Analyzing Air Asia’s Approach To Handling A Major Issue

Brief background of the chosen company

With the changes in economic condition, there are several problems and issues which are faced by multinational companies in Malaysia. In this report, Air Asia Airline Company has been chosen for this report.  This report focuses on the issues of the Air Asia Airline Company, critical analysis of the approaches taken by the Air Asia Company, and share price analysis and fluctuation of the share price of the company throughout the time.  After that implementation theory has been implemented to effectively manage the business in an effective manner. There are several suitable approaches and implementation theories have been used to improve the exciting work process of organization in an effective manner.  In addition to this, trend analysis has been done to evaluate and analyze the share price movement and return on capital employed available to equity shareholders. It is analyzed that Air Asia has been facing issues and problems due to external factors and increased business challenges in the online business market.

Air Asia Berhad Is the Malaysian Company which focused on the low-cost airline company indulged in creating the core competency in cost leadership strategy. The main headquarter of the company is in Kuala Lumpur, Malaysia. Air Asia Company is the largest airline in Malaysia in terms of fleet size and destinations. This company operates and schedules domestic and international flights to more than 165 destinations. Currently, the share price of the company has been traded at MYR 3.10 +0.14 (+4.73%) which has increased by 4% since last one year. The company gives 12% higher return to investors on their investment (Gumanti, et al.  2018). All the employees are accustomed to act as per the directions and instructions are given by Aireen Omar who is the present CEO of the company. It is analyzed that the company has grown effectively and developed higher profitability by focusing on cost leadership and product differentiation strategy in the market. The company has been leading the market with its advance attractive offers and discount and focusing on grabbing more market share.

Founded	20 December 1993; 24 years ago
Commenced operations Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	18 November 1996
Hubs	Kuala Lumpur International Airport
Secondary hubs	Kota Kinabalu International Airport Penang International Airport Kuching International Airport Senai International Airport Langkawi International Airport
Frequent-flyer program	BIG Loyalty Programme[1]
Subsidiaries	AirAsia X  Indonesia Airasia  Indonesia AirAsia X  Philippines AirAsia  Thai AirAsia  AirAsia India
Fleet size	89 (excluding subsidiaries)
Destinations	74 (excluding subsidiaries)
Company slogan	“Now Everyone Can Fly”
Parent company	Tune Group
Traded as	MYX: 5099
ISIN	MYL5099OO006
Headquarters	Kuala Lumpur International Airport Sepang, Selangor, Malaysia
Key people	Tony Fernandes, Co-founder, and GCEO of AirAsia Group Riad Asmat, CEO[2] Sasi And Co. Limited
Revenue	RM 5.01 billion/US$1.12 billion(1~3Q 2016)[3]
Net income	RM 1.574 billion/US$ 354 million (1?3Q2016)
Employees	17,000 (2016)
Source:-	www.airasia.com

(Gumanti, et al.  2018).

Air Asia Company is a low-cost airline company declared as world leading low-cost airline company in 2014. Despite its entire success and core competency in cost leadership strategy, company has been facing a decline in its profit due to the crash of Airbus 320-300This crash was the biggest issue which hampered the turnover of the company and reduced the profitability. The sales price of the company dropped by 12% which eventually decreased the profitability of the company as well. The main problem which Air Asia Company faced was related to its increased business losses. This was the major problem which not only hampers the profitability of the company but also increased the financial leverage at large. It was assessed that the company had to face high financial leverage as its increased interest payment was not covered by its earning proficiency. It was found that Air Asia Company had to face high financial leverage in its business. In addition to this, as a consequence of the incident, fair price drastically dropped and it hampered the business outcomes and lower down the return on capital employed (Dennis, 2015).

Description of the problem

Basically, there are following problems that have been faced by the organization in its business (Dennis, 2015).

• Decreased in its fair after the incident which eventually lower down the profitability and also negatively impacts the business outcomes.
• The company has been facing high financial leverage in its business as it is failed to cover its interest payment out of its available earnings before interest and tax.
• The high complexity in its business process also increases the costing and the total turnover of the company is lower than its business production costing.

Source:- (Reddick, Chatfield, and Brajawidagda, 2016).

The above give graph shows the occurrence of the incidents, a person who died and the possible issues which were faced by the organization due to the flight crash (Gumanti, et al. 2018).

AKARTA, Indonesia (UPDATED) –

Tuesday, December 1st crashed air Asia flight QZ 8501 went down in Java Sea.

Tuesday, December 1, 2015

A report released for the crashed air Asia flight QZ 8501

Saturday, November 14, 2015

The result of the investigation was started.

It was done for,” Soerjanto Tjahjono, head of Indonesia’s National Transportation Safety Committee, told AFP.

Tuesday, March 17, 2015

Search and rescue team stopped searching the dead body with 56 people still unaccounted for.

Saturday, February 28, 2015

Indonesia retrieved the final major part of the fuselage of the jet.

There are several approaches which could be used to mitigate the problem issues by the Air Asia Company to handles and issues and challenges of the Airplane crash case. However, the Situational crises communication theory backed by Apollo Root Cause Analysis Method was used by the company to mitigate the problem and encounter the issues arise from the problems. In addition to this, in order to manage the financial issues, the company implemented the capital budgeting approach in which all the inflow and outflow of the cash was managed. These two theories were undertaken with a view to assessing the impact of the financial issues and the root cause of the plan crash (Gumanti, et al.  2018).

In this study, the organization will consider many approaches and theories to critically evaluate the situation and make reliable decision named Apollo root cause analysis theory and crises response strategies as it is discussed by following table and chart:

After assessing the plan crash and financial distress in business, it was found that it was the issue or crises arise due to the human errors, mechanical issues and other affecting factors (Lim, 2017).

Crash Issue	Air Asia flight QZ 8501 went down in the Java Sea due to the engine failure and destruction of the plan system process.
Human errors harm	Employees in the system checking department and failure of the pilot to identify the right root towards the destination. Nonetheless, there were no proper steps which could be used by a company to identify the issues and problems.

Types of issues	Impact on the business of Air Asia
Plane Crash case	High impact on profitability.
Technical error	Causes to the technical process issues.
Preventable Cluster	Human errors, technical issue, and Misleading indication.

After assessing the details, it is found that plane crash case of Air Asia was the biggest failure of Company and impacted the profitability and overall turnover of the flights. This was arising due to the human error, non-effective internal control system, and system failure.

As per the preventable cluster, the company should follow proper communication and system design methods in which all the human errors and mistakes could be identified and rectified in a timely manner (Lim, 2017).

The crises response approaches could be imperative for making a solution in the favor of certain issues named Attacking the accuser, Denial, Scapegoating, Excusing, Justification, Compensation, Compensation, Apology, and Changing the financial structure. These are discussed as below:     

Particular

Denial posture

Attacking the accuser

The accidental support department managers will check the case and possible issues which are found.

Denial

It could be revealed to cause arise from natural disaster.

Scapegoating

Putting blames on others outside the organization.

Excusing

Showing human errors and issues in machines

Timeline of the Air Asia Crash case

Justification

Justify by saying that mistake occurred due to the act of god.

Compensation

Compensating to a relative of the dead.

Apology

Showing show causes notice.

Changing the financial structure

Focus on reducing the debt funding to lower down the financial leverage.

After assessing the details and case study, it could be inferred that Air Asia should have followed root cause which led to the air flight crash case. However, there could be some improvement which could have been followed by AirAsia Company to strengthen its business functioning and mitigating the same issue in the future (Brajawidagda, Chatfield, and Reddick, 2015). The following table demonstrates the methods and ways by which organization could be capable to improve their existing plan crush issues and research at the valid conclusion:

Basis	What AirAsia has done	What Air Asia Should have done
Use of proper check program	Air Asia failed to manage its quality check and system failure check program	There should be a proper mechanism to check every flight and its engine.
Use of capital budgeting technique	The company failed  to use capital budgeting technique and used top-down analysis	It should have used the capital budgeting technique to accept the particular project to strengthen the financial leverage.
Rebuilding strategic program	The company puts the entire allegation on the pilot and revealed less information related to a case.	It should have disclosed all the failure and improvement plans to reduce this sort of issue in future from happening.

There are several other suitable approaches which could have been used by Air Asia Company to handle the negative outcomes of its crashed air Asia flight QZ 8501 and rebuild the trust of its stakeholders. However, the crashed air Asia flight QZ 8501 plane should not be underestimated and other models and approaches should be followed to improve the existing plane performance (Reddick, Chatfield, and Brajawidagda, 2016).

This model could lead to comprehending certain factors named potential consumers, sales, and actual customers. This model assists the organization for more development in the working place by considering the computer simulation.  x`

Strength	The developed decisions based on the depth understanding and identifying the root cause which could negatively impact the brand image.
Practice by	Toyota
Weakness	Increases the complexity and high cash outflow which increase the business costing.
Expected outcome	Identifying the why factor to evaluate the crashed air Asia flight QZ 8501 possible issue and its route cause could be identified (Gumanti, et al. 2018).

After assessing the issues, Air Asia will develop a plan and business program to implement the strategic program to develop strengthen quality control program (Koo, Caponecchia, and Williamson, 2018).

From the application of this approach, an organization would be capable to determine the return on investment and risk. It could be effective for improving the existing financial situation of the firm.  It will show the critical output and return earned by a company out of its invested capital. This capital budgeting approach reveals the possible issues and financial leverage of the business.  This capital budgeting tool allows Air Asia Company to identify which investment option would give a higher return on invested capital (Khalo, and Bayaga, 2015).

This approach is highly accepted as it helps in identifying the issues and reducing the negative impact of the identifying issues in business (Rossetti, and Dannenhoffer, 2018).

Strength/ Assumptions	It first finds the problem, organizes a team, clarifies the issue, understands the problem, and select a solution for the identified issue.
Methods and tools	It implements the six sigma quality check, financial analysis tool and CATWOE tool to mitigate the possible issues in
Practiced by	NY Pearl River and The Boeing.
Weakness	Complicated to use and based on the gathered data.
Expected outcomes	It is beneficial as it will help in the implementation of the pre-check program and also assist Air Asia to prepare the effective financial strategic program (Hernández., and Donoso, 2017).

Best approaches to Air Asia Company 

After assessing the best approaches of decision making and problem-solving approaches, it could be inferred that focus approach is the best useful approach for the Air Asia to solve the possible problems and issues in its business. Its focuses on identifying the root cause of problems and implement the possible best course of action which could mitigate these issue to happen again in the future (Navarro, Cortes, and Galaz-Larios, 2017).

Authors supported focus model	Basis
K.Sing, 2010	The focus is the systematic approach which focuses on the financial and non-financial information to assess the root cause of a problem.
Mary Kersitn, 2015	It tests various opportunities and finds a solution to issues in an effective manner based on the gathered data.
Patricia, 2014	It is a client based model which allow the company to more focus on client satisfaction and their safety.

Basis	Follow of focus model	Application of focus model
Find	Identify the problem and root cause of the issue	The issue was crashed air Asia flight QZ 8501  which could be identified while checking the engine before the plane fly.
Organize	Setting team and meeting on a regular basis	Assess the past results and implement effective strategic decision making.
Clarify	Broken down the issues and problems in subparts.	Implement the strategic approach to meet the sub-objectives.
Understand	Identify the potential problem and issues.	Use of primary and secondary sources of data.

There have been high ups and down in the share price of copy due to the current market condition and sluggish market factors. However, the share price of a company is highly dependent upon the profitability, earning, return on capital employed, dividend offered to shareholders. It is analyzed that share price movement of Air Asia Company has changed throughout the time and increased due to the increased demand of its flight services in the market. It is analyzed that the profitability of the company has decreased due to its lowest fair (Cost leadership strategy in the market. After the crash, the share price of the company went down drastically but due to its increased business turnover, the share price of a company is copping up in the market and strengthens its business value (Lahmiri, and Boukadoum, 2016).

Description of the approach used

Source:https://www.google.co.in/url?sa=iandsource=imagesandcd=andcad=rjaanduact=8andved=2ahUKEwj3v_KX5ufeAhUISX0KHVofDpoQjRx6BAgBEAUandurl=https%3A%2F%2Fklse.i3investor.com%2Fblogs%2Fkianweiaritcles%2F101635.jspandpsig=AOvVaw28ekssnKfqiK5KzFpSHcUjandust=1542969157506503

source:https://www.google.co.in/url?sa=iandsource=imagesandcd=andcad=rjaanduact=8andved=2ahUKEwiFtvXt5ufeAhWJL48KHUGsAZ4QjRx6BAgBEAUandurl=http%3A%2F%2Fwww.theedgemarkets.com%2Farticle%2Fairasia-x-ceo-focus-now-win-market-shareandpsig=AOvVaw28ekssnKfqiK5KzFpSHcUjandust=1542969157506503

As per the increasing return on capital employed and increased turnover, investors have positive outlook for Air Asia. However, if investors invest their capital in Air Asia in long urn then it will increase the overall capital value in long run (Savery, 2015).

Sources: https://www.marketwatch.com/investing/stock/airasia/charts?countrycode=my 

The implementation theory focus on the deigning of the mechanism which set the equilibrium outcoto mes satisfy a creation of social optimality embodieda  in social choice of rules. The implementation theory focuses on the new challenges and issues which company could face if it adopts the new technologies and strategic planning such as merger amalgamation and expansion of the business (Field, and Long, 2018).  There are two types of implementation problem in Air Asia if implementation theory is adopted such as economic problem of producing and allocating public and private goods choosing oa ver finite set of alternatives.  The main implementation problem of company is to increase the profitability and increasing the return on capital employed. Air Asia Company needs to lower down its financial leverage by reducing the debt funding and also implement the strategic program to expand  business (Choi, and Robertson, 2013).

 

Source: https://www.dstockmarket.com/technical-analysis-of-airasia-berhad.html 

Furthermore, it is evaluated that there are certain steps  that could be considered by the firm to implement the strategy named establishment of yearly objectives, formulation of rules and regulation for the strategy implementation, resources allocation, actual performance of activity, and leading and controlling the activity performance of acts in different level of the firm. Apart from this, it is also evaluated that organization should also consider factors that could affect to strategic implementation like people, resources, structure, system, and culture. It is evaluated that Air Asia organization could deeply analyses financial budget could be imperative for the accomplishment of their desire goal.        

Conclusion

After assessing the real issue of the AirAsia Company in its business operation with its problem solving methods and approaches, best approaches for mitigating the issues of company have been given. The focus model approach should be accepted by company to strengthen its problem solving method which will not only align the interest of the stakeholders but also althe low company to spot the issue at its spot. In addition to this, share price of company will also increase in future due to its increased turnover which will a be positive indicator for investors to create value on its invested capital. It can also be concluded that the stock market situation of Air Asia has been changed over the time period. From the technical analysis, it can also be concluded that techniques could be crucial for effecting the overall situation of the firm. It can be suggested that organization could mainly consider this elements to make amendment in ups and downs.

The main recommendation is that the issue was crashed air Asia flight QZ 8501 which could have been identified while checking the engine before the plane fly. This was the biggest failure of the company which negatively affected the brand image and financial performance of company for the particular time period.  Air Asia Company should focus on using the FOCUS Model to mitigate these sorts of issues. Nonetheless, investors should invest their capital in Air Asia in long run if they want to create value on their invested capital (Bada et al. 2012). There should be more proper quality check process and engineers who could understand the ake proper cheek system before the operation. It can be recommended that organization should use modern technology for firm to improve their issue and make reliable decision. Further, it is evaluated the that organization should make uncertain policy towards the upcoming issue as it would be effective for declining the possibilities of failure form the working place. It can also be suggested that organization should use digital training and development method and improve skills of employees to attract stakeholders and increase the possibilities of getting positive result.               

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