Case Study of Air-Asia : Strategic Role of Information System in Business

Air Asia is established on 12 December 2001 by Mr. Tony Fernandes, the CEO of Air Asia and expanding rapidly since that. Air Asia is the leading low fare airline in Asia and Air Asia succeed to become the award winning, ‘Asia Pacific Airlines of the year 2003’ by Centre for Air Pacific Aviation (CAPA) in 2003. Air Asia has successfully positioned itself in customers’ mind by using the “ Now Everyone Can Fly” slogan. Air Asia had flown over 55 million guests across the region and continually create more extensive route network through its associate companies. Air Asia flies over 61 domestics and international destinations with 108 routes and operates over 400 flights daily from hubs located in Malaysia, Indonesia, and Thailand with a fleet of 72 aircrafts. Air Asia’s net profit for the second quarter ending 31 December 2004 was reported RM44.4 million, a 323% increase over the previous quarter (Air Asia 2005). The vision of Air Asia is to serve the 3 billion people who are currently underserved with poor connectivity and high fare and to be the largest low cost airlines in Asia. Their mission is to create a globally recognized ASEAN brand, to attain the lowest cost so that everyone can fly with Air Asia, to be the best company to work for as employees are treated as part of a big family, and to maintain the highest quality product, embracing technology to reduce cost and enhance service levels.

Roles of information system in Airline Business

Air Asia’s business strategy is centered on cost leadership and targets specific markets which are price sensitive customers (including 1st time fliers) who needing the short haul flights. According to Porter’s generic strategies (1985), cost leadership is one of them. Air Asia has to offer the lowest possible fare amongst all airlines in LCC (Low Cost Carrier) industry whom compete on costs in order to win the competition in current markets as well as new markets. The central objective of Air Asia is to achieve bigger cost advantages than the rivals by continuously searching areas for cost reduction along its value chain.

Support of Information System

The operational environment of airline industry is complex due to the continuous daily operation, larger network in supply chain and some external uncontrollable variables such as government regulations and weather condition. These issues are giving big impacts on airlines’ performance. This show how important to implement advanced planning and scheduling as it will be able to determine the success of airlines.

Air Asia has implemented APS (Advanced planning and scheduling) system which is triggered off by Air Asia current market condition that saturated market with high degree of rivalry among the existing competitors. APS system works as the brain supply chain activities (Ahmed, 2004) by gearing activities in relation with customers and suppliers requirements. It helps Air Asia to optimize its supply chain management as clusters and classifies customer orders, forecasts future fulfillment requirements, set order priorities and checks resources availability. APS system provides visibility across supply chain in term of cross functional scheduling and planning with suppliers and customers. APS system will able to further improve Air Asia’s processes performance and it also analysis the flying routes which optimal flying route is imperative in deciding new destinations for Air Asia to serve in future.

Air Asia has implemented the Database Managing System in order to share the centralized date amongst all functional areas to ensure daily operation is sufficient. Perriodot system had been signed up to develop the travel itinerary gateway for Air Asia to process all confirmed bookings with skylights Navitaire, where a final PDF processing will be handle through their XML driven itinerary processing server At the same time, Air Asia has signed up PEP (Process Flow Enterprise Portal) system for their internal intranet operation whereby modules to be implemented including news and announcement, leave management, claims processing lost luggage management and staff scheduling.

In order to successfully maintain process integrity, reduce financial month-end closing processing times, and speed up reporting and retrieval processes (Microsoft Malaysia), Air Asia had implemented a full fledged ERP (Enterprise Resource Planning) system powered by Microsoft Business Solutions (MBS) on Microsoft technology platform recently (May 2005) by Avanade consultants. ERP is the system that integrated comprehensive software to make the IT system works more effectively and efficiently. ERP system helps Air Asia to collect data from various key business processes in manufacturing and production, finance and accounting, human resources, sales and marketing, and storing the date in a single central date repository. Information is easily shared across the firm to help the different parts of business work together closer and this lead a better decision making of management level.

Air Asia has implemented YMS (Yield Management System) to optimize prices and allocate capacity to maximize expected Revenues. YMS helps Air Asia to understands, anticipates and reacts to the behavior of customer to maximize the revenue of the organization. The optimization is done on two levels:

  • Route (By adjusting the prices for destinations that have higher demands in the market).
  • Seat (Seat are available with various prices during different time. The reservation fee will be higher for the same seat at the later date. Thus, every seat is considered an opportunity to increase revenue).

Air Asia have actually lowered their revenue as YMS has given Air Asia the window to increase their revenue by offering higher discounts, more frequently during off-peak times while raising prices only marginally for peaks time. Air Asia was able to increase avenue (3-4%) for the same number of aircrafts by charging a premium for late bookings and by taking advantage of the forecast of the high/low demand period.

Furthermore, the other information system that Air Asia has implemented is CRS (Customer Reservation System) which is the Open Skies by Navitaire. CRS has helped Air Asia to grow at a dramatic pace. CRS is an integrated web-based reservation and inventory system whereby it includes call center, internet, airport departure control etc. By implemented CRS that works as a direct sales engine, Air Asia are able to eliminate the middleman and the sales commission which need to pay to them initially. Open Skies maintained the centralized customer data and helps Air Asia to track booking and schedule flight activities with real time, on demand reporting feature. Open Skies is able to integrate with the already implemented YMS. Thus, the systems be used in unison for pricing and revenue maximizations and driving down the costs of operation. Air Asia is the first airlines to introduce ticketless travel option and provides advanced boarding passes in addition to online booking as the result of CRS implementation. CRS satisfy the unique needs of Air Asia implementing a low-cost business model to transform the business process to efficiently streamline operations.

IT infrastructure

To power Air Asia website, www.airasia.com, it has selected the Dynamic Site Acceleration solutions from Akamai for 10 years deal on this front. Air Asia was looking forwards to provide the high quality services to the customers and features such as flight scheduling and easy to make online bookings due to the heavy visiting load which is an average of one million unique visitors per month. By handling the specific requirement, Akamai’s Dynamic Site Acceleration solutions offer website performance up to five time faster than the origin web infrastructure and it can be achieved without the costly hardware. Air Asia also make use of Akamai’s globally-distributed delivery network of 48,000 secure servers equipped with specialized software to increase site speed and performance due to Akamai provides turnket managed service that increases the scale, reach and performance of even the most complex Web sites and offers a full set of tools for enterprises to monitor and control the online business of Air Asia.

Air Asia has collaborated with Microsoft by implemented the Air Asia sidebar gadget which developed by TMS (The Media Shoppe Berhad), a Microsoft-certified independent solutions provider, for the Window Vista Platform. The Vista Gadget is available for downloading purpose at AirAsia.com. The gadget allows customer to access live travel information directly from the Window Vista interface. This gadget helps Air Asia to boost up their e-commerce business as it enable the customers to keep up to date with latest news and promotions, and continue to drive traffic back to Air Asia website.

Source: Scribd.com

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