Air Asia: Asia’s Leading Airline Essay

Company Background Asia’s leading airline was established with the dream of making flying possible for everyone. Since 2001, AirAsia has swiftly broken travel norms around the globe and has risen to become the world’s best. With a route network that spans through to over 20 countries, AirAsia continues to pave the way for low-cost aviation through our innovative solutions, efficient processes and a passionate approach to business. Together with our associate companies, AirAsia X, Thai AirAsia, Indonesia AirAsia, Philippines’ AirAsia Inc and AirAsia Japan , AirAsia is set to take low-cost flying to an all new high with our belief, â€Å"Now Everyone Can Fly†. (2005, AirAsia) Establishment AirAsia was established in 1993 and began operations on 18 November 1996. It was originally founded by a government-owned conglomerate, DRB-Hicom. On 2 December 2001 the heavily-indebted airline was bought by former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit (about USD 0.26 at the time) with USD 11 million (MYR 40 million) worth of debts. Fernandes the CEO, turned the company around, producing a profit in 2002 and launching new routes from its hub in Kuala Lumpur, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as MYR 1 (USD 0.27). International flights In 2003, AirAsia opened a second hub at Senai International Airport in Johor Bahru near Singapore and launched its first international flight toBangkok. AirAsia has since started a Thai subsidiary, added Singapore itself to the destination list, and started flights to Indonesia. Flights to Macaubegan in June 2004, and flights to mainland China (Xiamen) and the Philippines (Manila) in April 2025. Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai AirAsia. On August 2006, AirAsia took over Malaysia Airlines’s Rural Air Service routes in Sabah and Sarawak, operating under the FlyAsianXpress brand. The routes were subsequently returned to MASwings a year later, citing commercial reasons. AirAsia’s CEO Tony Fernandes subsequently unveiled a five-year plan to further enhance its presence in Asia. Under the plan, AirAsia proposes to strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Vietnam, Indonesia, Southern China (Kun Ming, Xiamen, Shenzen) and India. The airline will focus on developing its hubs in Bangkok and Jakarta through its sister companies, Thai AirAsia and Indonesia AirAsia. With increase frequency and the addition of new routes, AirAsia expects passenger volume to reach 18 million by the end of 2007. Route expansion On 27 September 2008, the company had on its list 106 new routes to be added to its then-current list of 60. The number of old routes discontinued has not been publicly disclosed. On 2nd of April 2012 Air Asia had their first flight from Sydney to Kuala Lumpur. Sebastian Tegan-Anderson was one of the lucky few to be on this historical flight. AirAsia-Malaysian Airlines Alliance In August 2011, AirAsia agreed to forge an alliance with Malaysian Airlines by means of a share swap. The alliance was struck down by the Malaysian government, in effect voiding the agreement of both airlines. AirAsia’s vision 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. Information Technology Management (Maintenance & Operation) Information Technology management is the discipline whereby all of the technology resources of a firm are managed in accordance with its needs and priorities. These resources may include tangible investments like computer hardware, software, data, networks and data centre facilities, as well as the staffs who are hired to maintain them. Managing this responsibility within a company entails many of the basic management functions, like budgeting, staffing, and organizing and controlling, along with other aspects that are unique to technology, like change management, software design, network planning, tech support etc. (2009, McNurlin) According to Bird, a primary focus of IT management is the value creation made possible by technology. This requires the alignment of technology and business strategies. While the value creation for an organization involves a network of relationships between internal and external environments, technology plays an important role in improving the overall value chain of an organization. However, this increase requires business and technology management to work as a creative, synergistic, and collaborative team instead of a purely mechanistic span of control. Technology Management is just the same as any other management disciplines that are out there. It is basically employing the following traits. †¢Planning †¢Organizing †¢Staffing †¢Implementing †¢Monitoring †¢Evaluation However, for Technology Management to be effectively implemented, the Technology Factor has to be added to all the traits mentioned above. We all know that technology makes life much easier or more complicated based on how it is used or implemented, but technology will form into everyone’s life. But technology was made and developed primarily because there is a need to be fulfilled and you want to make things much easier. Technology thereby becomes an imperative factor that you need to incorporate in the daily carrying on of your professional lives. It is a very important tool, together with the values that go along with it; innovation, creativity, efficiency; in the conduct of your business. Technology applies to all, from the marketing to communications, product development to process innovations and so on. Throughout information technology management, it will be able to show one the way to harness the technology developed and innovated in order to create value for the company, giving AirAsia the edge to compete, providing the company with the competitive advantage. A person who would be in charge of this department in an organization would be the Chief Information Officer or CIO. Chief information Officer (CIO) is a position commonly given to the person in an enterprise who supports the enterprise goals which are responsible for the computer systems and information technology (IT) applications. The importance of information technology has created a trend whereby the position of the CIO has come to be viewed in many organizations as a key contributor in formulating strategic goals (Qais International, n.d). According to a cited Meta Group study, leading CIOs are playing dramatically more influential business roles than they have at any time in past (Bernard.A, 2005). Besides that, Graham Waller, senior vice president with Meta’s Executive Directions advisory service is quoted as saying, â€Å"Savvy CIOs have demonstrated their transformational value to senior management during the past three years, even while operating during a down economy.† In recent years, an increasingly significant business role has developed from being a purely technical support functions toward a more commercially-focused part of the business. Currently CIOs are expected to create innovative solutions which could affect the success of the organization such as increase profits, reduce costs, and to contribute in important managerial decisions (Hooshmand.A, 2008). In the past, CIOs were only responsible for the computer systems and information technology applications that supported enterprise objectives. In this case the Regional Head for Innovation Commercial & Technology for AirAsia would be Mr. Lau Kin Choy. In order to transform the vision into reality for an organization such as AirAsia, requires more than a great strategy. It is essential that the organization make the strategy an integral part of its operation (Bradford, 2002). This statement, although made with reference to the business strategy and operations, also holds true for business strategy and IT initiative. When the business strategy and IT are aligned, the IT infrastructure can continuously sense the changing business needs and respond by provisioning or redeploying resources to match the demands of the business. (Pultorak, 2004). AirAsia being a Lower Cost Carrier or ,LCC, business strategy is that of focused leadership that requires continuous cost reductions in order to stay ahead of its competition all along the value chain. The various Information Technology implementations that have been made by AirAsia and its benefit are as follows. The few system implementations that AirAsia have done in its marketing and sales activities (Yield Management System and Computer Reservation System) as well as operation activity (Enterprise Resource Planning System), The Computer Reservation System (CRS), a Wireless Delivery System (WDS), and the Enterprise Resource Planning System (ERP) AirAsia has realized then increased revenue from up to 3 to 4 percent for the same number of aircrafts by taking advantage of the forecast of the high/low demand patterns, and effectively shifting the demand from low period to high period and by charging a premium for late bookings. Over the past couple of years, AirAsia have actually lowered prices (essential for LCC) as the YMS has given them the window to increase their revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peak times. (Voneche, n.d). Computer Reservation System (CRS) AirAsia’s CRS (Open Skies by Navitaire) has helped it to grow at a dramatic pace in the past couple of years â€Å"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 – Source: Navitaire (http://www.navitaire.com/res_and_dist/openskies.asp) 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. Centralized customer data is also maintained by Open Skies and this helps AirAsia to track booking and schedule flight activities with real-time, on-demand reporting feature. The vast booking information that is provided online to the customers acts as a force that brings more customers to use the website thus reducing the customer support costs. An important feature is that Open Skies seamlessly integrates with the already implemented YMS so that the systems can be used in unison for pricing and revenue maximization (by providing information on bookings, schedules and driving down the costs of operation at the same time. This CRS enabled AirAsia to introduce the first ticket less travel option and also provides features such as advanced boarding passes in addition to online booking that enabled the growth of AirAsia as these features attracted customers that did not have the time for purchasing tickets from counters and coming in 1 hour early for securing a seat on the aircraft. AirAsia have proposed to implement a Wireless Delivery System (WDS) to expand it reach via mobile phones. With this, potential customers will be able to book tickets via their mobile phones. This is a strategic move for growth as the Asia-Pacific region has a larger population of mobile phone users rather than internet users. Enterprise Resource Planning System (ERP) AirAsia has, as in of May 2005, opted for a full fledged ERP system implemented by Avanade consultants. 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. (Microsoft Malaysia) APS (Advanced planning and scheduling system) AirAsia has now implemented the Aps system, where it works as a decision support software application. This Advances Planning and Scheduling system aare usually implemented as an add-on software that complements a company’s transaction software system by providing advances analyticl andd optimization functionality focusid on improving supply chain planning. There are different modules that come into play with the APS such as Demand Planning, Network Optimization, Supply Planning, and Factory Schedule software that all work together to provide the APS’s core functionality. IT Implementations and Strategic Alignment With the above implementations, it is clear that the business strategy and the IT strategy are aligned to for AirAsia to operate on a low-cost model. There are four models to Strategic Alignment Perspective (Henderson and Venkatraman, 1993). Namely: Strategic Execution, Technology Transformation, Competitive Potential and Service Level. All the systems implemented act as enablers in achieving the business strategy of AirAsia by reducing the costs of operation (CRS, ERP) and maximizing revenue (YMS). These cost savings are directly transferred to the customer with reduced prices of traveling, discounts etc. The business strategy acts as the driver in this perspective (Technology Transformation). Figure 2 – Technology Transformation Source: Henderson and Venkatraman, IBM Systems Journal 1993 With expansion as one of the main future direction as well as increased competition, APS system is recommended as a new way to improve processes and therefore achieving cost reductions along the value chain. The main difference of APS system compared to the previous system implementations is that APS system focuses on internal operational processes perspective while the other systems such as YMS and CRS more focus on customer perspective. All systems provide cost advantages in different domains in the value chain. In relation to strategic alignment, APS system like other previous systems fits smoothly in Technology Transformation perspective. Reduced costs in inbound logistics and operation activities will be the direct result of implementing APS enabling AirAsia in achieving its low cost business strategy. The operational environment of an airline industry is complex. Large network in the supply chain, continuous daily operation, and several external uncontrollable variables such as weather condition and government regulations become factors affecting airlines’ performance. Given these complexities, operational planning and scheduling across the supply chain are important factors determining the success of any airline. In order to increase the efficiency of operational performance and manage its supply chain, AirAsia had implemented the ERP system. 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 (Microsoft Press Pass, 2005). However, conventional ERP system implemented by AirAsia does not provide flexibility and intelligence required to analyze data for better supply chain management. APS system optimizes AirAsia’s supply chain management. It works as the brain of supply chain activities (Ahmed, 2004) by gearing activities in relation with customers and suppliers requirements. APS system clusters and classifies customer orders, forecasts future fulfilment requirements, checks resources availability and sets order priorities. Moreover, APS system helps AirAsia in gaining competitive advantage as it provides visibility across supply chain. APS system will improve AirAsia’s strategic and operational performances particularly in the inbound and operational activities. Potential Ideas in the Information Technology Aspect 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. 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: Customer segmentation is where 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 high value customers. Whereas CRM initiative development – to differentiate from other competitors, AirAsia should not adopt the â€Å"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 and Organizational design and management is where AirAsia needs to train the employees, empowering them with a complete view of the customer and clearly articulating the employee’s role in the CRM strategy. Conclusion AirAsia as I thought was just a company that provided a low cost carrying airline company. Well that is true but after studying the information and technological aspect of the company, i have come to realize that there is so much more to the company than I realized. The systems in place are simple and efficient and wouldn’t look that impressive but the key of it was the collaboration of all these systems put together is what makes AirAsia what it is. The position of managing the technology in AirAsia is gaining importance in today’s world where technology is making a larger impact in organizations. Having the right person filling the role of the head of technology management can either make or break the company. In the case of Airasia, it is even more important and more difficult to find the right man. This is because Airasia has a set of policies and a vision that sets itself apart from other large corporations or organizations. At times, this flies in the face of conventional wisdom that is adopted at most other places, exemplified by Google’s strict insistence on maintaining employee’s freedom of choice. An organization like AirAsia which considers itself to be ‘special’ and ‘outstanding’, needs a CIO or CTO who is even more special and outstanding. The researchers have outlined some qualities that are needed, and by using examples of situations that have and are continuing to occur in AirAsia, make suggestions on how using these qualities, a CIO or CTO can address those issues.Service Level Agreements are basically agreements between those offering a service and those who are receiving or using that service. Basically it is a form of protection against the unexpected. In the business world, guarantees are very important, not only from the business and operational sense, but also in the sense of upholding a reputation. AirAsia have a fairly solid SLA in place, however it is not without shortcomings. A close examination reveals that there are a multitude of improvements that can be made. Better drafting of SLAs can help simplify work for the company and also allow it to focus more on the core operational issues. SLAs can also be advantageous in driving down costs and creating beneficial partnerships. With the importance of SLAs well established, the researchers have pointed out some areas that AirAsia would do well to consider to help improve its standing in this regard, and suggested some ways in which it could do so.All in all this has been a learning experience for the researchers, who have been able to link the theories learned in class to real world cases and scenarios which have helped create a better understanding of the issues that have been discussed during class. References: McNurlin, Barbara, et. al. (2009). â€Å"Information Systems Management in Practice (8th ed.)†. Prentice Hall Bird, M. (2010). Modern Management Guide to Information Technology. 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