Table of Contents

AirAsia at a Glance ...................................................................................................................................3

A Brief History of AirAsia............................................................................................................................3
What Air Asia want to achieve...................................................................................................................3
Mission........................................................................................................................................................4
Corporate Objective....................................................................................................................................4
Communication and Marketing Objectives................................................................................................4
Why Cost Efficiency?...................................................................................................................................5
Market Players............................................................................................................................................5
Identification of Target Markets.................................................................................................................6
Ways Taking to Identify Their Target Market.............................................................................................6
Marketing Mix Analysis..............................................................................................................................8
PRODUCT /SERVICES...........................................................................................................................8
PRICE...................................................................................................................................................9
DISTRIBUTION / PLACE.....................................................................................................................10
PROMOTION.....................................................................................................................................11
PEOPLE..............................................................................................................................................11
PHYSICAL EVIDENCE..........................................................................................................................12
PROCESS............................................................................................................................................12
AirAsia’s Operations in Bangladesh..........................................................................................................12
Problems of AirAsia..................................................................................................................................12
Intense competition..........................................................................................................................13
Lack of profitability...........................................................................................................................13
Point to Point Sale............................................................................................................................13
Lack of Social Engagement................................................................................................................13
All in one Fare...................................................................................................................................14
Solutions...................................................................................................................................................14
All in One Fare...................................................................................................................................14
Social Media Coverage......................................................................................................................14
Low costs...........................................................................................................................................14
Transit traffic.....................................................................................................................................15

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 New route expansion........................................................................................................................15
Increase range of network................................................................................................................15
Conclusion.................................................................................................................................................16
REFERENCES..............................................................................................................................................17

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AirAsia at a Glance
AirAsia Berhad is part of the AirAsia Group, a world-famous low cost airline that operates
extensive networks both domestically and internationally. AirAsia pioneered low cost airfares in
Asia and is now currently the largest low fare, no-frills airline in Asia. It is also one of the largest
airlines in all of Asia in terms of passengers carried. AirAsia has also been voted the World‟s
Best Low Cost Airline in 2009 and 2010. AirAsia Berhad is currently based in the Low Cost
Carrier Terminal (LCCT), Kuala Lumpur International Airport (KLIA), Sepang. Its associate airline -
AirAsiaX, is also located at the LCCT and shares operational facilities with AirAsia Berhad.

A Brief History of AirAsia

The airline was established by a Malaysian conglomerate in 1993 and commenced operations in
1996. In December 2001, with the airline heavily in debt, AirAsia was purchased by Tony
Fernandes of Tune Air Sdn. Bhd. for the price of RM1. As part of the purchase, Tony also took
up the RM40million debt. Under the leadership of Tony Fernandes, the airline was flying high in
2002 and launched its new route that year. In 2003, a second hub was opened in Senai
International Airport, Johor Bahru, as well as the airline’s maiden international flight to
Bangkok. After that the only place AirAsia was heading for is up, as the Thai and Indonesian
subsidiaries were set up as well as the commencement of flights to Indonesia, Macau, China,
Philippines, Vietnam and Cambodia in 2005. AirAsia now flies to all ASEAN countries, a great
portion of Asian countries that include India, Iran, Sri Lanka and Bangladesh; as well as to the
United Kingdom, France, Japan, Korea and Australia via AirAsiaX. In 2011, we are setting up
another AirAsia hub in the Philippines and are well on the way in setting up other similar
operations elsewhere in the region soon after.

What Air Asia want to achieve

AirAsia’s vision is to be the largest low cost airline in Asia so that they can provide a low cost
service that will allow the three billion people to fly to more destinations across the region.

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They aim to be a truly ASEAN airline corporation as they look out for every country’s best
interest.

Mission

To be the top company to work in, where employees are treated like family

 To create a globally recognized ASEAN brand

 To attain the lowest cost of any airline, so that everyone can fly with us
 To maintain the highest quality, to embrace technology, cost reduction, elevate
 Service levels and provide our guests with a “WOW” experience

Corporate Objective

The first objective of AirAsia is to become the largest low cost airline organization in Asia by
provide services to 3 billion people.

Second objective is to attain with the lowest cost and lead to everyone can fly.

The third objective is to maintain the product quality and reduce the costs.

Communication and Marketing Objectives

The first communication objective of Airasia is to promote the organization, services and
products through the effective communication program to the customers.

The second objective is to make sure that there is a communication relationship between the
Airasia and the customers and the relationship can be strengthening through the campaign
awareness and brand reputation.

The third objective is to expand the communication and media strategy in order to create brand
or product awareness to the customers in order to achieve the organization goal.

The last communication objective is to maintain the good relationship with the customers and
keep updating customers with organization information’s.

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Why Cost Efficiency?

Keeping costs and fares low is how we make “Now Everyone Can Fly´a reality. Air Asia attacks
inefficiencies, curb wastage, push for the best possible value in their spending and maintaining
this throughout the corporation relentlessly is how AirAsia can become the most efficient
airline in the world. Attacking costs is something AirAsia do every day. The better they attack
costs, the more competitive the fares become and more opportunities for growth will be easily
attainable.

Market Players

Malaysia has a handful of major, domestically registered airlines – on the LCC side, there is
AirAsia, and its sister, AirAsia. Then there is the new, full-service market entrant, Malindo Air.
There are currently more than 10 LCC brands in the region – including Singapore’s Tigerair
andScoot; Indonesia’s Citilink and Lion Air; the Philippines’ Zest; Thailand’s Nok Air and Orient
Thai; Vietnam’s VietJet, and Australia’s Jetstar together with its subsidiaries/affiliates in other
countries. With the SAM, competition will only intensify.

Malindo Air is an airline based in Malaysia, headquartered in Petaling Jaya. The name Malindo
is derived from the names of respective countries: Malaysia and Indonesia.

Malaysian Airlines: MAS also owns MAS Wings, which operates domestic flights in eastern
Malaysia, and MAS Kargo, the national cargo carrier. MAS itself is listed on the KL exchange,
with a majority shareholding held by Penerbangan Malaysia, a subsidiary of the government.

Tiger Air: Tiger Airways Singapore Pte Ltd, operating as Tigerair, is a budget airline
headquartered in Singapore.

PT Lion Mentari Airlines, operating as Lion Air, is an Indonesian low-cost carrier. Based in
Jakarta, Indonesia, Lion Air is the country's largest privately-run airline, and the second largest
airline, flying to 79 destinations in Indonesia, Singapore, Malaysia, Vietnam and Saudi Arabia, as
well as charter routes to China and Hong Kong.

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Identification of Target Markets

Target Market –is a set of buyers sharing common needs or characteristics that the company
decides to serve. There are three key factors to target market selection:

 Segment size and growth

 Segment structural attractiveness
 Businesses objectives and resources

For AirAsia that started in 2001, it was not too difficult for the Airline to identify its target
market. They have earlier survey the market to help them segregate their “would be potential
customers”. According to CEO’s of the company, Mr. Fernandez, he knew there are a lot
workers or low pay salaries earners who would like to travel often to meet their families
especially during special occasions but due to how expensive it was that time, their desire is not
fulfilled. By introducing a low fare will give all those people opportunities to travel if not more
than once in a year. This enables them to identify their target market. AirAsia is encouraging a
new [market] segment to be formed and therefore is creating a larger base for domestic
demand."

Ways Taking to Identify Their Target Market

For AirAsia, the following are some of element identified that AirAsia used to identify their
target market and formed a niche market.

Branding: AirAsia went into intensive General advertisements and other high profile activities,
which contributed, to the high offering of their company's image. They came with a brand
“Now everyone can fly” These points of contact with their target customer help them to mold
their image, which in turn created loyalty from their customers.

Philanthropy: Donating money, services, and/or time can build trust and a positive image for
your business. Philanthropy contributes both toward your branding efforts and toward your
company's internal well-being. AirAsia embark on this to build and attract more customers. In
early 2005, AirAsia Sdn Berhad (AirAsia) announced that it would give away 10,000 free seats

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on its flights to select Southeast Asian destinations. The airline said that was its way of
celebrating the completion of three years of successful flying and of saying thank you to the
people for their support. "AirAsia's accomplishments and success today is a reflection of the
public's trust and faith in the company," said Tony Fernandes (Fernandes), CEO of AirAsia.
(Refer Exhibit I for AirAsia's Free Seats Offer)5. With this incentive and philanthropy, more and
more customers are attracted to their business

New Product/services Pipeline: New products in development represent your future sales.
AirAsia has extended its services to different part of the world. AirAsia was initially a local
company but it has become international with its extension of its services to different part of
the world to meet up with their market. AirAsia get feedback from their customers or potential
target market, and they designed new services to meet their needs, this practice is ensuring a
demand for their products in the future.

Reduced Price Sales: This was one of the basics of securing a target market for AirAsia. They
reduced their price to suit their class of customers. AirAsia saw a need for a lot of low pay salary
citizens who could not afford the money to travel home. With the introduction of their services
of low fares, most people can travel home and most people that can only afford to travel once
could travel up to three times with their cheaper fares. This Limited time sales encourage
customers to act. You likely have customers intending to buy but have not "gotten around to
it". Holding a reduced price sale will give them incentive to purchase.

Group Discounts and Offers: Discounts or other offers to a specific group can help exposure
your business to new customers, resulting in a sales surge. AirAsia is a ticketless Airline that
allows customers to purchase their ticket online with at a discounted rate. They also have a
scheme of group discount and this help to get more target market, especially internet based
customers.

Foreign workers and Contractors strategy: AirAsia also target most foreign workers from
Indonesia, Singapore, Thailand, China, Macau who may not afford the expensive flight home
and offer them the cheap fare which attracted most of them as would go home very often
without paying much.

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Marketing Mix Analysis

In order to achieve marketing objectives, one need to have a strategy that includes different
elements - the various parts of the marketing mix. Calling it, a mix is to make sure one get the
balance right between the different elements. Marketing mix is a combination of marketing
tools that are used to satisfy customers and company objectives. Consumers often call the
marketing mix "the offering." Your offer is controlled

by the following variables that are often referred to as the seven Ps in marketing:

 Product
 Price
 Place (Distribution)
 Promotion
 People
 Physical Evidence
 Process

As mentioned earlier, I will be discussing this concept in the context of AirAsia. Meanwhile,
working on the marketing mix, it is very important for a company who has a practice that caters
to a niche market to make sure that their product is geared towards the need of that market. I
will work around the marketing mix employed by AirAsia to reach its target market. Having
stated the criterion for choosing the niche market, it very crucial that the marketing mix which
is used by the company to attract the chosen target market is discussed.

PRODUCT /SERVICES

The term "product" refers to tangible, physical products as well as services. It also means
defining the characteristics of product or service to meet the customers' needs.

Guest Convenience

AirAsia believes in providing convenient service to make traveling easier and more affordable
for its guests. Guests can make bookings through a combination of ways. In August 2003,

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AirAsia became the first airline in the world to introduce SMS booking where guests can now
book their seats, check flight schedules and obtain latest updates on AirAsia promotions from
the convenience of their mobile phones. AirAsia also recently introduced GO Holiday, the
airline’s online programme where guests can book holiday packages online in real time.

Frequent flights

AirAsia’s high frequency service ensures guest convenience is met. The airline practices a quick
turnaround of 25 minutes, which is the fastest in the region, resulting in high aircraft utilization,
lower costs and greater airline and staff productivity.

Nationwide call centre

Launched in April 2002, AirAsia’s Nationwide call centre in Kelana Square is now fully equipped
with 180 telephone lines providing convenient telephone booking services to guests. The call
centre now takes an average of 6,000 calls daily.

Ticketless service

Launched on 18 April 2002, this concept complements AirAsia’s internet booking and call centre
service by providing a low cost alternative to issuing printed tickets. Guests no longer need to
go through the hassle of collecting tickets!

Easy payment channels

In line with its “Easy to Book, Easy to Pay & Easy to Fly” approach, on 1 March 2002 AirAsia
became Malaysia’s first airline to enable their guests to pay for their telephone bookings by
credit card or by cash at any Alliance Bank branches.

PRICE

Price refers to the value or worth of a product that attracts the buyer to exchange money or
something of value for it.

Low fare, no frills

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AirAsia’s fares are significantly lower than those of other operators. This service targets the
guests who will do without the frills of meals, frequent flyer miles or airport lounges in
exchange for fares up to 80% lower than those currently offered with equivalent convenience.
No complimentary drinks or meals are offered. Instead, AirAsia recently introduce 'Snack
Attack', a range of delicious snacks and drinks available on board at very affordable prices and
prepared exclusively for AirAsia’s guests. Guests now have the choice of purchasing food and
drinks on board.

DISTRIBUTION / PLACE

Distribution is about getting the products to the customer, looking at location and where a
service is delivered – or whether they need to collect it or will you deliver it yourself Currently,
AirAsia flies to 12 destinations in Malaysia, using a fleet of seven Boeing 737-300s. By the end of
the next fiscal year, it will have added four or five new domestic destinations, and increased the
frequency of flights to existing ones. More interestingly, it will have started flying to secondary
airports near Bangkok, Manila, Jakarta, and Hong Kong. Ultimately, the goal is to increase the
fleet to 18 by June 2004, equivalent to the delivery of one aircraft a month beginning in
September. Already, AirAsia is looking to make Kota Kinabalu airport its base for flights to the
Philippines and Hong Kong, and Senai airport in Johor Bahru for flights to Thailand and
Indonesia.

Internet booking

Another is infrastructure. One criterion for an efficient low-cost airline is direct booking via the
internet - this does away with commissions and credits to travel agents and the cost of
processing tickets. While Raja Azmi claims well over half of AirAsia bookings are done via the
internet (the rest are through sales offices, "The internet, as a booking tool for international
travel, remains an exotic curiosity for a sophisticated few. As Asia’s first online airline, AirAsia
offers a new convenience in buying seats by logging on to its website http://www.airasia.com/.
No more phone calls, no more queuing. Launched on 10 May 2002, http://www.airasia.com/ is
now available in 7 languages - English, Bahasa Malaysia, Mandarin, Tamil, Bahasa Indonesia,
Thai and Tagalog.

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Reservations and sales offices

These are available at airports and town centers for the convenience of walk-in customers.

Authorized travel agents

AirAsia also introduced a direct B2B engine to its agents. The internet-based real time
inventory-booking engine is the first in Asia. The agents make immediate payment via a virtual
AirAsia credit card, developed through one of its strategic partners, Alliance Bank. Improving
customer service - AirAsia is constantly looking for ways to improve its services and increase
savings for its guests. AirAsia is the first airline in Asia to have a multi-lingual website with seven
languages available on http://www.airasia.com/, which are English, Bahasa Malaysia, Chinese,
Tamil, Thai, Bahasa Indonesia and Tagalog.

PROMOTION

In the context of the marketing mix, promotion represents the various aspects of marketing
communication, that is, the communication of information about the product with the goal of
generating a positive customer response. Marketing communication decisions More recently,
AirAsia struck an advertising deal with Time, which will have the local mobile phone operator's
logo painted on one of AirAsia's planes. Moreover, there will be more of these, as well as
advertisements on pull-down trays. Again it is obvious that AirAsia started offering fares that
were unheard of in Malaysia, people were lining up for hours, this brought a lot of public to
AirAsia and they got more publicity out of that,"

PEOPLE

AirAsia is known for treating its employees, well. They engage in direct service development
strategy simply by treating them as though they are an indispensable part of the organization.
People provide most services that is the selection, training, and motivation of employees.
Hence, it becomes key to choose the right set of people within the organization. AirAsia have an
image associated with them of choosing the right set of people depending on their capabilities.
When it comes to customer expectations, customers do not expect luxurious service or high

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class treatment, instead are satisfied with cheap fares and on-time performance of the flights
along fast routes.

PHYSICAL EVIDENCE

Physical evidence encompasses how AirAsia manifests itself. AirAsia is known for its optimum
utilization of logo based branding- right from the exterior of the aircraft to the interior seats
and uniforms. AirAsia’s brand colours are red and white. Both the choices of colours represent
the right set of emotions that the consumers identify with. While Red means determination and
Passion, White stands for perfection and positivity.

PROCESS

AirAsia boasts of a competent and dedicated customer care team, which is committed to
resolving customer complaints between one to twenty-four hours of request. They believe
customers are key to their expansion and growth, and hence should be catered to with utmost
priority. This completes the AirAsia marketing mix.

AirAsia’s Operations in Bangladesh

TOTAL Air Services ltd is the only GSA (General Sales Agent) of AirAsia in Bangladesh. AirAsia
started its journey in Bangladesh through Total Air Service ltd from 10th July, 2015. ... AirAsia is
the world best low cost budget carrier. Currently AirAsia flying Dhaka to Kualalampur and
Kualalampur to Dhaka in daily basis.

Problems of AirAsia

Although Air Asia has been performing since 1996 but they are new in Bangladesh. Air Asia has
emerged in Bangladesh once in 2008 and again in 2015. Air Asia has a lot to offer as low cost
airlines but still they have lack of market share due to their less advertisement and promotional
activities.

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Intense competition

Southeast Asia has become an intently competitive market, forcing AirAsia to cut fares as it
rapidly added capacity. While market conditions should improve at least slightly some
competitors are likely to continue to respond aggressively.

AirAsia’s network low-cost model, with a heavy focus on transit traffic, has the potential to
shake up several medium-haul markets which until now have only been served by full-service
carriers. As a result, AirAsia has the potential to stir up the pot across Asia-Pacific. Often-bigger
competitors will naturally try to fight off AirAsia as its model poses a threat to their own
survival.

Lack of profitability

AirAsia has been unprofitable three out of the last four years (2011, 2013 and 2014). Most
recently it has been unprofitable in three consecutive quarters including a MYR129 million (USD
40 million) net loss in 2Q2014, which was over three times the loss from 2Q2013. The group’s
financials improved significantly following the early 2012 network restructuring, which saw
AirAsia pull out of several unprofitable markets including Christchurch, Paris, London, Delhi and
Mumbai. Without the restructuring it is unlikely AirAsia would have been able to complete an
initial public offering in Jul-2013. But since the IPO the group has struggled financially.

Point to Point Sale

As Low cost carrier brands grow, charging extra for food and entertainment may be acceptable
on short or medium haul routes but many consumers see it as unfair on long haul routes so
strategic changes need to be made if they really do want to build brands.

Lack of Social Engagement

Building a brand in the consumer economy is more than the CEO and Chairman tweeting all
day. It requires a strategic plan with processes to deal with reputation issues and a willingness
to engage with consumers who raise positive AND negative issues on and off line. Brands are
defined by the economic, experiential and emotional value they deliver to customers. Fail on
any of these counts and your brand will struggle. The disgruntled Face book customer and

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customers like those in this article have undone a lot of the work AirAsia has done to build a
people friendly brand.

All in one Fare

According to the ACCC, AirAsia’s website did not include all taxes, duties, fees and other
mandatory charges when advertising fares on certain routes from the Gold Coast, Melbourne
and Perth. In Australia if a company wishes to advertise part of a price, it must also advertise
one total price for the product or service. When the passengers find the fare online and then
purchase the ticket they find that there is a huge fare difference which leads them to
frustration about the company.

Solutions

All in One Fare

Air Asia can include all of its fare to the first page so that people don’t get confused about the
fare. Just like any other airlines where the face of the wed page shows all fare, tax and meal
cost separately Air Asia should come up with that kind of improved webpage design.

Social Media Coverage

A Face book page with direct access to a community director and suggestions for alternative
routes or airlines and how to go about booking flights would have been a tactical initiative to
show the airline cared. I definitely think that engaging customers through social media
platforms is a must in today’s world. Or if you don’t want to do anything with social media, then
don’t do anything. Half-baked solutions don’t work, like putting up a Facebook page (and a wall)
which makes people feel you want to interact with them and then shutting them down when a
post is not flattering.

Low costs

AirAsia has the lowest unit costs in the industry. It is the only airline in the world with CASK
below USD4 cents. This is aided by AirAsia operating longer average stage lengths (about
5,000km) than other LCCs. AirAsia’s shortest route is three and a half hours. Other players in
the medium/long-haul segment are not publicly traded or do not provide separate figures for

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narrow body and wide body operations. But AirAsia primarily competes against Asian full
service carriers which have unit costs that are two to four times higher. AirAsia is the only LCC
on all 22 of its routes – although it does compete against other LCC groups on several
connecting city pairs.

Transit traffic

AirAsia has been able to grow transit traffic to record levels. Over 50% of AirAsia’s traffic now
connects onto other AirAsia or AirAsia flights. It has pioneered the network LCC model and is
almost certainly the only LCC with such a high portion of transit traffic. The group’s success at
more than doubling its portion of transit traffic in only three years has enabled rapid expansion.
The local Malaysian market would have never been able to absorb the growth over the last
year. Total passenger traffic at AirAsia was up 23% in 2013 to 3.2 million, driven by 39% growth
in 2H2013. Passenger traffic was up another 40% in 1H2014 to 2.1 million.

New route expansion

At present, fuel costs account for 50% of AirAsia's operation. Consequently, AirAsia gains a
disproportionate cost improvement as fuel prices fall, both giving the airline an advantage
when competing head to head with full service airlines and in terms of the range that can be
flown commercially. As a rough benchmark, five years ago when oil was priced around USD70
per barrel, AirAsia not only operated European services with the fuel-hungry A340, but was also
planning service to the US west coast.

Increase range of network

Oil prices have tended downwards recently, to around 12 month lows, although they remain
above USD90 per barrel; jet fuel has fallen in sync. A combination of more benign fuel prices
and new fuel-efficient A330neos would greatly increase AirAsia's range of network options. It
would also increase the margin between the LCC and its full service competitors.

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Conclusion
AirAsia business model has been analyzed in conjunction with the marketing mix that is
employed to identify its target Market. They build their brand name with their tagline ‘now
everyone can fly', AirAsia’s philosophy of low fares is aimed to make flying affordable for
everyone. AirAsia also aims at making travel easy, convenient and fun for its guests. Their
philosophy is vital in shaping AirAsia marketing mix. Their services and their pricing work
together to identify their target market, however, their promotional activities and their
distributional channel is aggressive developed, planned, and executed to target both foreigners
and locals alike. Moreover, more advertising model should be developed and AirAsia need to
identify more suitable areas for distribution as more and more loss potential target could be
captured which will at end generate huge revenue for AirAsia.

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REFERENCES

AirAsia Wikipedia Profile http://www.wikipedia.com/AirAsia

AirAsia Corporate profile, http://www.Airasia.com date accessed 12/05/06
AirAsia Fat Sheet Http://www.airasia .com date accessed 12/05/06
Free Seats on AirAsia http://www.icmr.icfai.org/casestudies/catalogue/business strategy /
airasia.html date accessed 15/05/06
Source:
Phillip Kotler and Gary Armstrong,
Principles of Marketing,
9th ed. (Upper Saddle River, NJ: Prentice Hall, 2001), p.245
Free Seats on AirAsia http://www.icmr.icfai.org/casestudies/catalogue/business strategy /
airasia.html date accessed 15/05/06
Passengers opinion about AirAsia http://www.airequality.com/forum/thai-air_asia.html date
accessed 15/05/06

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