AirAsia Berhad is a low-cost airline carrier based in Kuala Lumpur, Malaysia. It is the largest airline in Malaysia by the number of planes operated. It started in Malaysia and soon expanded to other Asian countries like India and Thailand. AirAsia was established in 1993 and commenced operations in 1996 and it operates scheduled domestic and international flights to over 165 destinations spanning 25 countries. Its main hub, Kuala Lumpur International Airport 2 (klia2), is built to allow seamless connectivity for local and international low-cost and full-service carriers.
Klia2 officially opened on 2 May 2014.
According to World Airline Awards, Air Asia is ranked first for the best low-cost airline in the world for 2019. This marks the 11th year for Air Asia for emerging as the top.
AirAsia is different as compared to other low-cost carriers due to the marketing of their products. It is pioneered in low-cost traveling. According to the founder of AirAsia, they have found different ways to gain an edge in marketing.
They tried routes that no one has done before and from one flight a day, they have now reached 22 flights a day. (Singapore Business Insider, 2018) Their vision is “To be the largest low-cost airline in Asia and serving three billion people who are currently underserved with poor connectivity and high fares”. Through their core belief which is “Now everyone can fly”, they have managed to gain a bunch of loyal customers. Due to all these underlying factors, AirAsia became a very well established brand in Asia.
AirAsia has also won the Best Marketing Campaigns at the ASEAN Tourism Association (ASEANTA) Awards for Excellence.
They managed to win this award due to their “Think ASEAN, Think AirAsia” campaign. The campaign includes a photograph lookbook and devoted posts of must-see spots in ASEAN via web-based networking media and Travel 3sixty online platform, featuring AirAsia’s ASEAN-propelled inflight menu and a YouTube video arrangement on activities and delicious food to eat in all the ASEAN nations, supported by promotional fares which go as low as RM10 to all Asian nations. (The Edge Markets, 2017) Other than winning the best marketing campaign,
they have also been voted the Skytrax World’s Best 100 Airlines for 2019 by airline customers around the world.
The core product for Air Asia will be its low-cost flight rates and providing consumers with more than 165 destinations to choose from in 25 countries.
Facilitating products are services or goods that must be present for the customers to use or experience the core product. AirAsia’s facilitating product would be its website, aircraft, different classes of seats to cater to different consumer’s needs and wants. The check-in counters and the self check-ins/online check-ins play an important role in supporting the core product as well.
All these facilitating products provide ease when checking in, also fulfilling the consumer’s physiological needs (Maslow’s Hierarchy of Needs). Even with all these different selections/upgrades, Air Asia still provides minimal price difference to fulfill its targeted travelers, price-sensitive travelers.
Supporting products are extra products and services that are offered to add value to the core product and are used to differentiate the company from the others. It is to offer a competitive edge over the other low-cost airlines. For example, AirAsia offers the AirAsia Premium Red Lounge which has an area where their guests are able to chill and relax as well as continue their unfinished business before resuming their flights on AirAsia. It has many services such as free WiFi to surf the internet, work station area to catch up on their work, charging area to charge their electronic devices, food and beverages, and VIP rooms etcetera. The facilities and amenities provided at the Premium Red Lounge will help to improve the guests’ experience before their guests take off. It will help AirAsia outshine its competitors by creating a comfortable space for their guests to meet their needs and wants.
The augmented product includes atmosphere and consumers’ interaction with the service organization and each other. In Air Asia’s Airbus A330, they offer premium flatbed seats where it can be converted to a full flatbed when desired and other features such as complimentary meals, priority boarding, inflight entertainment, and lounge access which will provide comfort for travelers on board, especially for long-haul flights. The twin seats offered by Airbus A330 also caters to couples and best friends with no middle seat, these travelers can get to enjoy maximum privacy with each other.
These features allow travelers that are traveling with AirAsia to have a more comfortable and unique experience despite being a low-cost carrier airline.
AirAsia’s fundamental product strategy is based on low-cost services. It is known for its cheap and affordable price to various destinations. AirAsia would usually set an extremely low price for flights to new destinations in order to capture a large mass of market share. The low fares provided would be proficient enough to attract a large number of customers who are price sensitive.
For AirAsia, a two-way flight from Kuala Lumpur to Bangkok costs about S$276.20 (Figure 1.0) whereas, for Scoot, another low-cost carrier operating in Asia offers a two-way flight during the same period of time at the price of S$350.40 (Figure 2.0). This comparison shows that AirAsia offers a lower cost as compared to Scoot, by S$80, which is relatively lesser and more value.
Internal factors that may have an influence over AirAsia pricing could be the products and services offered In return for the low fares, AirAsia offers no-frills services, frequent flyer miles or airport lounges. They also do not offer complimentary drinks or meals, instead, they sell food and beverages at an affordable price onboard. Another factor could be their costs. By bargaining for low lease rates, they have managed to achieve low fixed costs for its long term maintenance contracts and low airport fees. This allows AirAsia to reduce their expenses and investments in machinery in the absence of fringe services.
External factors would include competition, nature of the market, and demand. As there are other low-cost carriers present in the market, this may cause a threat to increase competition between these low-cost carriers. Hence, AirAsia has to come up with new strategies in order to stand out from its competitors. With competitive pricing, the airline will then be able to successfully differentiate themselves from its competitors and attract customers who are looking for cheaper and value alternatives.
AirAsia distributes its fares and ancillary services through a global distribution channel known as Travelport GDS. This allowed them to extend their low fares to even more travelers through GDS. Travelport-connect agents are able to search and book airline tickets at competitively low prices and common ancillaries such as check-in bags and advanced seat selection. AirAsia has been also partnered with Expedia and AirAsia Go. Both are travel portals that allow passengers to book flights and hotels online. In addition, they also have 161 sales offices across Asia for the convenience of walk-in customers.
Promotion is the publicizing of a product, organization, or venture to increase sales or public awareness. Promotion includes 4 different categories which are advertising, sales promotion, personal selling, and publicity. For instance, under the category of sales promotion, Air Asia has been having the “Best Deals from Singapore” promotion. This promotion offers lower flight rates to selected destinations such as Kuala Lumpur, Bali, and Bangkok. Air Asia has also been advertising their company through various social media platforms such as Instagram and Facebook. Their advertisements have always been very attractive and eye-catching by using red and putting.
Competitors of AirAsia include other operating low-cost carriers such as Scoot, Jetstar. AirAsia’s primarily operates in Malaysia, its original and most profitable market, which is now disrupted as its rival low-cost carrier group Lion launched Malindo Air. Malindo Air competes for the same group of consumers, specifically those that are price-sensitive. LCCs usually operate across the same market and offer similar prices. As such, AirAsia would have to ensure that they maintain a competitive edge over other existing LCCs since the selling point is affordability. Cost is another factor that affects LCCs. Security charges and landing charges are additional costs that all airlines are subjected to pay to be able to land or take off in an airport. These become a threat to airlines, especially LCCs as they mainly tap on cost reduction thus these extra charges may hinder their cost and affect their profits. For example, Changi Airport charges SGD21 for every person who departs from Singapore. Low-cost carriers will then have to compete and implement strategies to minimize the impact of additional charges to keep costs low so they can offer low prices to customers.
Nowadays, consumers’ behavior is becoming more dynamic. There are many types of travel purpose and duration, short and long, and as there are many countries around the world, the demand to travel to more exotic places is also increasing. When the demand for normal travel destinations decreases, airlines will have to change their approach and allow more flights to a new and interesting destination. If an airline fails to do so, they may make a loss as potential consumers will choose another airline that offers what they want. Consumers’ behavior differs based on different market segments such as family, an individual, retirees, and many others. It is difficult for an airline to meet the demand for these consumers.
AirAsia’s main market group is comprised of leisure travelers. In this case, they are missing out on profiting off business travelers. Leisure travelers’ demand tends to fluctuate based on seasonality as well as the economy. This means that they are not as stable when compared to Business travelers and lose out on potential revenue.
There has been an increase in oil price and this is an opportunity for AirAsia. Compared to other carriers, low-cost carriers like Air Asia require less oil to operate. This is because high-cost carriers are usually larger than low-cost carriers. Hence, low-cost carrier’s oil will still be lower as compared to other high-cost carriers. They can use their lower cost as an advantage and price their tickets strategically to attract more price-sensitive customers. This is an opportunity for all low-cost carriers so, with the right planning and pricing, Air Asia will be able to have a competitive edge over the other low-cost carriers.
AirAsia’s strategic partnership with Palantir, a data analytics company. The aim of this strategic partnership is to enhance operations” efficiency and implement tailor services that are more customer-oriented and data-backed. Data is the biggest asset retailers own hence it is important that they make full use of it by thoroughly analyzing them to use it to their advantage. Overall, these partnerships are highly beneficial as both parties are able to leverage off one another and be able to improve brand visibility and reputation.
One of the marketing strategies that AirAsia use is the AirAsia ASEAN pass. For example, customers have the option to choose the blue or red pass which offers 10 and 20 credit respectively such as paying $209 for a 10 credit pass. How it works is that with the pass, customers can pay for their flights in terms of credit. When they start to use the credit, the remaining credit has to be spent within the given time period the pass has. The cost to travel to ASEAN countries ranges from 1 or 3 credits. This enables the customers to save a lot of money as a one-way flight from Kuala Lumpur to Bali can cost up to $496.32 (Figure 3.0) but using the pass will only cost 3 credit and there will still be remaining credit to use. It also allows customers to properly plan their trips as they have to use it within the time frame. Customers are not allowed to travel to the same destination using the same pass more than once. This strategy attracted many customers, especially those who are price-sensitive, for AirAsia as it appears like a really good deal. In addition, this pass helps to promote AirAsia’s guests to travel to Asian countries which help to raise awareness of Asian countries.
Can include this pass is aimed at people who travel within the Asian countries a lot. People that go backpacking across Asia. Those who may want multiple destinations for holidays. People who travel between Asian countries a lot for work.
AirAsia focuses on operating sustainably and efficiently in various aspects of its operations.
Ensuring that boarding passes are printed on thinner papers, encouraging online check-ins. Tapping on the pre-purchased meal so that food wastage is kept at its minimum and only served to passengers who really want to consume in-flight meals only. Furthermore, in early October 2018, Air Asia, announced a new policy to reduce the usage of plastic on-board by encouraging passengers to finish their meals so that there won’t be a need for plastic bags to carry their meals when they’ve alighted at their destination. Apart from the minute aspects Air Asia also places emphasis on the aircraft itself and the amount of fuel consumed per flight. Since 2016, they have been conducting a careful selection of more fuel-efficient aircraft to join its fleet. For instance, Airbus A320 Neo has a technology that saves 15% on fuel consumption compared to the original A320.
With the pass now, pass holders are not able to make last-minute bookings as the pass only allows the booking of flights at least 14 days before departure. Therefore, allowing pass holders to book flights up to 5 days from departure will make it more convenient for them to book flights and plan their schedules. This will also make it more flexible for pass holders to plan their holidays without delay.
Not all flights are available for pass holders. The flights available are mostly early morning flights or late night flights. Therefore, it may be inconvenient when traveling with friends or family members that do not own the ASEAN pass as pass holders don’t get the same flight options as everyone else. The limited flight availabilities will make the pass benefits seem less attractive as it does not provide flexibility to the pass holders. AirAsia could alter the selection of flights for pass holders to have a fixed number of flights selection throughout the day on a daily basis.
AirAsia does not show the number of flights left for redemption which is very inconvenient if one is planning to travel with family or friends. As pass holders are limited to one redemption at a time, if the selected flight has only 1 redemption left which has already been redeemed, their friends with the Asian Pass might risk the possibility of redeeming the same flight. Hence hampering their traveling plans.
The above recommendations are aimed to make the AirAsia ASEAN Pass seem more attractive and value for money. Many improvements can be made to this marketing campaign as the shortcomings of the campaigns may make it seem like a gimmick rather than a value for money deal.
In terms of marketing strategies, Air Asia has been rather successful in their marketing strategies for instance, creating a mobile application that is user-friendly. Despite being the world’s best low-cost carrier airline, Air Asia is still planning to expand its fleet in 2019 by adding 25 planes as well as introducing new products to consumers.
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