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Value chain analysis at air asia

Air Asia is the next Malaysian national air travel which provides a completely different types of service called low cost no frills. Their eye-sight is to provide affordable price to all or any worldwide tourists with least in-flight service. thier price is just a bit less than to any other full service airlines. Before 2001 Air Asia does not take market or catch the attention of new customer due to its poor operation against the entire fledge service given by Malaysian airlines that was recognized by Malaysian federal. Turning point of Air Asia is at 2001 when this reduction making company bought by Tony Fernandez. Air Asia re-launched in Malaysia in past due Air Asia re-launched in Malaysia in past due 2001, with low priced home airlines.

Value Chain Evaluation:


The key activities in Porter's Value String are as follows


As inbound logistics requires different categories in air line industry for example how to program flights, keeping an eye on their rivals that what strategy they are really adopting how to support in market, and how to cut off their price as they take care of gas efficiency by purchasing it advance when prices are low, as well as how to plan routes as they mostly plan short routes so that their costs are low.


As air Asia largely uses their businesses through online as their ticketing process is very online and customer can get their tickets publication online and they can also print their boarding card of their homes, Air Asia uses general electric engine for his or her customer safeness as customers are the key preference of the company.

Air Asia has a solid brand name, nowadays marketing have a significant effect on any organizations sales, so Air Asia do advertisement by sponsoring "The amazing contest", and famous Manchester untied (mu) football club, painting a few of it's aeroplanes with club colorings and sports star, & most importantly leader Fernandes himself wear Air Asia official red cap and Tee shirt in almost every formal function.


Now a days retaining a customer is a difficult task so to overcome this Air Asia provide different type of services to it's customer like if airline flight is postponed by more then three time then u$ 61 e-gift voucher is given, traveler can also pre-book their examined baggage for less rate, and customers can also online reserve hotels, hostels, lease an automobile and medical services.


The value string analysis has some$ support activities as well. The support activities that Air Asia has to follow to keep their business clean and operational are;


Air Asia has a strong firm infrastructure they may have evolved from a classic lcc into an integrated service provider, they are simply centering towards their goals, they are really providing the least expensive fare, they are simply exploring new marketplaces, and decision making process is simple.

HUMAN Learning resource MANAGEMENT:

Air Asia employ the service of capable workers, and they assign multi skilled people so that they can overcome their price in term of real human learning resource and can maintain their company quest of low price airline, and they also compensate their employees in conditions of performance.


Air Asia uses different type of technology to minimize its cost and to make their operation easy and efficient, they are employing produce management system (YMS) which takes into account the operating cost and expected earnings, plus they also use computer reservation system (CRS) as it is web-based reservation and inventory system as it is a primary sale engine unit which eliminates the middle man, plus they also implemented venture resource planning system (ERP) which really helps to save enough time at month end closing, and speed up reporting and data retrieval functions.

Value Chain Research Diagram:


IT Problem:

Customer are facing problem regarding reservation tickets online, because their system aren't up to date if the airfare delay or terminated they don't have any system showing intimation to the customers. Some time cards are not accepted by the machine for payment, this may create trouble for the passenger to purchase.

Government involvement:

With growing needs of low cost carrier, Air Asia started penetrating more routes and connect up with more airports for instance In Singapore, Air Asia wanted to start the flights from the southern express of Johor, remember to entice the passengers by providing free bus service to the town state. Singapore federal did not allow providing bus connect to Air Asia by saying it had not been her countrywide interest. Government fears to reduce the changi air-port business, if Air Asia was included with that service, this suffer a huge damage to Air Asia.

Operating cost increased:-

Being an inexpensive carrier, there's always a danger either from other LCC or the entire service airlines to compete each other, in order to conquer the competitors, Air Asia developed value added service to the clients like internet check operating, with that one can enjoy printing their own boarding pass online, Air Asia not only give low priced tickets but also provide other financial services like travel cover, holiday packages, reserving services for hotels, car rental, and Citibank -Air Asia bank card. To maintain this kind of services required large amount. This increased the operating cost by producing value added service

High Labour cost:-

With increase in demand of low cost carrier, and extension of air road, there's always need to recruit new member too give better service for simple operation, it is now very difficult to employ people with low cost, repayment should varies differ to different market sectors. Being a low cost carrier, profit margin is merely 30% of Air Asia

Maintenance Hub:

As Air Asia doesn't have its maintenance and repair facility, as by duration of time and increase in amount of planes from 3 to 100 planes presently and about more 100 planes to received next season, so devoid of their proper maintenance hub it are expensive to the business.

Limited Human Source of information:

As to maintain it low priced competitive edge Air Asia goes with limited human resources so if some abnormal situation comes then it is difficult to handle the situation.

Flight Delay:

As when their flights are postponed then there is no proper route to communicate to the client or customer is not inform earlier

Fuel Prices:

Due to increasing in fuel costs, the air brand industry effects a lot in that case the operational activities of Air Asia also adversely effected.


Air Asia is concentrating on low cost and no frills to be on right route with fulfilling the organization goals. To contend with the market troubles and to face them following are some of the recommendations to improve the functional activities.

New IT System Implementation:

The company should execute IT system highly because the business enterprise of Air Asia is closely depending on internet, therefore they must apply Progress Planning and Scheduling system (APS). As APS system is capable in optimising operational planning, scheduling dealer portal, inventory planning, and demand per costing, maintenance management and route profitability which will help them to compete in the reduced cost market.

Staff Training:

Air Asia is selecting multi skill people, In case of difficult situation they ought to train their staff, Human Reference Development should take necessary steps by updating their workers through on job training as you will be charged effective.

Joint project with different low priced airlines:

As air Asia is an inexpensive air brand so to keep also to keep their customer stick with them they is going for alliances with different airlines in order to get access to different routes, and their cost should be low as well as there are different companies like virgin blue who want to extend service who wish to extend service to south east Asia, therefore air Asia can have a jv with them.

Self Maintenance :

As to maintain the quest of air Asia as an inexpensive carrier and no frill, it is must focus from different facets, maintenance and overhauling of the aircraft is the major

Operating activity, with the Air Asia needs its own hub and maintenance personnel rather counting on outsourcing. Originally it is costly but in the long term this investment would be feasible for the flight.

Flight delay:

To satisfying the customer is the essential importance for the service industry, if the flight is cancel or postponed the management should notify passenger on time or apologize by detailing the valid reason.

Frequent flyer program:

Loyalty programme should be bring in for the people who frequently soaring with Air Asia to be able to sustain them and flight should entail the devoted customer with the new future offers.

Additional Services:

Air Asia should add member lounge to take care of their frequent travellers plus they should provide extra entertainment through nominal charges to make smarter impact of airline. Air Asia also offers to start out in airline flight entertainment during brief haul plane tickets on customer demand.


Strength: -

They have strong relationship with administration and political leaders to operate easy function. They may have good management team who work proficiently with strong utilisation than it, so that each and every customer can reserve tickets online by choosing easy method. Air Asia penetrates more and more market for their low priced mentality, this help them to be low cost innovator in Asia pacific region. With strong working romance with specialists can help them to work easily in the country For example: dealing with Thai Perfect Minister Mr. Thaksin Shinawatra who holds 50% stake in the company help Air Asia to capture good market in Thailand.

Weakness: -

Air Asia don't have their own maintenance hub, in the beginning they began for few planes to maintain. By the passage of time, they have come up with 100 planes, but in future they are expecting another 100 planes. So they will be facing to maintain all the planes at the same time. It is one of the top disadvantages never to have their own maintenance hub. Second problem with Air Asia is one cannot change their, if it is postponed or get refund for the same and also charging more on baggage's to lower the price of fuel. Due to limited staff they cannot handle the difficult situation when arise. By providing low cost they neglect to provide basic service to the customers in order to maintain the profit percentage.


Explore more on Asian markets; there are Asian locations with population of more than 1 million that happen to be middle income, so they can be concentrating on more on middle class people. Jv with virgin blue group. This group want to increase their service to South East Asia, so Air Asia can have joint venture with virgin blue group to capture more markets with them. Increasing oil price which is often threat to all or any flight industry. But Air Asia does not have their customers already enjoying low price irrespective olive oil price goes up or down. Due to upsurge in growing demand of Air Asia customers. Potential clients produces for new routes for customers and even more numbers of international airport deals.

Threats: -

Some charges like Air departure, landing cost security charges aren't in charge of airlines operators. This threat is perfect for all airlines but especially to those airlines who are keeping their rates very low. Full service airlines can enter into any moment by lowering their cost. Because profit margin of Air Asia is 30% which is very less as compare to some other full service airlines. Problem might occur due to heavily count online sales, like disruption or any other fault can occur to system which may result on sales. There will be lack of assurance among customers scheduled to terrorist strike, accident, government plan etc.

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