Executive Summary The low-cost concept became a moneymaker in the United States, where it was pioneered in the 1970s

by Southwest Airlines, the model for budget carriers elsewhere like Ryanair and easyJet in Europe. A low cost airline generally has many features that differentiate it from the traditional carriers. These features include ticketless travel, online ticket sales, no international offices, no frequent flyer points, no free food and beverages, no inflight magazines, no club lounges, use of secondary city airports. Not all low cost airlines have these features, and not all airlines that have some of these features are low cost airlines. coffee and inflight magazine, and they are based at Brussels primary airport. According to Daniel Chan (2000), the airline industry is a unique and fascinating industry. It captures the interest of a wide audience because of its glamour, reach, and impact on the large and growing numbers of consumers and travelers worldwide. Based on this statement, airline industry becomes the greatest opportunity for AirAsia. The growing numbers of travelers worldwide can be the wonderful opportunity for AirAsiato running their business. In addition, to captures and attract a customer to choose AirAsia as an airline option, AirAsia need to develop and create a wonderful strategy and come out with special offering to their customer to successfully in their business. Moreover, to be successful in their long terms objective and their business, company need to identify their strategic management, because with good strategic management company can be achieving their vision and mission to achieve the successfulness in their business. Regarding this issues, the strategic management becomes important due to the following reason such as globalization to survival their business and then e-commerce become the critical success to the company nowadays. For example, Virgin Express is a low cost airline, but it still offers complimentary

Company Profile AirAsia Malaysia is second national airline. It was the first successful low cost, ticket-less airline in theSoutheast Asian region. On 8 December 2001, Tune Air Sdn Bhd officially acquired 99.25 per cent equity(51.68 million shares) in AirAsia from DRB-Hicom, one of Malaysias giant conglomerates. Tune Air Sdn Bhd is the holding company, while AirAsia remains as the operating company. On 2 December 2001, the heavily-indebted airline was purchased by former Time Warner executive Tony Fernandes's company Tune Air Sdn Bhd for the token sum of one ringgit (about $USD0.26 at the time) with USD$11 million (RM40 million) worth of debts. Fernandez proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1. Air Asia offers such service takes the form of a no frills - low airfares flight offering, 40%-60% lower than what is currently offered in this part of Asia. Their vision is "Now Everyone Can Fly" and their mission is to provide 'Affordable Airfares' without any compromise to Flight Safety Standards. The story of emergence of AirAsia is similar to Ryanair, since both carriers underwent a remarkable transformation from a money-losing regional operator to a profitable, low cost airline. AirAsia was initially launched in 1996 as a full-service regional airline offering slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001, AirAsia fail to either sufficiently stimulate the market or attract enough passengers from Malaysia Airlines to establish its own niche market. The turnaround point of AisAsia is in 2001, while it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled some of the lending low-cost airline experts to restructure AirAsias business model. He invited Connor McCarthy, the former director of group operation of Ryanair, to join the executive team. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-frills operation with three B737 aircraft as a low-fare, low-cost domestic airline. AirAsia group operates scheduled domestic and international flights to over 400 destinations spanning 25 countries. Its main hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai AirAsia and Indonesia AirAsia have hubs in Suvarnabhumi Airport

and Soekarno-Hatta International Airport respectively. AirAsia's registered office is in Petaling Jaya, Selangor while its head office is located in Kuala Lumpur International Airport.Air Asia plans to open ASEAN regional headquarters in Jakarta by August or September 2011.The airline itself will maintain its headquarters in Kuala Lumpur for the time being.

Mission 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.

Vision

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 Core Business Air Asia, as the second Malaysian National Airline, provides a totally different type of service in line with the nation's aspirations to benefit all citizens and worldwide travellers. Such service takes the form of a no frills - low airfares flight offering, 40%-60% lower than what is currently offered in this part of Asia. Their vision is "Now Everyone Can Fly" and their mission is to provide 'Affordable Airfares' without any compromise to Flight Safety Standards.

The story of emergence of AirAsia is similar to Ryanair, since both carriers underwent a remarkable transformation from a money-losing regional operator to a profitable, low cost airline. AirAsia was initially launched in 1996 as a fullservice regional airline offering slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001, AirAsia fail to either sufficiently stimulate the market or attract enough passengers from Malaysia Airlines to establish its own niche market. The turnaround point of AisAsia is in 2001, while it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled some of the lending low-cost airline experts to restructure AirAsias business model. He invited Connor McCarthy, the former director of group operation of Ryanair, to join the executive team. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-frills operation with three B737 aircraft as a low-fare, low-cost domestic airline.

WHY LOW COST Followed the statement of Datuk Tony Fernandez as CEO of AirAsia Berhad said his philosophy is very clear: before a business can grow, it needs to have its costs under control. It must be cost-efficient and profitable, and it must create value. Costs that do not add value must be contained, reduced and even eliminated. I have been asked by various people, How much lower can your cost reduce? Youre already the lowest in the world! My direct answer is if we do not strive to be more efficient and choose to be complacent our days are numbered. This is a continuous task we have to face head on year on year; it is the critical ingredient to operate a successful business. Based on the Datuk Tony Fernandez said, AirAsia can be growing in the airline business if they can control their cost. The cost that they have to running there must be efficient and reliable. Everything that can make inefficiencies must be reduced and possibly to eliminate. What a Datuk Tony Fernandez said is very strong opinion about their company to running their business. AirAsia can be possibly competing with other airplane industries if they can make efficiencies to reduce cost and make the low possible fare than other airplane industries. Furthermore, based on the environmental scanning performed, the demand for low cost carrier (LCC) industry will keep growing rapidly. The LCC industry attractiveness and profitability will attract many full services airlines to launch its

version adding the degree of rivalry in this industry. As the implication, AirAsia, current market leader of LCC in Malaysia, Thailand, and Indonesia, will face competition from both existing and new players. In order to sustain its competitive advantage, AirAsia needs to leverage its competency in creating cost advantages across multiple value chains. Based on that statement, AirAsia need to make a consideration and more stressed to be lowest cost carrier in the airline industry. The demand for lowest cost carrier is will be growing rapidly, it can be the great opportunity for AirAsia Company to run their business. In addition, AirAsia business strategy also centered on cost leadership. According to Porters generic strategies (1985), one of the generic strategies is the cost leadership. The cost leadership in AirAsia Company is already approving because AirAsia more focused and concentrated in the lowest cost carrier in airplane industries. AirAsia wanted to be a leader in the lowest cost for run their business. AirAsia builds and sustains its competitive advantage by providing services at a price that simply lower than competitors price. Operation effectiveness and outstanding efficiency are the two main characteristics of low cost business including in AirAsia. Moreover, AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. Efficiency creates savings that are then passed on to guests so that affordable air travel can become a reality. Through AirAsia philosophy of Now Everyone Can Fly, Air Asia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. As Air Asia continuously strives to promote air travel, AirAsia also seek to create excitement amongst their guests with the range of innovative and personalized service. In conclusion, with believes to make a low possible fare for to the customer, AirAsia was becoming an Airline company that is chosen by so many customers. The best philosophy of AirAsia now everyone can fly means to giving an opportunity to all the people to flight with the lowest possible fare and making them can flight even they only have the less money.

Air Asia Routes Map

Air Asia Routes Map- Long Haul Destination

AirAsia makes the low fare model possible and create values through the implementation of the following key strategies: a) Safety First Partnering with the worlds most renowned maintenance providers and complying with the world airline operations. High Aircraft Utilization Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity Low Fare, No Frills Providing guests with the choice of customizing services without compromising on quality and services. Streamline Operations Making sure that processes are as simple as possible. Lean Distribution System Offering a wide and innovative range of distribution channels to make booking and travelling easier. Point to Point Network

b)

c)

d) e)

f)

Applying the point-to-point network keeps operation simple and lower costs.

Air Asia and E-commerce & M-commerce

LCC pursued simplicity, efficiency, productivity and high utilization of assets to offer low fares. E-commerce helps LCC to simplify the process of purchase by online reservation and issuing of e-ticket, as such no middleman is required in this process. In terms of efficiency, LCC are able to perform real time transaction to a global customer for 24 hours a day and 7 days a week. The data provide in online booking combine with the right software will ease the business administration task to stored and categorized automatically, update in real time and accessed on demand. This is whereby LCC save cost on manpower to data entry this information. LCC also can fully utilize the resources of information such as booking seat, customer database to plan ahead their business strategy; this will help to minimize the empty seat and maximizes the sales of seat. E-commerce and m-Commerce also provide convenient to customers, they can easily compare the airline company to choose before purchase in terms of quality, price and availability. Customers will purchase upon their satisfactory after comparison; this business strategy is to create customer loyalty. The first successful and pioneered LCC was AirAsia in asia. It is also the first airline in the region to implement online reservation and fully ticketless travel.

Air Asia Website

Air Asia Self Check in Service

Web Check in is available Individuals or group bookings with up to 50 guests. For all return flights upon booking confirmed up to 1 hour for AirAsia (AK,QZ,FD) and up to 4 hours for AirAsiaX (D7) before their flight.

Air Asia Mobile Check In Service With your mobile phone, you can now check-in from almost anywhere. Opt for Mobile Check-In: 7 days prior and up to 45 minutes (AirAsia flights) 7 days prior and up to 4 hours (AirAsia X flights)

before the scheduled departure time with Mobile Check-In. This service is available for all Internet-enabled mobile phones. Guest(s) will be able to print their boarding pass(es) using the 2D barcode scanners or Self Check-In Kiosks at the airport. To check-in via mobile go to mobile.airasia.com. Guest(s) using Androids, BlackBerrys or iPhones can download AirAsias Mobile Check-In application to check-in via mobile http://www.airasia.com/sg/en/aam_home.html Before you proceed, do take note that the following guest(s) will NOT be able to utilise our Mobile Check-In services.

Guest(s) travelling with infant(s) Guest(s) with reduce mobility and those with special needs More than 9 guest(s) under one booking number

LOW COST CARRIER (LCC) BUSINESS MODEL The low cost airlines like AirAsia have changed the definition of airlines that air travel is a luxury and it is only for the upper segment of the population. The key objective of low cost carriers is to increase their reach and provide the services to a large segment. However, the low cost carriers are now facing some challenges in the market. BUSINESS MODEL AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry, which can be characterized as below:

a)

Simple Product Catering on demand for extra payment Planes with narrow seating and only a single class No seat assignment No frequent flyer programmes

b)

Positioning Non-business passengers, especially leisure traffic and priceconscious business passengers Short-haul point to point traffic with high frequencies Aggressive marketing Secondary airports Competition with all transport carriers

c)

Low Operating Costs Low wages Low airport fees Low costs for maintenance, cockpit training and standby crews due to homogeneous fleet High resource productivity Short ground waits due to simple boarding processes No air freight, no hub services, short cleaning times, and high percentage of online sales

CURRENT STRATEGIC IT IMPLMENTATION AirAsia has currently adopted information technologies strategically to integrate the operations and coordinate all the business and management functions. The followings are few system implementations that AirAsia has done in its marketing and sales activities as well as operation activity in the value chain. Yield Management System (YMS) Yield management system (YMS) as revenue management system it understands, anticipates, and reacts to the behavior of customer to maximize revenues for the organization. In this system, AirAsia used it to takes into account the operating costs and aids AirAsia to optimizes price and allocate capacity to maximize expected revenues. The optimization is done on two levels in AirAsia: a) Seat Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier for the same seat b) Route By adjusting prices for routes / destinations that have a higher demand when compared to others. As a result, by using this yield management system, AirAsia can understand the behavior of their customer and offering the effectives and efficiency strategy and also can allocate capacity to maximize the expected revenue. By this system, AirAsia can make efficiency to know their customer using IT technology

with lowest cost. Results increased revenue (3-4%) by taking advantage of the forecast of the high / low demand patterns, lower prices as YMS has aided AirAsia to increase the revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peak times.

Computer Reservation System (CRS) Furthermore, the other system that AirAsia implemented is customer reservation system (CRS), it is an integrated web-based reservation and inventory system. It includes Internet, call center, airport departure control and more. It is a direct sales engine that effectively eliminates the middleman (travel agents) and the sales commissions that need to be paid to them. By using this system, AirAsia can reduce the cost and eliminates the middleman (travel agents) and the sales commission to pay them. After that, this system are very customer friendly because the entire customer if want to buy or make a reservation a ticket directly via online, and no need to come to the ticket counter. In conclusion, by using this system effectively, efficiency, customer satisfaction, fast and secure in buying a ticket already met. It means the lowest cost can possibly achieve. Satisfy the unique needs of AirAsia implementing a low-cost business model to transform the business process to efficiently streamline operations. CRS also helps AirAsia to grow at a dramatic pace in the past few years as stated below:
Navitaire's Open Skies technology has truly enabled AirAsia's growth from 2 million passengers to 7.7 million passengers in less than two years. Open Skies scaled easily to accommodate our growth." - Tony Fernandes, EO, AirAsia

Enterprise Resource Planning System (ERP) And then, the last system that AirAsia used in maximized IT to meet the lowest cost during their business activities is the implementation of enterprise resource system (ERP). From the view of managers in a company, the emphasis is on the word planning. ERP represents a comprehensive software approach to support decisions concurrent with planning and controlling the business. Based on the definition, ERP is the system that integrated comprehensive software to make the IT system is more effectively and efficiently. By implementing this package AirAsia is looking to successfully maintain process integrity, reduce financial month-end closing processing times, and speed up reporting and data retrieval processes. In addition, it is a system focusing on capturing transactions in daily operations and helping AirAsia to save its operational costs as well as to increase

the efficiency and integrity in its operation. This system is an integrated ERP solution powered by Microsoft Business Solutions (MBS) on Microsoft technology platform which is implemented by Avanade consultants in Ma 2005. With the robust ERP technology platform, AirAsia is able to successfully maintain process integrity, reduce financial month-end closing processing time, speeds up reporting and data retrieval process. As a result, the system that AirAsia implemented by using strategy to maximized the IT system (yield management system (YMS), computer reservation system (CRS), and enterprise resource planning (ERP) system) can be a great strategy to make AirAsia more effective and efficiency and possibly able to reduce the cost and eliminated inefficiency in their business. Innovative RBS solution Travellers no longer need to reach for the calculator or suffer from exchange rate fluctuations after Asias largest low cost airline introduced a multi-currency pricing system based on the RBS FXmicropay solution. AirAsia, which operates approximately 600flights daily to over 75 destinations across Asia, Australia and the UK, has worked with RBS for many years on aircraft finance and derivatives. The bank has, therefore, developed a clear understanding of the airlines business model and identified a powerful case for introducing the FXmicropay platform. Travellers no longer need to reach for the calculator or suffer from exchange rate fluctuations after Asias largest low cost airline introduced a multi-currency pricing system based on the RBS FXmicropay solution. AirAsia, which operates approximately 600 flights daily to over 75 destinations across Asia, Australia and the UK, has worked with RBS for many years on aircraft finance and derivatives. The bank has, therefore, developed a clear understanding of the airlines business model and identified a powerful case for introducing the FXmicropay platform. In particular, while FXmicropay was capable of processing transactions in all of the G11 currencies, there were key Asian currencies that were not supported, including the Malaysian ringgit, Thai baht and Indonesian rupiah. To meet AirAsias requirements, the technical teams within RBS expanded the system to

include these essentialcurrencies. It was a complex project and RBS drew on the expertise of its teams in Malaysia, Thailand, Indonesia, Singapore, Hong Kong and the UK to deliver it successfully. The banks Aviation Capital, GlobalTransaction Services, WorldPay, IT and Credit teams worked closely together to provide the breadth of knowledge that was required. AirAsia and RBS have a history of working together effectively. RBS has provided services to AirAsia in aircraft financing, interest rates swaps, fuel hedging and foreign exchange derivatives, says Fernandes. RBS experts in Malaysia, Thailand and Indonesia also obtained approval from their central banks for the system, which links to the RBS currency trading rooms for each of the currencies to the flight booking system operated by AirAsia in real time. On the day that FXmicropay went live on AirAsias systems, it successfully processed more than 1,000 transactions. Andrew Sill, RBS Country Executive, Malaysia, says: AirAsia is the first Asian carrier to introduce FXmicropay, which provides an added service for its customers and enables the airline to manage its currency exposure more effectively. POTENTIAL STRATEGIC IT IMPLEMENTATION In order to gain market share and sustain its competitive advantages to be the low cost carrier in the high demanding environment, AirAsia must develop new ways to manage both customer relationships and suppliers or partners to optimize customer loyalty, supplier relationships, and revenue. The following diagram shows the strategic forces of value proposition of the airline industry, showing that the focus on Supplier and Alliances and Customers will drive positive values to AirAsia can achieve. Customer Relationship Management (CRM) application will be one of the area of strategic IT implementation that AirAsia can focus to achieve high values to both shareholders and customers. Lesson Learnt & Recommendation

In long term, customer relationships should be fostered for AirAsia to maintain competitive advantage and profitability. When planning and implementing CRM application, management is recommended the following approaches: 1. Customer segmentation mileage-based segmentation is inadequate, rather should focused on value-based and needs-based approaches can guide investment decisions and drive greater insight into the needs of highvalue customers. 2. CRM initiative development to differentiate from other competitors, AirAsia should not adopt the fast follower approach to CRM initiative development, i.e. learning from other competitors approach (e.g.installing kiosks for fast check-in). AirAsia should implement CRM program in favor of investing in initiatives with a high return, which respond to the needs and desires of their own customers 3. Organizational design and management AirAsia needs to train the employees, empowering them with a complete view of the customer and clearly articulating the employees role in the CRM strategy.