Fifteen Years Later AirAsia, with its sister long-haul Airline AirAsia X. was the largest low-cost Carrier in the Asian Region and the Founding Company of the Tune Group: Strategic Management Case Study, SMU, Singapore

Framework by using Ansoff matrix and porter generic

Fifteen years later AirAsia, with its sister long-haul airline AirAsia X. was the largest low-cost carrier in the Asian region and the founding company of the Tune Group, a corporate portfolio under the ownership and guidance of the original founders – Fernandes and Memorandum. Introduction In 2001. Tony Fernandes and Dato Kamarudin Meranum bought the failing government-owned Malaysian Airline – AirAsia – for one Ringgit (MYR).’ They launched their new venture as a short-haul, low-cost Malaysian carrier, with just two aircraft and a lot of debt.

Other ventures in the Group include Tune Hotels, Tune Talk. Tune Money, Tune Sport. Tune Labs. Tune Protect, Tune Studios, Epsom College and Caterham Cars, among others (see Figure D. Fernandes and, to a lesser extent, Meranum were highly visible owners who appeared regularly on websites and in the media promoting the group, its services and philosophy. Always smiling and sporting baseball caps the founders set out to serve the rising class of the less well-off in Asia by offering relentlessly low prices without comprising on service quality.

According to the group website. the philosophy behind their winning formula was constant innovation on the service offer, through an intimate understanding of what would appeal locally, plus efficient, low-cost use of the internet as a channel to engage with potential consumers.

All this was achieved through a fun, high-energy attitude reflecting Fernandes, media personality (and his baseball cap), with the purpose of changing the lives of Asia’s under-served customers – an ambition that appeared achievable as after a little more than a decade.

Tune Group planes were carrying around 32 million customers a year. AirAsia operated alone until 2007 when the Tune Group was officially created after AirAsia X was launched as a franchise to AirAsia under the Tune Air Company and Fernandes, along with his fellow investors, diversified into the hotel and financial services industries. Tune Hotels were built to offer a ‘limited service hotel chain that provides 5-star beds at 1-star prices’?.

Towards the end of the same year, the Group took a controlling interest in the Malaysian company: Oriental Capital Assurance (OCA). Commentators predicted that this might become the seventh company in the family group, and indeed it was – Tune Protect. Then, Fernandes announced a joint venture partnership between Caterham and Renault – the French car manufacturer – the aim of which was to produce and sell classic roadsters in Asia. In 2013.

Fernandes concluded successful negotiations with the Indian conglomerate Tata Sons with a view to setting up a new domestic airline for India. Finally, in 2015, Fernandes and his team of entrepreneurs added another venture to the Group – Tune Labs. After more than a decade of phenomenal success. questions were being raised about the future of the group and its figurehead – Fernandes.

So far, the doubters about Tune Group’s success have been subdued by the resilience of the group. its continued growth and the lure of the potential markets across Asia.

The questions were rumbling in the background. however, were about the number of ventures Fernandes had under his corporate Tune Group. How could he manage so many disparate businesses, especially since he had also bought the majority stake in a UK football team and he loved spending time at the Formula 1 track?

There were also persistent murmurs about AirAsia X, which were strengthened after flights to Europe and India were withdrawn in 2012. No other long•haul, low-cost airline had succeeded in the past. How could Fernandes make this a success when all others had failed?

Also, how do a roadster and an expensive Fl team fit with the vision Fernandes and Meranum started out with – of serving the ‘under-served’ with affordable services? Finally, why did this Group make sense over the longer term – why were these ventures better together than apart?

Growth came easily and swiftly to the Malaysian operation (see Appendix). The Malaysian government was generally helpful, appreciating that low-cost travel around the country (one where transport infrastructure – road and rail was immature or non-existent) could stimulate and support economic activity. Economic growth rates were, in themselves, highly attractive at about seven per cent.

The market was significantly under-developed; in 2001, only six per cent of the Malaysian population ever bought a plane ticket and this small percentage of fliers was typical among the population region-wide. Routes were limited, both locally and internationally, creating the potential for growth.

AirAsia ticket prices, at between 40 per cent and 60 per cent less than the traditional full-service fares, provided a stimulus to market growth as flying became a realistic alternative to taking the bus. There were few competitors in the market space that we’re able to deliver and sustain the low-cost culture that Fernandes created at AirAsia.

Competitors were often low-cost offshoots of full-service airlines whose culture simply didn’t transfer into the energetic and entrepreneurial drive required to find new ways to drive prices down and profits up, at the same time.