AIRASIA started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB-Hicom. On December 2, 2001, the heavily-indebted airline was purchased by former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $0.27). AirAsia has been expanding rapidly since 2001, to become an award winning and the largest low cost carrier in Asia. A new budget terminal, the first of its kind in Asia was opened in Kuala Lumpur International Airport on 23 March 2006. Built at a cost of RM108 million (US $29.2 million) and spanning some 35,000 square meters (116,000 square feet), the Low Cost Carrier Terminal (LCCT) is the new home for AirAsia Bhd. LCCT will initially handle 10 million passengers a year. AirAsia Group is expected to carry 18 million passengers in 2007. AirAsia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger break-even load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day. AirAsia is currently the main customer of the Airbus A320. The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. The first unit of the plane arrived on 8 December, 2005. Up till today Tony Fernandes has succeeded in turning a heavily debt AirAsia into the most successful low cost carrier in Asia, all in AirAsia has suddenly become a strong competitor in the field of Air transportation especially for MAS airlines. Besides that AirAsia has started to expand it’s current route covering several international countries, where the division which is in charge is AirAsia X.
Flying outside Malaysia is difficult. Bilateral agreement is one of the obstacles in the way of truly pan-Asia budget carriers. Landing charges at so-called “gateway airports” and navigation charges are often prohibitively expensive, and in key destinations like Bangkok, Beijing, Hong Kong and Singapore there are no cheaper, secondary airports. The budget airline industry in south-east Asia has been underdeveloped because the aviation market is tightly regulated by bilateral air rights agreements. Threat of terrorism, people is afraid to fly after the September 11 terrorist attacks incident.
No doubt we are going thru turbulence time and also the recent swine flu attack. It did not stop AirAsia , where in moments like this they actually plan to open additional routes to middle east countries as the responds is extremely well. This is due to a lot of company is trying to cut cost and the only solution to reduce their aviation cost is just to fly with AirAsia. In fact AirAsia still manages to rake in profits when most major players are suffering to even breakeven for their operating cost.
In terms of social , AirAsia has given the opportunity for less fortunate class people to enjoy the experience of travelling thru plane too. AirAsia tag line , ‘ Now Everyone Can Fly’ certainly suits it’s action and objectives where it is to provide the most economical flight possible towards it’s customers.
This area is the main reason why AirAsia stands out compared to other aviation company and also being so successful. The tracking system that AirAsia adopted enables the company to store and analyze data for customers booking frequency. This allow the company to judge and to make a wise decision for to open additional routes or to reduce, this enables the company to be always in the running along with the market trend to reap profits. Another amazing system that AirAsia has over its competitors is the online booking which is design for utmost user friendly, and this is a win – win situation for both parties as AirAsia could reduce the work force tremendously and it is very practical and convenient for it’s customer as they can book flight tickets from anywhere or anytime as long as there is a connection to the internet.
It is vital to the survival of a business for there to be sufficient liquid resources available to meet maturing obligation. Common liquidity ratios include the current ratio,A the quickA ratioA and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities becauseA they feel thatA they areA the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency. A company’s ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use theA liquidity ratios to determineA whether a company will be able to continue as a going concern.
Debt/ Gearing Ratio
Gearing ratio is the relationship between the amount financed by the owner of the business and the amount contributed by outsiders has an important effect on the degree of risk associated with a business. The higher a company’sA degree of leverage, the more theA company is considered risky. As for most ratios, an acceptable levelA is determined by its comparisonA to ratios ofA companies in the same industry.A The best known examples of gearing ratios include the debt-to-equity ratio (total debt / total equity), times interest earned (EBIT / total interest), equity ratio (equity / assets), and debt ratio (total debt / total assets). A company with high gearing (high leverage) is more vulnerable to downturns in the business cycle becauseA the companyA must continue to serviceA its debt regardless of how bad sales are.A A greater proportion of equity provides a cushion and is seen as a measure of financial strength.
Profitability ratio provides an insight to the degree of success in achieving this purpose. They express the profits made in relation to other key figures in the financial statement. Some examples of profitability ratios are profit margin, return on assets and return on equity. It is important to note thatA a little bit of background knowledge is necessary in order to makeA relevant comparisons when analyzing these ratios. For instances, someA industries experience seasonality in their operations. The retail industry, for example,A typically experiences higherA revenues andA earningsA for the Christmas season. Therefore, it wouldA not be too useful to compare a retailer’sA fourth-quarterA profit margin with itsA first-quarter profit margin.A On the other hand, comparing a retailer’sA fourth-quarter profit marginA with theA profit margin from the same period a year before would be far more informative.
Total liabilities divided by total assets. The debt/asset ratio shows the proportion of a company’s assets which are financed through debt. If the ratio is less than one, most of the company’s assets are financed through equity. If the ratio is greater than one, most of the company’s assets are financed through debt. Companies with high debt/asset ratios are said to be “highly leveraged,” and could be in danger if creditors start to demand repayment of debt.
It is to measure the efficiency with which certain resources have been utilized within the business. These ratios are also referred to as activity ratio. However the ratio is calculated, its purpose is to evaluate the overhead structure of a financial institution. Banking is no different from any mature industry – the surviving companies are those that keep costs down. The efficiency ratio gives us a measure of how effectively a bank is operating. Efficiency isA also a good measure ofA profitability.
Market / Investment Ratio
Investment ratios are certain ratios that are concerned with assessing the returns and performance of shares held in a particular business.
Conclusion / Recommendations
AirAsia’s success solely will reflect on its competitive strategy and planning over it’s competitor, no doubt AirAsia is great now , below are several recommendations to further improve the quality and strength of AirAsia. In addition to displaying information on gate numbers for flight departures, it would be useful for the notice boards to also display counter numbers for checking in. This would greatly facilitate and improve the efficiency of checking in, which is frequently hampered by overcrowding and general lack of space. This is very common in most airports of the world. This enables passengers to easily identify the correct gateway towards their plane. Group check-ins should be done at a separate dedicated counter, as I have experienced waiting in line for an excruciatingly long time for the person in front of me with about 20 passports of passengers to check in. This should be impose to keep the smooth flow of the ticketing instead of a bottleneck. Other improvements that AirAsia should look into is such as, Whilst there is improvement in the variety of in-flight dining options, the local food such as nasi lemak contains too much coconut milk, which has a tendency to deteriorate with time, causing indigestion. perhaps AirAsia should stick to a more stable food such as sandwiches, burgers and hot dogs, and they are less smelly too, especially on board. This is especially for flights which exceeds 2 hours, and passengers might want to grab a light meal without getting stomach upset. In conclusion , it is the minor little things that would change peoples perception from bad to good or vice versa. So in order for AirAsia to be the leading aviation company in Asia they should start looking into the details.