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3. Alternative Strategies Selection process: a)



Build Strengths-Weaknesses-Opportunities Threats (SWOT) Matrix



SWOT ANALYSIS MATRIX – AIR ASIA AIRLINES STRENGTH



WEAKNESSES



1. Attractive business model – Low Cost 1. No heavy maintenance facility Carrier (LCC) with lean, simple and Air Asia is currently outsourcing all of its efficient operations. heavy maintenance – MRO facility Three attributes that contributes to its (maintenance, repair and overhaul) to several success which are simple product (which ranges of providers including Sepang Aircraft offering to only one class and narrow Engineering (SAE). seating), positioning (which generally targeting on non-business passengers), and 2. Challenge in balancing service quality with low operating costs (widen its margin while pricing maintaining its productivity). Being low-cost airlines has put Air Asia’s customers on position of not willing to 2. Well established LCC with international compromise on the service quality. With subsidiaries 83.5 million passengers catered for the full It has 8 international subsidiaries across Asia year of 2019, it is an ultimatum for Air Asia region which are Indonesia, Thailand, to preserve a high quality service for all its Philippines, India and Japan. passengers. 3. Broad destinations 3. Difficult in sustaining costs Air Asia Group operates with route network Another challenge to tone the cost down is to spanning 25 countries with 165 destinations. sustain the cost as low as possible. In the case of crisis, where fluctuations in fuel and 4. Mass fleeting other prominent costs, and an increase in It has an overall of 282 fleet size with service costs, it is hard for Air Asia to sustain approximately a total of 266 is Airbus A320 its costs. which accommodate 140 – 170 passengers. 4. Less routes provided as compared to 5. Strong Promoter market leaders in Asia Air Asia invested a lot on marketing efforts Although Air Asia is listed among the top 10 of which mostly can be seen through its big Asian airlines, it only covered 165 destinations collaboration campaign with international globally compared to other Asia market leaders. names such as Taylor Swift, Manchester United, AT&T Williams Formula One team, 5. Stiff competition in its sector etc. Most current airlines companies are expanding their strategy from focusing a single segment to 6. Powerful brand offering several segmented services. For Air Asia is a brand name wholly owned by example, national airlines are now providing Tune Group. Indirectly, they were flying alternatives such as introducing the lowannouncing to the world that the main goal cost carriers through its subsidiaries (Lion Air, is to conquer Asia, and the brand name itself Southwest, Ryanair, SilkAir). explains the whole thing. 6. Difficult in retaining loyalty 7. Up to date with technology and Among the consequences of being a low-cost



innovation Among the key successes of Air Asia are its adaptability towards innovation and flexibility. Through integration of digitalization into its management, Air Asia has built new revenue stream such as BigPay (digital banking and money application) and Teleport (cargo and logistics service). 8. Outstanding stakeholders Its team management comprises of professionals from strong and various industries and background. Air Asia also obtained strong influence towards governments and affiliates, for example, strong working relationship with Airbus company which assists them to purchase aircraft with much reasonable price and also designated airports at several regions.



airlines is that customers have little brand loyalty, whereby airlines generally compete on price rather than quality. Although Air Asia has launched its loyalty programme known as “Big Member”, as LCC, passengers are still priorities fares over those. 7. No government intervention on the regulation of airport deals Air Asia has been voicing out towards Malaysian Aviation Commission (Mavcom) regarding issues on the standardization of the passenger service charge (PCS) between KLIA and KLIA2. This is due to high charges and poor infrastructure provided at KLIA2 terminal, which it resisted a regulatory ruling tat it should pay the same PCS as airlines using the main terminal at KLIA.



9. Strong financial performance Based on its 5-years financial and key operating statistics (for year 2014 – 2018), Air Asia has illustrated positive growth rates in its margin, return on shareholders’ equity, including its net cash flow. 10. Good return on ancillary sales Air Asia is excellent on earning from its ancillary sales which made up of 22% of their total revenue in 2019. OPPORTUNITIES



THREATS



1. Growth of middle income consumers For all Asia developing countries, 80% of its 45 economies in the World Bank classification are middle income consumers. The share of the lower middle income is higher than the upper middle income in the region.



1. Global Pandemic COVID-19 has given a negative impact towards tourism and other related industry. Due to restriction in movement, less people are commuting through airlines. This has also given an impact for Air Asia, as they have decided that several staffs comprises of engineer, pilot and air crew will have to be retrenched to reduce the losses incurred due to COVID-19.



2. Increasing traffic from Asia Based on Travel and Tourism Competitiveness Report 2019, Asia-Pacific has the largest aggregate domestic travel market. Such rise may be factorized by lifestyle trend and costconscious travellers. 3.



Technological industries



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2. Alleged corruption and scandal In the recent allegations which are the probing corruption on the aircraft purchase and also sponsorship deal for a Formula One team, Air Asia shares has fell as much as 11% on February 2020 - their lowest since May 2016.



Every transaction nowadays are made through online. Each online marketing campaigns directly affect consumers purchasing power, depending on its effectiveness in fascinating potential customers. An interactive web and friendly users interface are among the essential features to encourage spending. 4.



Ancillary source of revenues in the airline industry Apart from flying service, other revenue streams can also be ventured by the market players, such as merchandising, dining, hotel, etc. 5.



Tourism: One of the world’s fastest growing industry Due to emergence of nations such as China and India, the newfound freedom of its citizens to travel is finally lifted. 6. Industry shifts An industry consolidation in airlines allows to open up prospects for new routes and airport deals, which leads to key productivity benefits. Recently, it is an option for MAS and Air Asia to merge due to COVID-19 impact. The aviation expert viewed that the low-cost air travel will remain largely unaffected if Air Asia were to cease operations. Such consolidation will boost Air Asia’s value in the market in the long run. 7. Long haul flights With vast experience in running LLC business model, Air Asia may tap those into the long haul flights option, as there is fewer airlines across Asia that provides such service. 8. Higher fuel costs A fluctuated fuel costs may indicates less profitable competitors in the same business model. 9. New route expansions To venture and exploit growing markets across Asia such as China and India, where there is fewer competitors’ positioning. It also builds good connection with that certain market by helping them to boost its tourism industry. 10. Customer’s trend The rapid changes in consumers’ trend based on



3. Rising Fuel Costs The uncertainty in fuel prices, which swings wildly based on oil price, will have a direct impact towards Air Asia future financial projection. As it offers low-cost pricing, fuels are among the top supplies needed in its operation and the price of fuels is directly affected its pricing decision. 4. Rising Labor Costs In 2016, labor costs had surpassed fuel as global airlines’ biggest single expenses. As airlines have been up in its margin, the workforce has gained a market power which substantially pushing up the cost of labor. 5. Internet Transparency Currently, the cost of flying continues to trend lower as the internet has exposed price transparency to consumers, which creates stiff competition and pushing them to reduce its margins or focus on volume. 6. Rise of other LCCs in the market Consumer’s trends and lifestyles tend to change over the years. Aside from Air Asia, other airlines also tend to change its competitive strategies by implying similar business model. 7. Political Risk Several countries in the world are facing series political issues, which put a risk on its nation’s safety and government decisions. 8.



Accident, terrorist attack and natural disaster The following unforeseen incidents may be a threat to customer confidence, for instance, Malaysia Airlines flights MH 370 and MH 17 had put MAS credibility on jeopardy for several period.



its lifestyle and exposure, especially among the middle income class, most of them tend to travel at least one a



SWOT ANALYSIS MATRIX – MALINDO AIRLINES



STRENGTH



WEAKNESSES



1. Attractive business model - LCC Mutually owned by a Malaysian company and Lion Air, the top discount carrier in Indonesia, Malindo Air is tapping Malaysia’s market by offering low fares with added values. This eventually putting themselves at par and at competition with the dominant LCC, Air Asia.



1. Small fleet size Malindo Air only consists of 38 fleets, which mostly is Boeing 737 that can only accommodate maximum of 180 passengers at a time.



2. Powerful group company Lion Air is among the largest low cost airlines in Southeast Asia with astounding reputation. Although Malindo Air is just starting in Malaysia on 2012, being a Lion Air does subsidiary perceive those existing and loyal passengers of Lion Air to have similar perception towards Malindo Air.



2. Unagressive marketing Unlike Air Asia, Malindo Air is not aggressive in promoting its service. Even in social medias, push notifications and emails, there is less activities and information provided by Malindo Air. 3. New kid on the block Being relatively new to the market, it took several years more for Malindo Air to be at par as its prominent competitor, Air Asia.



3. Reasonable add-on services The basic package is inclusive 30 kg baggage allowance, which usually more reasonable than other low-cost airlines. Malindo wifi and also sports gear allowance is certainly an advantage over its competitors who usually charge extra for this addition.



4. Sustaining costs Another challenge to tone the cost down is to sustain the cost as low as possible while preserving its service quality. In the case of crisis, where fluctuations in fuel and other prominent costs, and an increase in service costs, it is hard for Malindo Air to sustain its costs.



4. Bundling strategy Apart from flights, Malindo Air also uses a strategy to bundle its products at promotional price, for instance, 10% off promotion of the flights and hotels that are booked together.



5. Less routes Currently, Malindo Air is only covered a total of 65 destinations, providing limited alternatives to passengers.



5. Creative branding Similar to other product, branding is one of the key factors for higher long-term and short term returns for the company. It’s tagline of “Smarter way to travel”, which gives a meaning of paying a cheap fare while getting a quality of service, has provided customers with flying alternatives.



6. Stiff competition in its sector Although there is a range of other LCC in Asia region, Air Asia is relatively known to be a dominant player in this market sector. 7. Difficult to retain loyalty Among the consequences of being a low-cost airlines is that customers have little brand loyalty,



Such tagline also meant to encourage passengers to travel smart and getting the best flight experience with affordable prices. 6. Culture preservation Malindo Air is among those airlines that preserved cultural value in its service, through its batik design and flight crews’ attire. 7.



Good reputation on safety, accidents and incidents Unlike Air Asia, there are no major incidents or bad press yet to be reported. Most of its fleets are well-maintained and service operation is smoothly managed. 8. Seating class alternatives Malindo Air also provides alternatives for passengers to travel on either economy or business class, with extremely reasonable price. 9. Inflight entertainment One of the best features is that each seat is provided with in-flight screen, which allow passengers to access entertainments such as movies, music, books, and games. 10. Makes business class popular to travellers Malindo Air has introduced the new Business Class fare grouping by providing the option of Business Class Flexi (maintain the full-fledged fare features) and Business Class Promo (for those who want to fly business class on budget). Such decision allows opportunities for passengers who are cost-conscious to experience the comfort of flying in Business Class 11. Smart interline partnership with international airlines Malindo air has inked an interline partnership with few international airlines such as Turkish Airlines, Qatar Airways, ANA, Etihad Airways, Oman Air, Pakistan International Airlines, and XiamenAir. This is for the purpose of tapping new market as well as enables passengers to find connection easier when travelling between Asean to destination listed in their networks. This eventually helps to increase the traffic from all over those destinations.



whereby airlines generally compete on price rather than quality. 8. Slow response on technology advance There is room of improvement for Malindo Air on enhancing technology usage in its operation, for example, providing a check in kiosk in terminal or e-boarding pass.



OPPORTUNITIES



THREATS



1. Growth of middle income consumers For all Asia developing countries, 80% of its 45 economies in the World Bank classification are middle income consumers. The share of the lower middle income is higher than the upper middle income in the region.



1. Global Pandemic COVID-19 has given a negative impact towards tourism and other related industry. Due to restriction in movement, less people are commuting through airlines.



2.



Technological advances in airlines industries Every transaction nowadays are made through online. Each online marketing campaign directly affects consumer’s purchasing power, depending on its effectiveness in fascinating potential customers. An interactive web and friendly users interface are among the essential features to encourage spending. 3.



Ancillary source of revenues in the airline industry Apart from flying service, other revenue streams can also be ventured by the market players, such as merchandising, dining, hotel, etc. 4.



Tourism: One of the world’s fastest growing industry Due to emergence of nations such as China and India, the newfound freedom of its citizens to travel is finally lifted. 5. Long haul flights Malindo Air may tap those into the long haul flights option, as there is fewer airlines across Asia that provides such service. 6. New route expansions To venture and exploit growing markets across Asia such as China and India, where there is fewer competitors’ positioning. It also builds good connection with that certain market by helping them to boost its tourism industry.



2. Rising Fuel Costs The uncertainty in fuel prices, which swings wildly based on oil price, will have a direct impact towards Malindo Air future financial projection. As it offers low-cost pricing, fuels are among the top supplies needed in its operation and the price of fuels is directly affected its pricing decision. 3. Rising Labor Costs In 2016, labor costs had surpassed fuel as global airlines’ biggest single expenses. As an airline has been up in its margin, the workforce has gained a market power which substantially pushing up the cost of labor. 4. Internet Transparency Currently, the cost of flying continues to trend lower as the internet has exposed price transparency to consumers, which creates stiff competition and pushing them to reduce its margins or focus on volume. 5. Rise of other LCCs in the market Consumer’s trends and lifestyles tend to change over the years. Plus, other airlines also tend to change its competitive strategies by implying similar business model. 6. Political Risk Several countries in the world are facing series political issues, which put a risk on its nation’s safety and government decisions. 7.



7. New market segment This would be an opportunity for Malindo Air to capture and set its footing to a new market segment, which will boost their level of competitiveness with other LCC market players. 8. Creative promotions In order to capture a new market segment,



Accident, terrorrist attack and natural disaster Although there is no news reported on these causes yet, it would jeopardize the airlines credibility and public confidence.



Malindo Air should re-strategies its promotional and marketing piece and broaden its exposure. 9. Fleet expansions and upgrade Currently, the average domestic flights provided by Malindo Air are lesser than its LCC competitor, Air Asia. One of the reasons is due to lack capacity to operate due to smaller number and smaller types of fleets. 10. Enhancing loyalty programme Unlike Air Asia, Malindo Air provides alternative to fly business class which service quality is at par as other established airlines (i.e. Malaysia Airlines). Having an attractive business model in which focusing both economy and business class in low fares, Malindo Air could gain brand retention from existing passengers.