Evaluación

The labour costs have been rising over the last decade . Additionally, security costs and stringent air transport department regulations put additional strain on airline operating costs without signs of relief. These issues hurt the entire airline industry, even low cost carriers have been impacted by this .

5.Infrastructure

The problem of inadequate infrastructure and facilities have impaired the smooth operation of AirAsia. As a result AirAsia has to share the facilities at the newly built KLIA resulting in delayed schedules and inconveniencing customers. Crowded in the mornings and congestion on the runway have increased its operating cost.

10. RECCOMENDATION

AirAsia is strategically strong with an organized management team, established ‘low-cost’ mindset with employees, and a sound strategic vision. Moreover, AirAsia is also the front runner in the low cost industry with its early conception and aggressive product branding and marketing techniques in the Asian region. It has used IT to its advantage with the use of the internet and newer airplanes. Finally, it is beginning to establish its name and brand on the world stage with innovative and intelligent sponsorship deals.

When there exists many strengths for AirAsia there are also some weaknesses. These weaknesses, however, do not seem to be overly dangerous. Higher fuel costs around the world, and fluctuating, unstable markets have made operational costs higher, especially

for the airline industry. However, this also means that companies with less profit margins than AirAsia may become redundant in the future; thus, opening up customer bases previously unavailable to AirAsia. In addition, AirAsia has a relatively poor reputation with customers, particularly due to their flight times and cancellations. Improvements are needed to be made in this area without increasing operating costs.

Opportunity is the golden word where AirAsia is concerned. With the dramatic increase in middle income earners in China and India especially, there is much potential for AirAsia to expand its routes and frequency of flights. Relaxation of the ‘ASEAN Open Skies’ laws means that, with AirAsia’s established number one position, low cost, strong brand and strategy execution, it is firmly established to overcome potential new entrants and increase market share in the future. Furthermore, increased access for Asian people to the internet, coupled with new and developing IT solutions allow AirAsia to bolster its reputation as an innovative and leading organization in terms of IT.

Potential threats to AirAsia come in the form of potential new entrants into the market from established full carriers like Singapore Airlines and AirAsia are positioned well to withstand any competition in this area. There are always threats from areas outside of AirAsia’s control such as terrorism and global conditions. Finally, AirAsia needs to be aware that system failures with the internet would seriously damage operations for such a technologically reliant company. The company must have adequate back up facilities in case there is a system failure.

11. CONCLUSION

To be a leader in the low cost carrier industry , AirAsia needs to use strategic management continuously because the airline industry is a unique and complex in nature. The budget air line needs not just reduce cost and make the operational activities running effectively but also needs to come out with the strategy that can make competition irrelevant or uncontested market space through differentiation which AirAsia already doing but it has to enhance it further.

In a teleconference recently CEO Datuk Tony Fernandes said that AirAsia is in the best financial position now and it would continue its focus on lowering cost ,improving returns and expanding its network. Despite the share increase in prices of oil and aviation fuel resulting from the Middle East crisis, Datuk Tony Fernandes has assured to the customers that it will impose fuel surcharges.

12. REFERENCES

1) Sen Ze and Jayne Ng , Air asia story, How a young airline made it possible for everyone to fly and become a runway success practically overnight

2) http;www.scribed .com/doc/18152552/Ryanair-Case ( retieved on 20/3/2011)

3) Gerry Johnson ,Kevan Scholes & Richard Whitington , Ryanair –Competitive Challenges and strategic choice in the budget airline industry ,(page 694-707) – Low fares airline , Exploring Corporate strategy,8^th edition

4) AirAsia Berhad, Annual Report 2007.2008 and 2009

5) Danny Yap and Elaine Ang, Blure Ocean Strategy for Corporate Malaysia (Article published in the Star,Daily on 16/7/2007

6)

http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/AA_4Q10_Analyst_Presentation.pdf ( retrieved on 2/4/2011)

7) David, F R . Strategic Management –Concept and cases Thirteenth Edition ,Prentice Hall,One Lake Street,Upper Saddle river ,New jersey

14. APPENDICES

APPENDIX 1 - Income Statement For The Financial Year Ended 31 December 2009

2009 2008 2007

RM'000 RM'000 RM'000

Revenue 3,132,901 2854970 2,018,779,603

Operating Expenses/Cost of sales (1,909,664,970)

- Staff Cost (306,002

) (236,793

) - Depreciation of property, plant and equipment

(447,644 )

(346,954 )

- Air craft fuel expenses (927,795

) (1,389,841

) - Maintenance, overhaul, user charges

- and other related expenses (410,583

Loan to a subsodiary -

Port employment benefit obligations - - 23,105,680 Borrowings (interest bearing) - - 169,377,260 Deferred tax liabilities - - 27,000 Deferred income - - 3,126,000

7,067,712 6,067,697 195,635,940 2,621,020 1,605,536 225,814,402

Capital and Reserves attributable to equity holders of the company

Share Capital 275,774 237,421 60,000,000

Share Premium 1,206,216 735,352 17,386

Currency Translation reserve 592 592 338,060

Retaines earnings 1,138,438 632,171 165,458,956

Total Equity 2,621,020 1,605,536 225,814,402

APPENDIX 3 - Cash Flow Statement for the financial year ended 31 December 2009

2009 2008 2007

Operating Activities RM RM RM

Profit/(loss) before taxation 622,288 (869,198) -

Adjustment :

Property, plant and euqipment

-depreciation 447,644 346,954 -

-write off 388 29 -

Cash generated from/(used in) Operations 1,257,017 (192,565)

Interest paid (322,407) (239,755) -

Net cash flow from/(used in) investing activities (1,777,468) (2,601,928) (89,366,518)

Poceeds from allotment of shares 509,217 2,882 - Hire-Purchase instalments paid (77) (77) -

Proceeds from borrowings 1,670,390 3,044,531 -

Repayment of borrowings (593,131) (300,780) -

Deposit pledged as securities 5,112 2,019 -

- - - (Repayment)/proceeds from short term - - -

bank borrowings (net) - - (88,238,936)

Proceeds from long term bank borrowings - - 32,910,300 Repayments of long term bank borrowings - - -

Cash grant received - - -

Dividends paid to shareholders - - (7,200,000)

Net cash flow from financing activities 1,591,511 2,748,575 (62,528,636) Increase/(decrease) in cash and cash equivalents 597,662 269,414 21,202,758

Currency translation differences 1,207,603

Cash and cash equivalents

-at start of year 120803 390217 25,906,941

-at end of year 718465 120803 48,317,302