Firefly: Malaysia Airlines and Airline Industry Essay

2.0 Background to the organization Firefly is the wholly-owned subsidiary by the Malaysia Airline System Berhad (MAS). Firefly is launched on April 3rd 2007 as well as it is the Malaysia’s first community airline that operated under FlyFirefly Sdn Bhd. the Malaysia’s first community airline also known as a new Malaysian no-frills airline. The name of Firefly is come from the characteristics of agility, brilliance, charm, and fun. Firefly offers a full service point-to-point carrier. The head office of Firefly is located at Sultan Abdul Aziz Shah Airport in Subang, Selangor. The first flight of the Firefly was from Subang Sultan Abdul Aziz Shah Airport to Penang International Airport, on the 2nd April 2007. Besides Airline of Air Asia Berhad, Firefly is another low-cost airliner. It mean that Firefly has the separate management compare with MAS even though it is wholly-owned subsidiary by MAS. Firefly is operated in two hubs that are located at Sultan Abdul Aziz Shah Airport, Subang, Selangor and Penang International Airport. Penang is the second big hub after the Kuala Lumpur. The aim of the Firefly is to bring communities closer by overcoming geographical constraints, link the world to the communities we serve, and contribute to the economy of the communities by bringing trade and tourism. Firefly not only wants to bring together the community in Malaysia but also for travelers to visit both of our neighboring countries and throughout the region. Become the Malaysia’s first community airline, Firefly most emphasis on the safety and comfort it its flying experience. However, Firefly try their best to provide the best service to their customers such as getting their customers to the destination in the shorter time, cost effective and make flying Firefly as a fun. 3.0 Situation analysis Positive or negative of general environment in the airline industry will significant affect the growth of the Firefly Airline. In order to growth the position and hit the target of Firefly, it is important to understand the current situation of external factor that can influence the Firefly Airline. 3.1General Environment 3.1.1 Political Fully Deregulation of the airline since December 2008 allow the member state to fly across other’s territory, make fuelling stop as well as pick up the passenger in order to complete their journey to reach their destination. This deregulation brings the benefit such as enhance the customer’s choice and increase the competition. For most time, the political stability and government decision will directly affect the direction and decision of the company. For example, the Malaysian government policy to support and develop the Low Cost Travel sector (Bernama 2006) was good news well for Firefly because Firefly applied the strategies of low cost carrier. Another example is Firefly took over the service rural air service in year 2007 announced by Transport Minister Datuk Seri Chan Kong Choy (The star 2007). Datuk Seri Chan Kong Choy announced that the rural air service was the responsibility of the government and they will continue to subsidies the cost for the operation of the rural air service to maintain the low-fare structure. Apart from that, On the 24 March 2010, the state government of Perak signed a contract for strategies collaboration with Firefly to promote tourism and foreign investment in their state. The decision of the state government brings good news to Firefly. Though this collaboration, Firefly can enhance their reputation and increase their profit. Ps: if too much words, can delete it or add to opportunity. 3.1.2 Economic [pic] Firure1: Traffic Update for Association of Asia Pacific Airlines (AAPA) Member Airlines Source: AAPA (2010). From the figure 1, we can clearly see that the increase 10.7% in the passengers by November 2010 compared with November 2009. The main reason for the increase in passengers is Asia Pacific carrier had successfully in economic downturn. However, carriers need to carefully in the global recovery economic in develop market as well as the threat of high oil price or government increase the taxes. Due to the global recovery economic, Firefly planed to increase 3 new planes as the demand of travel. However, Firefly will be caution in the fuel cost since it steadily rising. 3.1.3 Socio cultural As a lower travel carrier, Firefly position itself at the middle class airline. Hence, we can see that Firefly always focus on four community that are The Holiday Goers community, the â€Å"Balik Kampung† Community, The â€Å"Indonesia Workers† community, and The Business Community. The Holiday Goers community is convenient to the tourists or Malaysians who like to visit the Langkawi, Phuket, Koh Samui. Firefly provides an attractive price for the tourists to encourage them flight on Firefly. For the â€Å"Balik Kampung† Community and the â€Å"Indonesia Workers† community, there have the same purpose. It allow the worker who work on other state or country as well as for those who want visit their relatives at hometown to reach their destination easily at a reasonable price. In addition, Firefly connect with major cities such as Johor Bahru, Penang, Alor Setar and Subang enable the executive travel their business trip convenient. 3.1.4 Technological  The aircraft of Firefly is the product that combined with the advanced technology. The aircraft named ATR 72-500 not only fuel efficiency, but also for the noise friendly. It compliant with noise regulations and have a large margin with regard to Chapter IV (ICAO) noise regulations effective 1st January 2006. ATR operate at relatively low altitude, leaving the ozone layer unaffected and barely contributing to pollution of the upper atmosphere such as features of low fuel burn and gaseous emissions. It also supports the Clean Development Mechanism of the Kyoto Protocol as it is an opportunity to contribute to the prosperity of developing countries through the transfer of cleaner and greener technologies. Besides this, the 72-seat aircraft will be equipped with the â€Å"Elegance† cabin, Light Emitting Diode (LED) as well as the newest technological innovations in passenger comfort, communications and navigation tools. 3.2 Industry condition [pic] The Porter’s five force model is major affected in the airline industry due to the airline industry become the major and important industry in our world. Though the five forces of Porter, we can clearly understand the industry condition. The five forces include rivalry among existing competitors, threat of new entrants, threats of substitution products or services, bargaining power of supplier and bargaining power of buyer. 3.2.1 Rivalry among existing competitors  Rivalry among existing competitors mean that the competition between the existing competitors in an industry. Normally, this type of competition earn a low returns because the cost of competition are quite high. The competitors exist in the airline industry is high. Except the Firefly owned by MAS, there also have Air Asia, Berjaya Air, Layang-Layang Aerospace, Sabah Air and Hornbill Skyways which is a helicopter service that operates in the rural area of Sarawak. In order to boosts its market share, all competitors will try their best to offer different type of services, cut-fare and other benefit to grab the more and more customers from their competitor. This type of competition will result the overall slow market growth rate. 3.2.2 Threat of new entrants Threat of new entrants refers to the threat of new competitors to enter the exits market. If the new entrants can enter the market easily, that means the barriers to entry are low. Whereas if the new entrants difficult to enter the market, the barriers of entry are high. In the airline industry, the market is nearly saturated with the existing airline such as MAS, Air Asia, and Firefly and so on. The new entrants will face a lot of barriers if they want enter the market. One of the barriers is cost of entry. Airline industry is expensive industry. The cost of technology, buying or leasing aircraft and manpower are high. Another barrier is the brand name of existing market. For the most time, customers will loyalty to the brand that they preferred 3.2.3 Threat of substitute product A threat of substitute product is stated that the availability of another product that customers can purchases to replace for existing product. Airline industry considers highly risk in threats of substitute product. Customers would change their choice to another airline company if that company provides the lower price than others. The competitions between the airline industries enable all competitors to come out the better services, promotion and lower price. 3.2.4 Bargaining power of suppliers  Bargaining power of suppliers is the ability to setting the price. Normally the suppliers are power if there are not so many substitute supplier and suppliers more control and concentrated. The main suppliers in the Airline Industry are Boeing and Airbus. Therefore, airline industry isn’t any cutthroat competition due to the limited of suppliers. In other words, Airline Company less opportunity for the bargaining in industry and it can be threats of industry. 3.2.5 Bargaining power of buyers Bargaining power of buyers refer to the ability of the customers to setting the price. In Airline industry, bargaining power of customers are high because the highly competitive.