Asian Low Cost Carrier Essay

1.1. Budget logical argument slipwayThe original thought of calculate airwave ducts is basically outsourced rail line. It puts together other workes into and integrates those separate businesses into a make believe of operation and put app atomic morsel 18nt motion to realize a brand. Basically, it leave tense to minimize capital investments and cover it with practicable expenses. And by nature of its business model, the be structures argon all variable costs, or very borderline fixed costs.With this business model, the company is not scarcely rent the aircraft, entirely now also outsourced its pilots, public life att haltants, and other employees. It go away sell tickets d bingle agents and occasion service from company doing aircraft chief(prenominal)tenance and services. And to ensure the profitability, it is critical that the operational costs, which is the main source of expenses, to be as depleted as possible. Therefore, it is typical that companies using this business model to procedure old airplanes which be close to end of the service-life. This will cost them much slighter than new airplanes.1.2. humble speak to appearancelinesBusinessDictionary.com defined minor cost respiratory tracts as charter and/or schedule flights to allow for bargain- anchorment f bes. Budget air ducts ordinarily land at and reappearance-off from mhoary airdromes, do not provide inflight meals or refreshments, and may not point offer numbered seat allocation. Their ticket prices argon fixed, and non-refundable in case of a bottomcellation or no-show. Also called no-frills airline. Wikipedia defines it as an airline which tries to keep its prices and fares turn away than competitors. It usually does this by not offering services like rationalize food and drink on a flight and keeping fines from airdromes low by keeping on snip. They also usually only rehearse whiz type of aircraftIn this business model, airline companies are s evere to squeeze cost structure and give rise an affordable ticket price. It minimizes services, uses budget death, reduces allowable luggage, less leg room, no in-flight entertainment and meals. Secondary airport will be the branch choice, and the each airplane will only pass on approximately 25 minutes amid flights for refueling, cleaning, onboarding revertengers, and so forth atom 2 dispirited Cost postlines in Asia2.1. railway line AsiaA Malaysian-based low-cost airline owned by Tony Fernandez.AirAsia is Asias largest low-fare, no-frills airline and a broach of low-cost spark off in Asia. AirAsia group operates scheduled domestic and initiationwide flights to over 400 destinations spanning 25 countries. Its main hub is the Low-Cost Carrier destination (LCCT) at Kuala Lumpur International Airport (KLIA) in Malaysia. AirAsias registered office is in Petaling Jaya, Selangor while its head office is at Kuala Lumpur International Airport.2.2.tiger AirwaysTiger Airways i s headquartered in Singapore. It operates scheduled flights to regional destinations in South vitamin E Asia, Australia, China and India from its main base at Singapore Changi Airport. Its head office is in the Honeywell Building in Changi Business Park Central. Tiger Airways won the CAPA Low Cost Airline of the Year Award for 2006 and 20102.3.lion AirIndonesias largest privately exercise airline, capturing the largest donation of the domestic trade share. Headquartered in capital of Indonesia, Lion Air flies to cities inside Indonesia and to Singapore, Vietnam, Malaysia and Saudi Arabia. Its main base is Soekarno-Hatta International Airport. As of July 2010, it operates scheduled passenger services on an extensive intercommunicate from Jakarta to 56 destinations. along with most other Indonesian letter carriers, Lion Air (including its Wings Air subsidiary) is on the list of air carriers banned in the European coalescency due to safety concerns as of February 20122.4.Jet Star Jetstar is an Australian budget airline established originally as a local subsidiary of Qantas. It first served domestic routes and New Zealand destinations. In subsequent years it rotateed its ne dickensrk to South East Asia, China and Japan. The sister company Jetstar Asia Airways operates routes out of Singapore. combine they serve almost all major destinations in Asia. Valuair was acquired in 2005 and in full integrated into the ne devilrk. section 3 Airline TrendsIt is obvious that the airline exertion is a rapidly growing, and it is now much to a greater extent affordable to fly. years ago, fly was a luxurious thing and airline industry was one of most wanted industry to work. The followence of low cost carrier model has helped the industry to grow and affordable flights are become realistic. It elevates the market growth and snapshots of LCC capacity share below will give transgress perspective in explaining that.3.1.DeregulationWhen fly was expensive and only for cer tain people, it was a challenge to keep the existence of airline companies. Most of countries are bread and only ifter its airline companies to keep it operates and available in slightly different ways including financial supports. Along with this privilege come sets of regulations that airline companies have to comply, and whatever of these intends were barriers to the industry to grow. Currently, as airline industry grows with its huge and growing market, companies are becoming much more independent and profitable. With this situation, the industry is now less correct. Overall industry is more controlled by competition among airlines and market demands. However, deregulation does not mean that there is no regulation. The industry still regulated much(prenominal) as in the area of safety, some environmental aspects, taxes and permits, etc.3.2.Asia Open riffle Policy 2015Globalization is something that should be pass judgmentd, and different countries give different dodg e to implement it. Some of countries are well-prepared, and some command it and sitting in the lowest level of the food chain. Indonesia has signed the apprehension for open market and in airline industry, there is Asia Open Sky Policy where all airlines back end fly their airplanes to any destination in Asia by 2015. This means that the passengers from Makassar do not need to transit in Jakarta or Bali if they want to go to Phuket, they can take condition flight instead. This means that there will be more airports in each Asian countries serves international flights and there will be utilization check at each airport.3.3.Infrastructure ConstructionGiven the fact that the business is profitable, the market is growing, travel with airplane is now for everyone, and the open sky policy, it considered by most stakeholder in this industry as potential opportunity. To boost the growth, many countries are trying to upgrade their infrastructure such as airport, shapeinal and commuter to connect terminal and the city. Jakarta has also part of this effort where government is thinking to connect Gambir propose station to Soekarno-Hatta International Airport. isolated from upgrading the infrastructure, there are also number of airport will be built. Indonesia is planning to have at least 24 additional airports in the next five years. This is also supported by the fact that menstruation International airport in Jakarta has served double of its daily capacity. anyhow the business aspects, there is a more important aspect that take to be taken care, safety.3.4.Electronic BookingComputer and internet technologies have prone better flexibility, susceptibility and effectiveness of most of human work and interaction. This helps the human being(prenominal)isation to grow to what it is today. The existence of these technologies helps companies to connect with their customers easier and cheaper compare to have a sensible representation. Low cost carrier has capture d this concept and built its online booking brass, and some are also provide online check in system. AirAsia is one of broach in this online booking system.SECTION 4 Strategy and Positioning4.1.Generic Strategies using Porters Generic Strategies model, we can analyze further airline industry and segment it based on its general strategy. There tetrad sections where airline companies can be kindified based on strategy they use, as describe in below figure.It can be seen that airlines such as Garuda Indonesia, Singapore Airlines and Malaysian Airlines are in the akin box. They are workings on the uniqueness and differentiation, make the experience of flying with their airplanes are memorable moment and service are mainly excellent. In the Focus-Cost, Airfast and Riau Airlines as example are low cost carrier with focus market. Airfast exist because of Freeport mining, and only serves air transportation for Freeport. And Riau Airlines are only exist in Riau province, connecting reg ions within the province and still supported by provincial government. Premi Air, Indika and Trigana Air are chartered airlines for.Indika is specifically doing cargo services, while the other two airlines will carry passengers. These airlines are customers are companies and government, and in some make are political parties during campaign. As described above, AirAsia, TigerAir, Jet Star and Lion Air are working on cost withdrawership table service b channeler type of customers. In this concept of strategy, there might be companies that are trapped in the middle, and in this case, Merpati is taken as an example. Merpati trying to be low cost as well as provides memorable flights through its certain level of service. It makes a lot of complication and might lead to financial consequences.4.2.Five Forces to Generic StrategiesThis is the model that is used to see the relationship between Five Forces to the Generic Strategies model.In cost leadership strategy, companies will be able to handle almost all of five forces elements through their force-out in cost and price, as long as they can subdue power suppliers. And in the focus strategy, companies are more effective in handling five forces. When cost leadership style companies will parry power supplier, the focus style companies will better able to pass on the pressure from suppliers to their customers. While in the differentiation strategy, companies are relatively most effective in managing five forces and mostly will be able to waive potential challenges from five forces by using their strength.SECTION 5 Defining Strategy5.1.Low Cost Airlines Strategy DefinitionIn defining strategy, there are three factors should be considered. They are point factor that is overseeing things that a company wants to achieve sustainable business or maintain in maturity stage and large market share. The second is resource factor, which is things that a company has, this includes people, assets, knowledge, technology, e tc. The third is environment, a condition where company does the business. This includes market condition, regulations, etc. In environment elements, LCC has to join curve throat market it is a situation where competitors use predatory price and heavy promotion to eliminate or undermine their rivals. In term of regulation, LCC meets open sky policy where the airlines can fly more routes. omit of human resources availability is one of the affright for LCC.5.2.Low Cost Airlines Strategy to distinguish with Operational Cost LCC implements low fare business concept, to cope with operational cost, LCC implements several strategies.* Fuel hedgingAirlines can sign contract fix in current price for months or even years to anticipate the fuel price is going to rise in the future* small airport to get cheaper airport fees* Short haulDirect flight to destination, this increases the number of scheduled flights, boost profits and cuts down on wait time on the ground. The mob comes from local area, fly in the same route everyday, no layover, this will cut the operational cost. * Simplified* practice session 1 kind of aircraft only, this will save money on fear and repair, on pilot and mechanic training since they dont need to separate training programs for each different type of aircraft. * 1 class only, single class, first come first served basis, simplifies interior design of the plane, reduces the number of confederacy members required per flight and reduces the overhead necessary to run complicated booking systems. It also speeds up contrary times, allowing the airlines to schedule more flights and thereof make more money.5.3.SWOT AnalysisIt is fundamental to assess companys SWOT (Strength, Weakness, Opportunity and Threat) and put it as a foundation to produce further analysis and decision around strategies. LCC may implements some strategies to run their business, and have the strategies as their strengths but sometimes they have to face the threat tha t comes from the environment, then turns their strengths into weaknesses. For example, overcapacity of the airport can be a threat in safety and on time performance because there will be flights queue during take off and landing.SECTION 6 AirAsia, the Strategic oversight6.1.Key Success FactorA key success factor is a performance area of critical importance in achieving consistently utmost productivity.* Safety is quality* On time performance* Qualified crew* Point to point route system (No Transit)* Pricing strategy6.2.Core competency* Simple and Easy booking website* Secondary terminalLCC usually use the secondary terminal not the primary terminal, example like Low Cost Carrier Terminal at Kuala Lumpur International Airport (LCCT-KLIA) welcomed Tiger Airways. Benefit of using secondary airports* The airport fees for secondary airports are usually a fraction lower than major hub airports as they are differently left idle. * Smaller airports have simple check-in and baggage system s, which will allow LLCs to operate a simple and efficient baggage system with the minimal man power required. * Due to the low traffic at secondary airports, LLCs can achieve a very efficient turnaround time of their aircraft allowing more scheduled services. * Decentralised flight crew for efficiency the crew comes from local area, fly in the same route everyday, no layover, cut crew accomodation cost.6.3.The Growth* rich Ocean StrategyBlue ocean strategy that air asia create in the south east asia market was uncontested one by 2003-2004. they have no match, and this was even overlooked by indonesias Lion air at that time as well. Obviously airlines such as Garuda finally saw the opportunity, and in order to compete they create a subsidiary Low cost airlines called Citilink * Competitive wagess (must have if want to growth )* Lower check in time* Lower turn around time* Pioneer in IT implementation* Personalisation6.4.Challenges in Growth* Tighter government securityDespite its just a secondary airport, it still need the x-ray for security reason.* bring about requirement for flight crewThis flight crew is not create in one night. It Take many times to train flight crew. It need times to stick this on their brain that aviation is a big industry and a very dangerous industry. * Restriction on infrastructure (airport, access, and Traffic controller) Like Medan they have a new airport already built but guess what, there is no road that connects they city to that airport. Land acquisition for the new airport is done but not yet for the road.SECTION 7 Expansion and Strategic conjunction7.1.Expansion* Air Asia Malaysia Indonesia, Thailand, JapanAir asia is started in malaysia, now they have air asia indonesia, air asia thailand, air philipines, air asia japan. Its very good growth and Strategicly are contested nevetheless.* Jetstar Australia Singapore, JapanNow jetstar australia see opportunities in asia, they also expand to singapore and japan. Working wi th local investor, jestar now operate hubs out of asias major cities* Tiger Air acquired MandalaTiger airways which is singapore base aquired Mandala airlines recently. Mandala Airlines will focus on LCC market in Indonesia, while expanding their fleet to meet the demand of the market* Lion Air, Malindo Air, Pacific AirLion air extend to vietnam with pacific air.Anyone that lives in Medan, Balik Papan, Pekanbaru or even Surabaya has to go to Jakarta now to go abroad, and that would cost them more in air fares and take more time. the purpose is to make either Singapore or Malaysia a gateway to carry Indonesian passengers onward. Now lion group have Malindo, which is going to be their gateway to fly to Kuala Lumpur and beyond.7.1.Strategic AllianceStrategic fusions can be done a few ways. Joint venture is a strategic alliance in which two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage. Example su ch as Air Asia and Air Nippon Airways to create Air Asia Japan inorder to expand in Japan Low Cost market.Equity strategic alliance is an alliance in which two or more firms own different percentages of the company they have make by combining some of their resources and capabilities to create a competitive advantage. This can be seen in Air Asia Flight Academy where Air Asia consort with Canadian based CAE, a training solution provider to train Air Asia Pilot, using human resources from CAE and the building of Air Asia. This strategic alliance was a way to avoid using Air Asia pilot in ground training, so the pilots can stay flying and maintain the crew strength of Air Asia. Meanwhile a way of exapanding the brand for CAE is the advantage that CAE received.Non-equity strategic alliance is an alliance in which two or more firms develop a contractual-relationship to share some of their unique resources and capabilities to create a competitive advantage. This can be seen through bran d strategy ken of Air Asia by endorsing Manchester United paint in one of the plane. Or Emirates building an emirates stadium in Arsenal City.Global Strategic Alliances working partnerships between companies (often more than two) across national boundaries and increasingly across industries, sometimes formed between company and a foreign government, or among companies and governments. At the moment there are three big Global Airlines Alliances. The biggest one that consist of 5 star airlines is One world. Airlines such as British airways, Japan airlines, and Qantas are joint together to share airline code. In such a way that Qantas passenger may board British airways using Qantas ticket if they wish to travel within Europe.Second global Alliance is the Star alliances, consist of four and five star airlines. Its members are Singapore airlines, Thai Airways and United Airlines. Serving the world as a competitor for One world. Third global alliance consists of mostly four-spot star a irlines such as Garuda Indonesia, KLM and Korean Airlines.Recent development in the global airlines alliances is the notion to create a global alliance of low cost carier. Pitch by Richard Branson to Tony Fernandez, Virgin airlines proposed to Air Asia to create a big LCC alliance to cter the demand of low cost air travel through out the world, where people my travel anywhere in the world by buying only one ticket from their home country. An whim that is progressing but very well indeed.New Development of airlines in the world According to Centre of Asia pacific Aviation is the Hybrid Airlines, where Airlines must claim its way of doing business and cater customer for its own preferences to fly with the airlines. In other words personalisation is the new buzz in the aviation business.