Sunday, September 22, 2019
A Position Paper for the Enhancement of the Strategic Ability of Air Essay
A Position Paper for the Enhancement of the Strategic Ability of Air Asia - Essay Example Following sections presents the strategies and the enhancement proposed accordingly. 1. Air Asia to control its costs and source of funding for purchase of new fleet of aircrafts. Increase of fleetsÃ¢â¬â¢ strategy. Air Asia wants to continue to be the lowest cost short-haul airline in every market it goes in. In considering this vision, the action required is significant investment in aircrafts, distribution channels, production capacity and working capital. In this situation, there is a need to determine first if Air Asia has the capability to raise funds and its financial worth. Financial resources. Financial worth of Air Asia as of 2009 shows current net assets of RM 511,284 million which is an improvement from its RM 263,085 million current net assets in 2008. It has the ability to raise funds from creditors and shareholder, its debt/equity ratio is 2.61 and a net profit margin of 16.2%. A debt equity ratio is a measure of the companyÃ¢â¬â¢s financial leverage and indicates w hat proportion of debt and equity the company is using to finance its assets. A high debt ratio means that the company is using a lot of debt in financing its assets as in the case of Air Asia. However, in further analysis, capital intensive industry generally has a high debt ratio of 2 (Investopedia, n.d.) Air Asia has a net cash flow of RM598million, equivalent to $181.2 million (Air Asia.com). Air Asia reports of 21.1% profit after tax margin in Malaysia, 1.8% profit after tax margin in Thailand and 17% profit after tax margin in Indonesia (Centre for Asia Pacific Aviation, 2010). Chart 1 shows the EBITDAR margin and profit after tax margin in 2Q2010 for year 2010l. It will be noted that after deducting... The study analyzed the strategies used in each strategy of Air Asia, had seen its strength as well as weakness in achieving targets. On this, proposals for enhancement have been recommended. On the first position that requires funding for purchase of additional new aircrafts for new routes and replacement of old ones, recommendation is to get funding from long term debt because of tax advantages. Getting funds from outside sources will save the cash flows for internal operations of the company. Second position pertains to inventory management that will require management to maintain an RFID technology along with a perpetual inventory system that will track inventory and supplies of the airline company in its various segments. The third position calls for a study on the cost saving realized by the on line system of booking to properly explain to stakeholders the benefit of the strategy and to outline further enhancements. The fourth proposition is a recommendation for promotions and a dvertising to attract more customers in order to maximize use of airline capacity. The fifth position is the continuous training and skills development of employees as airline business is dependent on skills of employees particularly in aircraft flying and maintenance. This paper makes a conclusion that a position is presented that needs government approval for a patent to protect brand image of Air Asia as the lowest cost airline carrier in the region.