Case Study Air Asia Business Essay


AirAsia was established in 1993 and commenced its operations on 18th November 1996. This airline was originally founded by a government owned conglomerate DRB-Hicom. However, on 2nd December 2001, the heaviliy indebted airline was purchased by former Time Warner executive Tony Fernandes's company Tune Air Sdn Bhd for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in KLIA at breakneck speed which undercutting former monopoly operator Malaysia Airlines with promotional fares as low as one ringgit.

In 2003, AirAsia has opened a second hub at Senai International Airport in Johor Bahru which is near Singapore. And, it launched its first international flight to Bangkok. AirAsia has therefore started a Thai subsidiary, added Singapore to the destination list, and it commenced flights to Indonesia. Also, flight to Macau was started in June 2004 and flight to Mainland China and the Philippines started in April 2005. In addition, the flight to Vietnam and Cambodia is in the year 2005 while to Brunei and Myanmar is in 2006.

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With a strong yet simple slogan "Now Everyone Can Fly", AirAsia has effectively placed its brand in customer's mind when comes to selection of flight. In Malaysia, AirAsia is the second powerful national airline. Also, it was the first successful low cost and ticket-less airline in the Southeast Asian region. It is main based in the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). And, AirAsia has a registered office in Petaling Jaya, Selangor and its head office is on the grounds of KLIA in Sepang, Selangor. In addition, AirAsia is one of the successful businesses that have adopted cost leadership thoroughly through effectiveness and efficiency of the operation management. AirAsia has broken the travel norms around the world speedily and has become the world's top airline. Beside this, AirAsia also has a route network that spans more than 20 countries; therefore it continues to pave the way for lower cost aviation through innovative solutions, more efficient processes and a passionate approach to the business.

The vision of AirAsia is to be the largest cost airline in Asia and for the purpose of serving the 3 billion people who are currently underserved with poor connectivity as well as high fares. There are 4 missions such as to be the best company to work for where the employees are treated as part of the big family in AirAsia, to create a ASEAN brand which is being recognized globally, to attain the lowest cost to make sure everyone in the world can fly with AirAsia, and to maintain the highest quality product by embracing technology in order to reduce cost and enhance the service levels of AirAsia.

Apart from that, together with the associate companies such as AirAsia X, Thai AirAsia and Indonesia AirAsia, AirAsia is set to take the low cost flying. AirAsia X was established in 2007 in order to provide high frequency as well as point to point networks to the long haul business. Its cost efficiencies are derived from maintaining a simple aircraft fleet and a route network based on low cost airports. Hence, guests will continue to enjoy the low fares through cost savings that AirAsia pass on to the guests. Moreover, AirAsia X franchises the brand name of AirAsia, Asia's largest low cost carrier which uses a common ticketing website, uniform, uniforms, and management style with AirAsia. AirAsia X is also affiliated with Virgin Group and Air Canada.

Reasons for Adopting Information Technology (IT)

There are some factors that contributed to the adoption of IT for AirAsia. As we know, airline companies involved in helping people move from one place to another. And, there are billions of people in this world. Without IT, airline companies will not process smoothly and it might lead to serious confusing among the customers and the company. Also, people in this society are having the same problems such as traffic jam, working pressure and time pressure. They are busy with their works and they focus more on efficiency and effectiveness. They do not want to spend extra time on irrelevant things such as queue up to buy something or waiting for long hours. Therefore, most airlines including AirAsia do offer online reservation for the flight as well as hotel rooms in order to save their customers' time as well as enhance customer satisfaction.

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Apart from that, the technology is getting in advanced in this modern era. There are many companies who have adopted Information Technology (IT) in doing their business. And, this IT has helped in enhancing a better management of the operation of the companies. Also, people in this society are concern more on company who has adopted IT and how this IT will help in making their life better as well as decision making in some tasks. AirAsia therefore choose to adopt IT in its business as to follow up the current IT trend as well as fulfilling the demand of the people in this society. They also implemented different systems to enhance their overall operation which will lead to efficiency and effectiveness of AirAsia.

IT Strategy

AirAsia has some strategies initiatives which involve IT solutions in order to build its company share and reputation.

In order to make its operation effective and efficient, AirAsia has implemented few IT systems in its marketing and sales activities. As you know, E-Commerce in nowadays has become a business tool and it is also a vital strategic management that allows a company to sell, advertise, purchase, supplies inventory tracking as well as sharing of information. Therefore, E-Commerce does become a major success to Airline Company that lead to effectively and efficiency in their business. AirAsia is one of the airline companies that implements E-Commerce and maximizes their information technology usage to manage their company effectively and efficiently including make low cost possibly in their business.

In order to maximize their IT, AirAsia has implemented current IT systems, for examples, Yield Management System (YMS), Computer Reservation System (CRS), and Enterprise Resource Planning (ERP). These systems have indirectly generated extra revenues and build customer loyalty for AirAsia.

Yield Management System (YMS) which also known as Revenue Management System (RMS) is the process of understanding, anticipating as well as influencing consumer behavior to maximize revenues or profits from a fixed perishable resource. Moreover, there is an important component in this system which is the use of overbooking where sometimes there must be a chance that a customer may not appear during that day. As a good example, it might be possible for a customer to book a ticket for a flight but did not turn up for the departure. And, this may cause the airline to end up flying an empty seat which will then cause lost in revenue for the airline company. But, in order to solve this problem, most airlines routinely overbook their flight. And, if there is an unusually large proportion of the customers show up, the company will be forced to "bump" some customers to another flight.

Second, AirAsia using Customer Reservation System (CRS) which is an integrated web based reservation and inventory system. This includes Internet, airport departure control, call center, as well as others. This system is a direct sales engine that rid off the travel agents effectively and the need to pay for the sales commissions to them. And, CRS is totally customer friendly as the customer can buy or reserve a ticket directly via online without come to the ticket counter. This has brought more customers to use the website often thus reduce the extra costs of customer such as transportation costs.

CRS also include Open Skies and New Skies. First, the Open Skies system is a built-in web enabled reservation as well as inventory system. The solution is built expressly in order to satisfy the distinctive needs of airlines that either implements a low cost business or in the process of making their business to more efficient streamline operations. Also, this system can be used either individually or combined yet it is depending on the person's needs. Open Skies helps some low cost airlines in worldwide to become a high performance business that continue to grow widely.

On the other hand, New Skies is a next generation of reservation and distribution system. And, it is designed for the world's fastest growing airlines which include newly launched airlines as well as rapidly growing hybrid airlines such as AirAsia. This system is a comprehensive airline passenger sales and management solution that provides capabilities for integrated online booking, call center reservations, inter-airline and alliance code-share itineraries, departure control as well as travel agency global distribution connectivity. Also, New Skies is based on the Navitaire's Open Skies reservation and distribution system that have been used by over 40 of the world's successful airlines. It represents a giant leap forward in quick deployment, speed to market with the new features and enhancements. New Skies has completely integrated departure control and real time reporting to keep your operation runs smoothly. Also, it is easy to use, change as well as customize.

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Third, AirAsia implements Enterprise Resource Planning (ERP) system. It is a packaged of business software that integrates organizational processes and functions into a unified system. It helps business management executives with a comprehensive overview of their complete business execution which may influence their business decisions indirectly. There are some examples of functions: Human Resource, Supply Chain Management, Finance and Logistics. These all are stand alone software and has their applications and database. But, with ERP System, all of this individual software can work under one umbrella. And, all the departments can share information easily and it helps to save time and cost. The workflow that has taken place between different departments becomes more automated. The customers also get better services as the person who is using the customer facing applications can access to every bit of information that regarding each relevant process. For an instance, a person who is work under sales team can access to the customer's product which is still under manufacturing. In addition, ERP system helps to reduce the need to carry large inventories which will increase the operational and labor costs. And, this system is implemented in AirAisia thoroughly.

Experience Resulting From The IT Implements

Utilization of Information Technology (IT) have directly contributed to the promotional activities, enhance brand equity, and keep the cost as low as possible by enable the customer to direct purchase the ticket online or through sales offices. This has helped the customers to save airline agent fees.

The systems that have been implemented by the AirAsia have a significant change to their company.

First, AirAsia has used the Yield Management System (YMS) for taking the operating costs and in helping themselves to optimize the price as well as allocate the capacity for maximizing expected profits. For an instance, seats are revenues for AirAsia and other airline companies. Every seat is considered as a profit for them. Therefore, AirAsia has introduced a plan whereby seats are available at different prices in various points of time. Hence, reservation that has done in later time will be charged more compared to one who has reserved earlier for the same seat. As a result of this system, this has enabled AirAsia to understand the behavior of their respective customers and implement effective strategy to generate expected revenues with lowest cost.

Second, AirAsia has implemented Computer Reservation System (CRS). AirAsia has used Open Skies to centralize customer data and this has helped AirAsia to track booking and the schedule of flight activities in real. Open Skies booking system which provided by Navitaire performed almost flawlessly on every single occasion and it managed to handle the most demanding requirements of AirAsia's flight booking operations.

On the other hand, on July 2010, AirAsia has successfully completed the implementation of its new reservation system which called New Skies. This booking system has replaced the previous system, Open Skies. Furthermore, this New Skies gives the customers a new experience as well as providing a greater convenience and generate more savings for the customers.

New Skies booking system has make the procedure of booking more efficiently. This New Skies ensure the airlines to maximize the distribution channels and dynamics packaging that emphasize on direct Internet sales. For distribution, New Skies gives AirAsia the control that they need over how quickly they deploy sales fares, special promotion, discounts and electric vouchers to stay ahead of the competitors. This is wise useful for AirAsia in this modern era. It also eliminates the need to maintain multiple databases associated with paper and e-tickets which indirectly increase the operational costs.

Same with Open Skies, this New Skies enable the customers to continue booking online and the AirAsia sales offices, counters as well as the call center. They also can normally self check in via the web, mobile and kiosks at the airport together with the self manage options online such as adding check in baggage weight, pick a seat and pre-book meals.

However, there are some differences between the Open Skies and New Skies booking system. With the new reservation system, the customers can look for the new feature which is Low Fare Finder. It helps the customers to view the lowest fare available according to their selected destination and date for travel. Also, the customers now are able to book their seats for multi-cities in just one transaction only. For an instance, if the customer plans to fly from Kuala Lumpur to Perth to Singapore and return, the respective customer do not have to make two separate bookings which is only provided by the new reservation system only. In addition, this New Skies booking system is able to support characters such as Mandarin, Japanese and other languages whereby the Open Skies system was able to support alphanumeric characters only. Hence, AirAsia can target multilingual customers globally and stay ahead in the airline industry.

Lastly, Enterprise Resource Planning (ERP) is implemented by AirAsia as this enables AirAsia to successfully maintain process integrity, reduce the financial month-end closing processing time, and speed up the reporting as well as data retrieval process. Every department such as financial, marketing and sales are unified into a single IT system to allow the employees to make decisions by viewing enterprise wide information on all airline operations. And, this system helps AirAsia by focusing on capturing transactions in daily operations therefore it helps to save operational costs and this indirectly increase the efficiency and effectiveness in its operation management.

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