HICOM Berhad), for a symbolic price RM1 (USD 0.25 cents), and agreed to close the debts of the company. (AirAsia Annual Report, 2008, p.3)
They started with an innovative goal to make air travel cheaper and more affordable to people that “Now Everyone Can Fly”. AirAsia was re-branded and re-launched and started new life with two Boeing B737 planes, approximately 250 staffs and had only five destinations to Kota Bahru, Kota Kinabalu, Kuching, Labuan, Langkawi and Penang. According to AirAsia website, after 10 years Air Asia has around 100 air planes and flies to more than 60 destinations from 23 countries. Additionally, Air Asia operates more than 3,500 flights a week and has around 8,000 staffs. In 2009 AirAsia ferried more than 22 million passengers and AirAsia is ASEAN (Association of South Asia Nations) carrier. (AirAsia Annual Report, 2009, p.4). The Air Asia subsidiaries are the likes of Thai Air Asia, Indonesia Air Asia, Viet Jet Air Asia and Air Asia Red Tix. Meanwhile, Air Asia associate companies are Air Asia X, Tune Hotel and Tune Money.
AirAsia Mission, Vision & Values
Basic Principle of AirAsia
The founding principle of AirAsia is to be aware at all times that we are engaged in a business where the responsibility of peoples’ lives is in our hands. We safeguard that responsibility through the safety and quality of our operations. We operate with the highest level of integrity, striving to exceed industry standards in a proactive manner while doing so with respect to others and the environment.
Safety Values of AirAsia
The safety values of AirAsia are:
• Provide a product with safety and quality as our first goals.
• Do our job with the highest level of integrity.
• Prepare our employees through first-class training.
• Provide equipment that is well maintained.
• Select contractors, vendors and suppliers who meet our values.
• Value oversight from regulators and other organizations that enhance our system through checks and balances.
• Embed an ethical culture by maintaining openness with regard to safety and quality.
• Embed a continuous improvement ethos by learning from aviation industry experiences.
• Maintain a high level of environmental consideration in all of our activities.
This basic foundation for doing business allows us the pleasure of serving our guests.
To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares.
• 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
• Safety conscious
A safe airline is a happy airline. Our guests’ safety is our primary concern so we do our jobs with care. Because where safety is concerned, every little thing matters.
It’s a warm and friendly feeling to have, so we take pleasure in caring for our guests in ways that make them feel at home.
Being passionate means going the extra mile to achieve a purpose much larger than ourselves. They say passionate people can change the world and that’s something that’s very close to our hearts.
• Full of integrity
We believe everything that is worth doing, is worth doing right. It’s about us doing the right things at all times.
It means one team, working together towards a common goal. Whether it’s meeting our 25 minute turnaround time or making sure we keep you connected to the best destinations at the lowest prices, we do it as a team. All for one. One for all.
Fun means we celebrate life. It means we laugh louder, our smiles are wider, and we can be our own unique selves. We’re a sociable bunch and we enjoy sharing ideas and solutions to make things even better. After all, fun is meant to be shared.
The organizational structure of geography divide the workers by geographical area designated as below at different part of its branches operation. It was formed on the request of customers who are far away or outside an organization’s operations centre. The organizational structure of geography in operation among different staff is responsible for carrying out business activities in designated locations. I have also presented the advantages and disadvantages of the organizational structure of geography adopted by The Air Asia Management.
In this geographic structure, units and divisions based on the places and the geographical area. This structure is suitable when companies or offices operate in many different geographical areas in which the state, religion and country. In addition, the geographical structure is the coordination of work and workers in the unit or where different parts are all responsible for each of the organization or activity in a specific geographical area. Based on the geographical structure chart of the Air Asian Management, it has expanded its production in some specific geographical area. The advantage gained is the company able to expand its business across borders including financial markets, social relationships and the resulting product or products to the local market. In addition, the company is able to foster a closer relationship between places worldwide. The company is also able to expand the understanding and friendship between the peoples of the world with opportunities for personal conversion that is progressively emerged. Thus indirectly the company has formed or able to meet its own slogan which is “Now, Everyone Can Fly”. In addition, the company is also able to improve the standards prescribed or used in the ranking of global requirements such as the standards prescribed or used in the ranking of global requirements such as copyright law. The company on the other hand is also able to shape the universal’s value and get the technology needed to help in spreading its market (marketing) throughout the world. The company is also conducting management activities between the border and the processes of development which will be adopted when the emergence of a global market in the future. In addition, these companies are also more frequent use of advanced technologies because it often built connection or get connected between the borders and to develop a global telecommunications infrastructure
ADVANTAGES OF GEOGRAFIC STRUCTURE
1) The whole organisation is able to use the expertise of all staff in ‘worldwide’ speaking according to the geographical location of the organization.
2) Products and services can be produced and marketed to different countries thus, make marketing job easier and effective
3) It is able introduce the organization to the world.
4) The organization becomes larger.
5) It can reduce organisation costs by putting the resources of the organization closer to the geographical area specified.
DISADVANTAGES OF GEOGRAFICAL STRUCTURE
1) There might be difficulty in coordinating the departments in the geographical area because its location that is far from each other.
2) Lack of control might occur to each geographical department of the organization
3) Redundancies can happen
4) It cannot guarantee the full loyalty of employees to the organisation
5) The existence of a change in products (travelling) and services as cultural factors, physical and weather
In a company nowadays, general management engaging in the four major functions of which is planning, organizing, leading and controlling. The process of achieving organizational goals may not sufficient and supportive for the organization succeed in the world of complex environments. It concerns about the process to manage the company internally but do not concentrate more on creating competitiveness regarding environments affecting the organization. Even companies adopt general management to sustain profitability by reducing the defects or costs, and improving operations process in order to increase productivity, they may not succeed in the competition because they perform only similar activities better than competitors but do not create distinctive competitiveness. Additionally, they perform only operational effectiveness but not strategy. Operational effectiveness and strategy are both essential to superior performance but they work in very different ways. Strategy is about competitive position that the company performs different activities from rivals or performing similar activities in different ways. To learn how the companies create strategies and put them into action, the executives or strategists should examine carefully an aspect of strategic management. Moreover, the organization or company nowadays is faced with constantly changing external environments and needs to ensure that its own internal resources and capabilities are more than sufficient to meet the needs of the external environment. Organizations or companies do not exist simply to survive in the market place but want to grow and prosper in a competitive environment. In order to make sense of what is going on around them, firms must undertake an analysis of their external and internal environment. To understand and how take an action about external and internal environment, a company needs to support themselves with a good strategic management.
Because of this reason, AirAsia need to consider a strategic management as the important things in their company. The strategy that AirAsia need is not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully. AirAsia company needs to consider and stress to a strategic management because the globalization. The globalization consideration impacts virtually all-strategic decisions in a company. The globalization also forced AirAsia Company to survival for business. To see and appreciate the world from the perspective of others has become a matter of survival business.
The year 2008 to 2009 was really turbulence for everybody, but yet AirAsia Bhd triplet its advertising spending. AirAsia saw opportunities to expand beyond economic slowdown. “I always believe nothing is impossible and for me, at this time of uncertainty, a lot of opportunities are there for us to grab,” CEO Boss, Fernandes further explained in airasiafansclub.blogspot.com (2009). Later he stressed “… This is the best time for you to build your brand as others are taking a step backward,” he said
In most cases, everybody agreed that AirAsia has its own Finance Guru, and that has to be the CEO himself. Since 2009 AirAsia has been named the ”The World’s Best Low Cost Airlines” in the world. The best strategies seem applied during the economic downturn by AirAsia in 2008 to 2009. During global downturn, Wong (2014) stated “AirAsia increased efforts during the global downturn as Air Asia’s fellow competitors shrank back and cut down on flight routes. This strategy is called “Seize the opportunity to lead the sheep away”. AirAsia even gave millions of free seats and increased advertising. What AirAsia did is to fill up the vacuum left in the industry and use to poach customers from other airlines.
AirAsia’s success as referred to (AirAsia Berhad, 2009, p.6) had something to do with its guest confidence who prefer low fare with no-frills, convenient while at the same time hassle free in air travel. The key is to consistently maintaining lower cost. AirAsia made it possible by following these key strategies:
(I) Operational Strategies
As Bateman & Snell (2013) has expressed that Öperational planning identifies the specific procedures and processes required at lower levels of the organization”.
Safety First – Never compromise on Safety is the single most important criterion in every aspect of the operations, an area that AirAsia will. AirAsia complies with the conditions set by regulators in all the countries where the airline operates. In addition, AirAsia partners with the world’s most renowned maintenance providers to ensure that its fleet is always in the best condition.
High Aircraft Utilisation – AirAsia’s high frequency flights have made it more convenient for guests to travel as the airline implements a quick turnaround of 25 minutes, which is the fastest in the region. This has resulted in high aircraft utilisation, lower costs and greater airline and staff productivity.
Low Fare, No Frills – AirAsia targets guests who are prepared to do away with frills such as meals, frequent flyer miles or airport lounges in exchange for fares lower than those currently offered without comprising on quality and service. Guests have the choice of buying exclusively prepared meals, snacks and drinks from our in-flight service at an affordable price.
Streamlined Operations – Making the process as simple as possible is the key to AirAsia’s success. We are working towards a single aircraft fleet; this greatly reduces duplicating manpower requirements as well as stocking of maintenance parts.
Lean Distribution System – AirAsia offers a wide and innovative range of distribution channels to make booking and travelling easier for its guests. AirAsia’s ticketless service provides a low cost alternative to issuing printed tickets.
Point to Point Network – The LCC model adopts the simple point-to-point network. All AirAsia flights are short haul (four-hour flight radius or less) while our sister airline AirAsia X focuses more on the medium to long haul flights (more than four-hour flight radius). The underlying business is to fly a person from point A to B.
(II) Tactical Strategies
As Bateman & Snell (2013) elaborated, “Tactical planning translates broad strategic goals and plans into specific goals and plans….often are functional area like marketing or human resources…”. This was how the biggest budget airlines was built. Lee (2013) wrote that Tony Fernandes had mentioned 12 success strategies applied by AirAsia during 2009 until 2013, they are :
A good grasp of finance – Similar to Megaworld’s Andrew Tan, Fernandes is an accountant by training and good at numbers. Educated at the London School of Economics, from 1987 to 1989 he worked as the financial controller of British tycoon Richard Branson’s Virgin Records in London. He is from Malaysia’s ethnic Indian minority, with ancestral roots in India’s former Portuguese colony of Goa, which explains his Portuguese-sounding surname. Fernandes was formerly Southeast Asian regional vice president for Warner Music Group from 1992-2001. No need to become accountants, but we all need a good understanding of accounting and finance.
Determination – During a speech at the Sabah International Business Luncheon Talk 2012, Fernandes was quoted by the Borneo Post as saying nothing is impossible to achieve as long as there is determination. He turned around an unprofitable and small airline company with only two airplanes to one that now has a 160-strong fleet of aircraft in only 12 years!
Do not fear failure – “I don’t care about failing because I do not want to sit down in my older years and say, ‘How come I didn’t try?’ So we did and Malaysia is the country which allowed four Malaysians to go out and make their dreams come true,” Fernandes said.
Take care of key assets, your people — One of Fernandes’ strengths is his caring for and nurturing good employees. He sees people as the “key asset” of any business and hopes to help develop their full potential, passions and dreams. His business offices have no walls and he seeks ideas from his staff. On Dec. 12, Fernandes gave 263 Chopard watches totaling five million ringgit as gifts to 263 staff members who’ve been with the company 10 years. Chopard is a 153-year-old Swiss luxury watch brand. Also, after typhoon Yolanda destroyed Tacloban City, Fernandes reportedly sought out one of his employees whose home was wiped out and I heard the tycoon will help rebuild the house.
Branding – JG Summit Holdings founder John Gokongwei Jr. years ago told me that earning profits is not enough in business, that it is important to create a brand or brands. One believer in the power of brands is Tony Fernandes. He said it took him seven years to consciously and consistently build up the AirAsia brand name and logo as distinct and internationally known.
Marketing – Tony Fernandes invests in and excels in marketing. He said: “If you have a great product but no one knows about it, it’s history.” Fernandes reminds me of his former boss, Virgin Group’s colorful Richard Branson and America’s high-profile realty developer Donald Trump. Like Trump, Fernandes this year hosted the Asian version of the TV series The Apprentice Asia, with the winner being Filipino UP Diliman economics graduate Jonathan Allen S. Yabut, who is now also chief marketing officer of AirAsia Zest.
Support from Government – As in most societies, entrepreneurs cannot go against the government but need their support. Fernandes got his break in 2001 when then Malaysian Prime Minister Dr. Mahathir Mohamad heard of his dream to start an airline and advised him to just buy the heavily in-debt, government-linked AirAsia. Fernandes mortgaged his house and got personal savings to buy this firm with two old jets and US$11 million worth of debt. He bought the company for one ringgit (about 26 US cents). After he turned around AirAsia, in 2003 Fernandes lobbied Dr. Mahathir to raise the “Open Skies” idea with leaders of Thailand, Indonesia, and Singapore, leading to these nations giving AirAsia and other budget airlines landing rights.
Use digital technologies – Fernandes believes in using digital technology for his businesses. Much of his business comes from AirAsia.com. In fact, one unique thing about AirAsia flights is its inflight magazine Travel 3Sixty, which has this reminder: “Touch me, feel me and flip me over, but you can’t take me home. Read me online.” I think Fernandes isn’t scrimping on publishing costs, it is part of his clever marketing strategy to make passengers discover and enjoy his website.
Generosities – Fernandes is legendary for his personal and corporate generosity. He gives people big gifts, not only to generate loyalty to the business, but he is also generous in philanthropy, for example, his relief assistance to typhoon Yolanda victims here in the Philippines. His AirAsia Foundation also recently supported the social enterprise Rags2Riches led by Reese Fernandez-Ruiz of the Philippines. Rags2Riches is a genuine NGO helping underprivileged Filipino artisans transform their lives and turn scrap into high-fashion bags and other items.
Passion – seems to be a common denominator among achievers in business, the arts, sports and other fields. Tony Fernandes hires people with passion. He is exceptionally passionate, not only about his firms, charities and employees, but also about sports. He owns a football team in England, an F1 car racing team and is a major supporter of Asia’s biggest mixed martial arts sport, the OneFC.
Bold Vision – Tony Fernandes has a bold, global and long-range vision for his various companies. As a child, he dreamt of three things: running an airline, owning an English football club and owning a Formula One racing team.
Dynamic Corporate value – Fernandes said: “In AirAsia we consider ourselves basically a dream factory. We deliberately decided that we wanted a company where people can pursue their passion and we wanted to make use of all the talent that we have in-house. The culture that we have stems from the fact that we want openness and we want people to be creative and passionate about what they do. In order to do that, we’ve got to inspire them.”
Apart from traditional Human Resources, it is learned that Airasia has one of the most flexible and dynamic workforce structure, even recruitment process, training, reward systems, and labour system. According to airasia fan club, (2009) the success stems from AirAsia’s work culture, which stresses innovation, openness and a never-say-die attitude. Its offices have few physical barriers between desks, there are no titles on name cards and everyone is encouraged to use first names. Cabin crew are pushed to develop their own personality, instead of conforming to preconceived notions about their role, resulting in a relaxed on board environment. There are no reduction process during downturn of 2008 to 2009. This is due to expansion made to create more routes instead of hold on to cost as others airlines did.
Nextup Asia (2014), found the leader behaviours in Tony Fernandez as he adopts a walk around management style. “If you sit up in your ivory tower and just look at financial reports, you are doing to make some big mistakes.” For him, few days in a month he will works on the ground or in the cabin and getting feedback from the crew before making important decision. This type of management is called Transformational Leadership. “Leaders who motivate people to transcend their personal interests for the good of the group.” Bateman, 2013, p.425. Further examined by (Kamisan & King, 2013) they found that Tony Fernandes has more freedom in decision making and traits of entrepreneurship skills. This proven b expanding his businesses to various portfolios such as Tune Talk, Tune Insurance, Tune Hotel, etc. Due to this it is understood that Tony Fernandes can be very effective in manoeuvring the organization in the downturn scenario. Moreover his kind of interpersonal communication has no barriers when it comes to mix with subordinates. It always been said that there are no walls in AirAsia office, so everybody can directly meet Mr Tony Fernandes.
AirAsia is the leader in airline business. According to airasia fan club, (2009) “Commerce, rather than governments, drives Asean. Countries will always want more want tourists and traffic. Asean governments realised they had to open up or always play second fiddle to China and India,” That was on the bureaucratic control system. As the first mover into low cost carriers businesses, AirAsia definitely has the competitive advantage over rival. Business expansion is inevitably, in airasia fan club, (2009) Fernandes quote to say AirAsia is now the region’s largest low-cost operator, with a network of 122 routes covering more than 65 destinations. It has carried over 65 million passengers since its inception and grown its fleet to 80 aircraft. It has gone public, ordered 175 Airbus A320s, started associates in Indonesia and Thailand, and finally secured access to Singapore after overcoming various obstacles. Fernandes and AirAsia have also helped to start AirAsia X, a long-haul, low-cost airline that has 25 Airbus A330s on order and will imminently sign a deal for around 25 Airbus A350s.
Economic downturn 2008 to 2009 has given many opportunities to AirAsia. With Tony Fernandes leadership’s style, AirAsia has become the biggest airlines players in South East Asia. But Airasia needs to be aware and consider with the strategic management. The reason of the airline industry is a unique and complex industry, not just how to reduce cost and make the operational activities running effectively. But, AirAsia needs to come out with the strategy that can make competitive position that the company performs different activities from rivals or performing similar activities in different ways to achieve their business successfully, and the last one is because the effect of globalization and E-commerce becoming an effective tool in a company nowadays.