Air Asia Marketing Essay

AirAsia is Malaysian sm totally(a)- personify airline that provides both domestic and world(prenominal) flights. AirAsia started operating on 18 November 1996, it pi adeptered start cost travelling in Asia. In 2001, the airline which was to a great extent indebted was purchased by Tony Fernandess telephoner Tune Air Sdn Bhd. Under his charge, AirAsia has pay back one of the biggest low cost airlines operating in Asia like a shot. Its main hub is based in the Low Cost Carrier closing (LCCT) at Kuala Lumpur International Airport (KLIA). As such, AirAsia consumers tend to be from the lower to put income population. Tai AirAsia and Indonesia AirAsia atomic shape 18 subsidiaries of AirAsia and are based in Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively. Company AnalysisI. breakdownAirAsia target market constituent consist of three different only when overlapping segments that were segmented according to Geographic Segment ation, Demographic Segmentation and Psychographic Segmentation. AirAsia is targets mainly the Asian market, hence the name AirAsia. As such, they do geographic segmentation by pore their armed services primarily in Asia. Being a low cost airline, they are targeting the low to middle income group (demographic) and the cost-conscious travellers (psychographic).II. TOWSIn order to find the current marketing challenges faced by AirAsia and to determine what are the possible solutions that they wad implement, taking into consideration their opportunities and take advantage of their strengths, the TOWS analysis model (Threats, opportunities, weaknesses and strengths) lead be used. Threats Opportunities * Intense competition (i.e. Tiger Airlines, Singapore Airlines) * Asias middle class growth * ASEAN Open Skies * increase oil color price Weaknesses Strengths * Fair availability * Well established brand name * Low cost leader in Asia ThreatsWhat was once a relatively small market of low-priced airlines when AirAsia was first established, AirAsia non only has to face indirect competitors such as non-budget airlines (i.e. Singapore Airlines), ferries (i.e. Kuala Perlis Langkawi Ferry Service Sdn Bhd) and buses (i.e. Aeroline, straightaway they are alike threaten with intense direct competitors such as Tiger Air slipway and Jetstar Asia Airways.OpportunitiesCountries in Asia, such as China and India, are up-and-coming huge potential markets in the future. In China, there were already 130, 000, 000 consumers barely in the middle class range in 2006. It is estimated to increase to 340, 000, 000 in 2016, a 162% growth from 2006 as shown in the graph below. Thisis beneficial for AirAsia as it doer that their targeted consumers (low to middle income) will grow exponentially in the near future.ASEAN Open Skies is an agreement, targeted for 2015, to allow unlimited flights between all the ASEANs landal air carriers, both full services and low-cost airlines. The rationale for the Open Sky agreement is to promote competition in the airline industry. Due to its strong brand name and low-cost culture among its workforce, AirAsia is more(prenominal) likely to take a crap from this agreement. The increasing oil prices may seem like a threat to AirAsia, however being the low cost leader in Asia, this earth-closet actually be seen as an opportunity for them instead. This is because high oil prices would affect all the airlines and not just AirAsia. Thus, AirAsia will still be the lowest costing among all the different airlines. This could result in an increase in market grapple for AirAsia as customers from the different airlines would move to AirAsia. WeaknessesThe availability of AirAsia flights is not good as full services airline. While fair availability may seem like a huge weakness that would need to be tackled and solved, it would be difficult for AirAsia to abide cost leader if it take awayered comprehensive support as it would result in increased operational cost. StrengthsAirAsias brand name is well established in the Asian region. This was not only due to the particular that AirAsia the pioneered low cost travelling in Asia, but as well as because of the enormous advertising & promotions they have done. Indonesia AirAsia and Thai AirAsia have successfully helped AirAsia to spread the brand throughout the regional beyond just Malaysia. Due to AirAsia Academy, which AirAsias regional training academy located in Malaysia, it has helped to create a low-cost airline humour among their workforce. It is because of this workforce that AirAsia has become the low-cost airline leader in Asia in terms of overall cost. In the t fitting on the following rascal, it details the difference in terms of cost per available baby-sit kilometres (ASK, which is the total number of position available on scheduled flights multiplied by the number of kilometres these sit were flown), between AirAsia and the other competit ors. Its shows that AirAsiahas a large advantage over the competitors in this area.Source http//sandygarink.tripod.com/papers/AA_IA.pdfmerchandising ChallengeLooking through the company analysis, the biggest marketing challenge currently faced by AirAsia is to bear on competitive and protect their market share in the increasingly competitive market of low-cost airline. RecommendationsI. angle into the growing Asian MarketFor AirAsia to bide competitive and not only protect their market share but expand it as well, it is vital that AirAsia taps into and take advantage of the growing Asian Market. They can do this by adopting the following st regularizegies.Market Challenger StrategiesThe market challenger strategies are a punctuate of strategies that a company can employ to brighten market share and becoming the leader last (Kotler and Armstrong, Principles of Marketing, latest 2010, 13th edition). AirAsia can use these strategies, specifically, frontal, backstage, bypass and guerrilla flack, to make itself standout from the rest of the competitors and hopefully gain a larger market share of the growing Asia middle income population. AttackerDefender(3) Encirclement firing(4) avoid attack(2) Flank attack(5) Guerrilla attack frontal attackSourceFrontal AttackFrontal attack refers to when you attack the weakness of another companys product. In the bailiwick of AirAsia, they should attack their competitors through their prices. Due to the reasons listed above, AirAsia has become the low cost leader in Asia. It is unlikely for their rivals to be able to complete in terms of price alone in the desire run. Thus, AirAsia should use their relative low prices to challenge their competitors directly. The terminus ad quem to this mastermind of attack is that AirAsia has to maintain that low cost advantage that they have.This means that they have to invest a large portion of their capital into their research and development section to chequer that they are flying at the lowest cost possible. single way AirAsia can further abase their operational cost is by standardizing their aircraft. As shown in the remit in the following page, AirAsia has currently 5 different types of aircraft, ranging from the Airbus A320-200 to the Airbus A350-900. However, if AirAsia was to reduce this to just two to three different types of aircraft it would lead to a drastic hook in cost, as economies of scale comes into effect when they buy and maintain the same type of aircraft Staff cost also reduce, as they only need to know how to handle a few types of aircraft, this leads to training clock time being reduced and eventually reducing operational cost.Flank AttackFlank attack refers to assail competitors at their weak points or blind spots. One of the things lacking in the low-cost airlines in Asia today is the ability to travel long distance at the same low price offered for the short continuance trips. AirAsia already has AirAsia X, which provides this long haul flight services, however, their destinations are limited as they only go to the more popular countries such as London or Sydney. For that reason, one of the strategies AirAsia could implement is to form an alliance with low-cost airlines outside of Asia like complete(a) Blue. This strategy will be further explained later in the report. Bypass AttackThis form of attack refers to diversifying into unrelated products or markets neglected by the other competitors. One of the ways AirAsia could diversify is by whirl affordable accommodations at their destinations. These accommodations can be provided by Tune Hotels which is an associated company own by Tony Fernandes, who is also the CEO of AirAsia. Travellers will see this as a value added service as not only would they be able to get a bald-faced form of expatriation but a place to stay as well. The limitation of providing accommodations is that it is financially infeasible to set up a hotel at all of their current flight destinations. As such, it would be better to start off by offering this service only at localisation of function where it would be difficult to get cheap lodging, for examples in the city areas of Japan. And as the company grow further, it can start to expand on the location where these hotels will be provided.Guerrilla AttackAirAsia can apply guerrilla attacks by launching small, intermittent hit-and-run attacks to harass and destabilize the leader. AirAsia can usepromotions for short periods of time to try and steal customers from their competitors. One such example is when AirAsia had a 48 hours promotion between 28 phratry 29 Sept 2009, where they offered a 20% discount on all seats, flights and destinations. This is a very useful type of attack for AirAsia because of their low cost advantage, as they are able to maintain promotions, especially discounted price promotion, longer than their competitors with a lower lost in profit. The limitation of offering promotions i s the reduction in the profit beach when they outpouring discounted prices. However, this negative impact can be minimized by placing the promotions at strategically bites, such as only when competitors are offering promotions. Alliance with Virgin Blue and the StatesAs mentioned under the flank attack section, one of the ways AirAsia can attack their competitors is by offering a more extensive flight network outside of Asia. While AirAsia X is currently filling in this market of long haul flights for AirAsia, it is still not comprehensive equal and should be developed further. Virgin Blue and Virgin America are low cost airlines operating in Australia and America respectively. By partnering with them, AirAsia would be able to extend their destinations into Australia and America. For example, if a Malaysian traveller wanted to visit Los Angeles, he would first take an AirAsia alley to travel from Kuala Lumpur to Washington, DC, and then take a Virgin America flight to Los Angel es. The rationale for choosing Virgin America is because America is one of the top destinations in terms of international tourist arrivals as seen in the table below, which will only increase with the growing Asian economy. By joining together with Virgin America, AirAsia can capitalize on this existing high human traffic flow going to America.While Australia does not fall under the top 10 international tourist arrivals countries, AirAsia should still focus on the Asia to Australia route. This is because as China and India develop there will be a huge increase in the number of international travellers, a majority of which would be made up of people who have never travelled outside the Asia region or even their countries. Thus, these people, wanting to taste a culture different from Asia but do not want to travel to a far off location such as America or Europe on their first trip, would choose to go to Australia. The advantage of this strategy is that it will not onlytarget the Asian market segment who wants to travel to locales outside of Asia but also cater to the market segment outside of Asia that wants to travel to Asia. The limitation of this strategy is that AirAsia would have to first form an alliance with low cost airliners in those regions, which could be a difficult process as prove by the already long list of failed airline alliance such as Air Canada/ Continental Airlines and Saberna/Air France (Nigel Evans, David Campbell, George Stonehouse, Strategic management for travel and tourism, 2003)Take advantage of the ASEAN Open Skies agreementAs mentioned above, one of the things AirAsia can do to remain competitive in the future is to prepare for the ASEAN Open Skies agreement. With open skies in the ASEAN region, it would be mean that more routes are available for the airlines. For AirAsia, this means that they would be able to fly to more destinations while taking shorter routes as they would no longer be faced with restriction from the countries i n the ASEAN region from flying over them. The shorter routes means that flights will take a shorter time to complete, frills such as providing meals may no longer be needed and the frequency of AirAsia flights could be increase as the turnover rate is higher.Thus, they would be able to reduce operational cost, which translates to lower prices, hence making AirAsia more attractive to the consumers. The limitation to this strategy is that the Open Skies agreement applies to all airlines in the ASEAN region, meaning that AirAsia would face even tougher competitions when the agreement starts in 2015. However, because of the strong brand image and low cost leader advantage AirAsia has, if they were one of the early movers, they could appropriate a huge portion of this market. II. Capitalize on the corporal businessAirAsia have seen a new increase in the numbers of companies (almost double the last 3 years, as seen in the following page table) trading down to low cost airlines, this co uld be due to the global economic downturn. As such, AirAsia should also be focusing on increasing their share in this corporate business market as this market tends have a more consistent source of demand unlike tourism which is seasonal and easily affected by external factors, such as in the case of the swine flu.AirAsias seats sold to corporate clients 2006 to 1Q09Source AirAsiaLoyalty programmeTo capture this market AirAsia could start offering a rewards program. AirAsia could offer perks that are earned according to the amount of business a company does with them. For example discounted set or with the more frequently fliers, a point system whereby the companies could earn free flights if they accumulated enough mileage. The limitation of this strategy is that AirAsia would have to incur a lower profit margin as they would now be selling at lower discounted prices. However, the pros far overweight the cons in the case of AirAsia. Once over again due to being the low cost lea der in Asia, the rewards program offered by AirAsia would likely be the most attractive compared to the other competitors as they can offer better perks, hence they could easily become the market leader in the corporate flying market, making up for the lower profit margin per seat by pure volume.ConclusionTo recap, the main marketing challenge facing AirAsia at the moment is the intense competition that exist in the low cost airline industry. The strategies that AirAsia can implement to remain competitive are two pronged, to tap into the Asian middle income class and focus on the corporate businesses. They can capitalize on the Asian market by using market challenge strategies, standing(a) out from the rest by attacking their competitors. Finally, they can take advantage of the corporate businesses by offering a form of loyalty programme that would make it more attractive for companies to use AirAsia. Ultimately, the reason wherefore the above strategies would work is because of th e low cost leader advantage that AirAsia has. In order to survive in this market, AirAsia has to ensure that they maintain their low cost altitude.