Contribution of leader

Tony Fernandes, the CEO of AirAsia also founded Tune Air Sdn. Bhd. He is practically the man behind introducing the model of budget or no-frills airlines.

Analysis of Leadership from Competency Perspective

1. Motivation for Leadership

Tony Fernandes has always displayed exemplary commitment to business and has been extremely accessible to the media. He aims at influencing employees to accomplish organization goals. As an example, Tony wore AirAsia's official red cap and T-shirt to almost every official meeting or occasions. He even at times has served customers aboard AirAsia flight along with the cabin staff. (Tony Fernandes, 2012) According to Tony, he wanted to set an example and motivate staff to strive towards higher goals. Besides, Tony Fernandes is a sociable, outgoing and talkative by nature. He hands out his personal phone number to media representatives, and himself became the biggest brand ambassador for the company. Although Tony is the CEO, yet he retains his humble beginnings. Owing to his personal attitude and characteristics, he has been able to achieve the company's goals and objectives. He has become an inspiration for his employees, and so the employees are motivated to follow him in spirit in their respective work.

2. Intelligence

Tony Fernandes is undoubtedly an intelligence leader. He possesses the rare ability to analyse a wide variety of issues, alternatives and opportunities. He also has a remarkable vision of future, as has been proved by how well he has exploited the market opportunities. AirAsia's vision is to be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares. (AirAsia Corparate Profile, 2012) Although this market did not seem profitable to others, Tony went ahead and took the risk, ultimately transforming AirAsia from a heavily debt-ridden subsidiary into a market leader. Besides, he also owns a chain of hotels called Tune Hotels based on similar no-frills concept, thereby demonstrating his intelligence and foresight to diversify in the marketplace.

3. Business Knowledge

Tony possessed incredible knowledge about airlines business and his company's external environment. He was the pioneer of low costs, no frills air travel. His knowledge does not stop with the airline industry. In fact, he has continually introduced a plethora of innovative ideas and concepts, e.g., hostel booking services, online booking and web check-in, holiday products, travel insurance, and car rental. By introducing the disruptive innovation of low- cost, no-frills strategy and moving down the value chain, he has demonstrated tremendous intelligence and knowledge of his operating environment.

4. Drive

Tony Fernandes drives and motivates AirAsia employees (Allstars) to chase their goals while encouraging them to move forward with him. As per him, he believes in inculcating a management philosophy that pushes employees to pursue their passion and dreams. Tony himself believes in the power of dreams and since childhood aspired to run an airline, own an F1 team and a football club. (Tony Fernandes, 2012)

Transformational leadership

1. Create a strategic vision

Tony Fernandes is a transformational leader as he transformed the entire business model of airlines with his "Now everyone can fly" slogan. Low-cost, no-frills strategy was the first at a time when all airlines wanted to move up the value chain. Today AirAsia has swiftly gone on to break the norms of travel globally and continues to rise to become the most favoured low coat airline of the world. Tony Fernandes mortgaged his home and sank his savings to invest AirAsia Company (Alesia Sion, 2012).

Tony has a strategic vision for AirAsia to be the largest airline in the low cost segment in Asia and serve over 3 billion people currently underserved. From 2004 onwards, AirAsia has won several awards in low-cost airline segment around the world. This goes on to prove that Tony’s leadership has been successful at accomplishing his company’s vision.

2. Communicating Vision

Tony Fernandes has strived to foster a work environment that encourages employees to grow while learning. He encourages his employees to love their jobs and pursue their passions. Besides, every month Tony spends a day as a baggage-handler; every two months as a cabin crew for a day, and every three months, as a check-in clerk for a day (Shashank Nigam, 2009) so as to experience first-hand the working environment of his employees in different department. He has even instituted a "cultural department" to "hold parties and pass the message". AirAsia workplace is in stark contrast to the traditional management in Asia based on strict levels of hierarchy and control. Any employee can meet him any time he/she wants. 3. Modelling the vision

Tony also modelled the vision of AirAsia. He proved that he not just talked but also enacted it to offer everyone to fly by offering cheap fares. Further, his personal mission statement is "dream the impossible, believe the unbelievable, and never take no for an answer". A real example of him extending this to others happened when at the launch of AirAsia Thailand, he was told by a woman that she wanted to become a pilot. Tony replied to her that if she clears the pilot-training exams, he will hire her without questions. Eventually, the woman did complete her training and joined AirAsia as a first officer. Subsequently she became a full- time captain (Chris Forrest Harvey, 2012). This small incident shows that he inspires everyone and willing to give others an opportunity to work alongside him towards fulfilling their personal dreams and aspirations.

4. Commitment toward the vision

Lastly, Tony worked hard to build and inculcate employee commitment towards his vision. He aspired to start a low-cost airline and he turned that vision into reality. AirAsia continues to keep its promise of low fares enabling its customers to fly to different destinations. AirAsia’s airfares are significantly cheaper than its competitors. Its vision "everyone can fly" is now a reality. Besides, he also did away with conventional hierarchy so as to encourage employees to voice their opinions. He shares office space with employees in an open floor plan. He also allows them to reach out to him personally via call, SMS or email. Thereby cutting down the need for them to go through multiple departments. Even the lowest ranking officers also can have his phone number to contact him directly which means he treats everyone as equal and willing to commit to their needs (Shashank Nigam, 2009).

Strategies used by AirAsia that contributed to its success

The overall business strategy employed by AirAsia is that of cost leadership, targeting markets such as short-haul flights as well as long-haul flights within a region. This coupled with pricing their services well below the industry average in order to increase their market share.

Beyond price competition, AirAsia has also brought into market a range of value-added services e.g. free seating policy, ticketless travel etc. Under the pretext of offering more choice, AirAsia also began the trend of monetizing services previously taken for granted under premium airlines. For example, AirAsia offered a web check-in service allowing customers to print their own boarding passes. They introduced additional charges for seat selection and early boarding; pre-booking of checked baggage etc.

Realizing that cost as well as convenience are the two most important factors for their target customers, AirAsia embarked upon and achieved superior cost leadership by employing innovative strategies like a single class in aircrafts, low fares without any seat preference etc. It also keeps coming up with regular promotions during lean periods to encourage early booking. This is coupled with continually increasing booking avenues like sales offices, phone, travel agents, post offices and local banks, along with internet and mobile apps.

Lastly, strategic alliances with industry associations of prominence have also boosted AirAsia’s image as a market leader in its segment.

AirAsia can be expected to sustain its competitive advantage by sticking to low fares, no frills strategy, and continuing to expand their operations throughout Asia and the world. Armed with their robust marketing and sales strategy, AirAsia seems set to beat competitors in the airlines industry. Besides, their strong foundation and business practices has allowed them to remain people's preferred choice to fly. The low-cost advantage seems to continue to work in favour of AirAsia vis-à-vis its competitors.

Given the first mover advantage, cost-leadership continues to be a viable strategy for AirAsia to maintain its leadership position. Nonetheless, the key is to strengthen other aspects, such as customer comfort, and integrated lifestyle packages, rather than merely focusing on cost. This is essential so that they are not left in a fix in the scenario where escalating costs render them unable to sustain their cost-leadership. It also needs to leverage upon its existing brand value to diversify and monetize more of its offerings.

In conclusion, the cost leadership strategy makes sense for AirAsia in an industry rife with rivalry and competition. Due to the nature of the service offering and the industry, the room to differentiate one’s service from other providers on other parameters is quite limited.

6. Conclusion - Sustainability of the company based on the internal / external environment

Porter (1996) suggests that in order to outperform rivals, the organisation needs to deliver increasingly more value to customers while building comparative value at lower costs. Airline industry is at a growing stage, hence stiff competition from new and existing low cost carriers is bound to surface. To sustain competitive advantage, AirAsia will need to leverage its cost advantages over competitors more significantly. Presently, AirAsia only differentiates on the basis of no frills, low fares concept and by offering new flight routes.

Murray (1988) recommends that sustainable differentiation through product differentiation is uncertain. He suggests that this could better be attempted through service and quality. While Porter (1996) highlights that positioning is successful based on the activity system and simple consistency between each activity aligning with the organisation strategy. AirAsia built its reputation by providing quality service at low prices. Further, AirAsia continues to focus on brand building through marketing and advertising campaigns such as the sponsorship deal Oakland Riders, an American football team.

During its inception stages, AirAsia remained focused on domestic destinations but have since ventured into international destinations. AirAsia X today remains the first choice for customers looking at long-haul low-cost carriers. Based on the similar no frills model, its prices are up to 80% lower than competitors. Additional services such as food and entertainment etc. are priced additionally. AirAsia also continuously introduces innovations that create excitement among customers such as self check-in. Customer loyalty is build by the differentiation, which could act as a defence against rivalry (Eng, 1994).

Considering AirAsia’s phenomenal success, it is possible that competitors will try to copy its business model. However, AirAsia has the first-mover advantage in South East Asia, as well as experience and an established brand image. Competition also exists across segments (full-service vs. low-cost). AirAsia has the advantage to lay down the norms and accepted standards in the industry.

To remain market leaders in customer satisfaction, we propose the following recommendations for improvement in their current strategy:

 Thorough technical and feasibility study before introducing any major changes to their overall organizational strategy, so as to avoid unforeseen risks.

 Price of Oil is a big cost factor for the airlines industry, more so the LCCs. Hence AirAsia should enter into long-term engagements with oil suppliers to ensure stability and hedging against wild swings in oil prices.

 To circumnavigate any unforeseen circumstances and considering their hectic flight schedules, the company should consider maintaining a spare aircraft at each of its hubs.  AirAsia should aggressively consider making itself into a green company including systems such as carbon offsetting to save environment and promote its image as an environment-friendly company.