Established in 1993 and officially started its operation on 18 November 1996, AirAsia is a low cost carrier (LCC) airline in the aviation industry. On 2 December 2001, the heavily-indebted government-linked commercial airline was bought over by the current Chief Executive Officer (CEO) of AirAsia, Tony Fernandes. From then, AirAsia cleared its former debts which worthed USD 11 million and became a profit-making low cost carrier. The main hub of AirAsia is in Kuala Lumpur, namely the Low Cost Carrier Terminal (LCCT). In 2003, AirAsia launched its second hub at the Senai International Airport in Johor Bahru.
Besides, AirAsia also launched its first international flight to Bangkok in the same year.
Since then, AirAsia’s has been expanding its routes to different countries such as Singapore, Indonesia, Philippines, and China. AirAsia’s low fare service is not limited to flights in Asia countries. In 2009, AirAsia launched its flight to London through AirAsia X, an associate company that offers long-haul services from Kuala Lumpur. Through AirAsia X, AirAsia has successfully opened various profit-making routes to countries such as Australia, France, Iran, New Zealand and South Korea.
With that, AirAsia has successfully managed to build a bigger and stronger customer base.
To date, AirAsia flies over 61 domestic and international destinations with 108 routes and operates over 400 flights daily from hubs located in Malaysia, Thailand and Indonesia. Furthermore, AirAsia has flown over 55 million guests across the region and will continue to create more route network in order to deliver greater benefits to the customers. With the joint efforts together with its five subsidiaries, namely Thai AirAsia, Indonesia AirAsia, VietJet AirAsia, AirAsia Philiphines, and AirAsia Japan, AirAsia promises to deliver the lowest fare to the customers in the hope of getting the customers to the desired destinations.
Besides generating profits from the day to day operation, AirAsia is also concerned about the community.
AirAsia has been involving itself in many Corporate Social Responsibility (CSR) activities in order to give back and lend a hand to the community. Air Asia’s other CSR initiatives extend towards its work in extending help during natural calamities. For example, they joined hand with UNICEF to raise $128 million for children and families affected by the earthquake in Haiti. They also provided transportation of aid to cyclone-ravaged Myanmar. Aid workers are always offered free transport to and from disaster areas.
In the light of leading AirAsia to the route of success, Tony Fernandes’s effort in promoting, restructuring and leading the entire AirAsia and the team of staff is undisputable. Withstanding the negative responses from the mass media on the survival ability of AirAsia as a budget airline, Tony Fernandes has proven that his mission and vision are feasible under his leadership. Thus, Tony Fernandes is the significant mastermind that has paved the way to success for AirAsia. Tony Fernandes’s outstanding leadership is displayed through various medium. The most explicit one would be the awards that Tony Fernandes has received as an acknowledgement of his exceptional leadership.
For example, Tony Fernandes was awarded the International Herald Tribune Award for the “Visionaries & Leadership Series” for his outstanding work in AirAsia, and also the “Malaysian CEO of the Year 2003″ in December 2003, which was a highly acclaimed recognition, so far awarded to only nine other recipients in the country by American Express and Business Times. The award was an initiative to recognize entrepreneurial and managerial expertise and performance among leaders of Malaysian corporations. With the slogan ‘Now Everyone Can Fly’ together with the exceptional leadership ability of Tony Fernandes, AirAsia is able to reach out to the people from all walks of life and AirAsia proves that flying is no longer a dream anymore to every social classes.
In business world, it is crucial to have a good leader in order to succeed in any field. Thus, a good leader needs to acquire good leadership skills. Leadership means the ability to influence, motivate and enables other people to accomplish an objective and directs the organization which they are one of the members to achieve its goals (Bass & Bass, 2008). Leaders may influence the followers to achieve organizational goals through motivation, persuasion and communication.
One of the perspectives of leadership is transformational leadership. Transformational leadership shows how leaders change the organization by creating, communicating and modeling a goal for the organization and guide the followers to achieve the goal. It means how the leaders change the organization to fit the environment. Thus, leaders are known as agents of change. In transformational leaders, it can be viewed from four elements which are creating a strategic vision, communicate the vision, model the vision and build commitment to the vision (McShane & Von Glinow, 2010). It can also be viewed in three perspectives which are intellectual stimulation, individual consideration, and inspirational motivation. In intellectual stimulation, leaders with this style encourage followers to think independently to help them to think more creatively.
It gives opportunity for followers to explore new ways of doing things and an opportunity to learn (Barling, Slater, & Kelloway, 2000). For individual consideration, it shows how leaders recognize the needs and desires or each follower. Besides, leaders will need to support and motivate them to ensure their work performance (Avolio & Bass, 1995). Lastly, as for inspirational motivation, it means the way leaders inspire confidence, motivation and a sense of purpose in his followers. Good communication skill is important for leaders to convey their message to the followers effectively (Densten, 2002).
For example, as the market for IT products has becoming more competitive, Nokia will have to consistently invent new products in order to fulfill the demand of the market. So, leaders of Nokia that follow transformational leadership will guide and motivate the employees to come out with new ideas and new products such as the latest Nokia Lumia 800 in order to fit in the competitive market. Thus, transformational leadership plays a role of introducing changes to the organization and followers in the light of paving a greater route to success.
The next perspective of leadership is leadership competencies. Leadership competencies are personal characteristics such as skills, knowledge and aptitudes that lead to superior performance in a leadership role. It is known as the key influences on leadership potential and of an effective leader. Personality, drive, leadership motivation and cognitive and practical intelligence are some of the leadership competencies that a leader possesses (Lobel, 1990). Personality is described as the leaders’ higher levels of extroversion and conscientiousness. More effective leaders will have higher level of extroversion and conscientiousness. Other than that, drive means the leader’s inner motivation to pursue goals and encourages others to move forward also. Successful leaders will normally have high need for achievement. Thus, their inner motivation will be high.
As for leadership motivation, effective leaders are motivated to leads others. They will need power to accomplish goals and this is important to compete in this competitive workplace. Lastly, cognitive and practical intelligence shows the leader’s above average cognitive ability to process information and ability to use their knowledge to solve real world business problems by adapting, shaping or selecting appropriate environments (McShane & Von Glinow, 2010). For example, the former CEO of Apple, Steve Jobs, was a leader with a very strong drive to pursue his goals. His vision, “to start a revolution in the way the average person processes information”, has led to the creation of a multi-million business from a mere idea or wish.
He succeeded in doing so by leading his team from the front, spearheading the innovation and constantly renewed products of the company. Therefore, leadership competencies are definitely of primary importance in defining the efficiencies and effectiveness of a leader in achieving accomplishment for an organization. 2.1.3 Behavior Perspective: People-Oriented and Task-Oriented Behavior The next leadership perspective is the behavioral perspective of leadership. In this perspective, it is divided into two categories, which are people- oriented behaviors and task- oriented behaviors. People- oriented behaviors leaders show mutual trust and respect to their followers, concern for followers needs and always look out for followers’ welfare.
This type of leaders will listen to followers’ suggestions, support their interests and treat their followers equal. They emphasize more on relationship with their followers. As for task oriented behaviors leaders, they are more focus on performance of the work done by followers. They will usually assign specific tasks, clarify the followers’ work duties and procedures, ensure followers follow rules and will push them to achieve performance capacity. Both of these styles have their own advantages and disadvantages upon application and implementation.
Followers prefer a leader with people- oriented behavior as followers will be less stressful in performing their job, but it will lower down the result of the performance of the followers and it may affect the organization in pursuing their goals. On the other hand, if the leader uses task- oriented behavior rather than people- oriented behavior, it is effective as it will increase the productivity of the followers but it will decrease the motivation of the followers. In the end, followers will lose interest in their job (Ehrhart & Klein, 2001). For example, Google is a company where the leader is people-oriented.
The company is organized in a way that creates a comfortable and enjoyable environment for the employees to work in. Various facilities are provided in order to relieve the stressful works of the employees. Whereas for task-oriented style manager, the leader will only specify and clarify the employee’s tasks. The manager will want the employee to fulfill the task by hook or by crook without considering the condition of the employee. The manager will focus on the performance of the employees instead of their welfare. Nevertheless, the type of behavior to be applied by the leaders depends on the preference and style of the leader, as well as the situational factors.
Lastly, cultural issue in leadership will also affects leaders’ behavior. Culture can shape leaders’ values and norms and these will influence the decisions and actions of the leader. Culture can also shape followers prototype of effective leaders. If the leader has good value, the followers will learn from the leader and will apply in their work. Thus, good and ethical culture will be formed in the workplace (Cohen, 1993). Gender discrimination and racist are also crucial issues in the workplace. These may decrease the morale of the followers and will result in affecting the performance of the followers. Studies had shown that male and female leaders do not show differ in their level of ability in leadership skills (Powell, 1990).
Gender stereotype should be avoided in the workplace. Thus, an effective and good leader will not judge their followers according to their gender. All the followers must be given the same chances and treatment in the workplace. With that, the followers will have greater motivation to serve the organization. For example, a manager should not evaluate performance of male and female employees due to gender discrimination and stereotyping. The manager should not judge that female employees are not better than male employees. They should be treated equally. Hence, leaders should also direct their attention to the cultural issues in the organization while executing their leadership in leading the entire team of followers.
In conclusion, the leadership styles implemented and adopted by leaders are important and crucial factors for smooth progress in an organization. However, a matter to bear in mind is that leadership styles may vary among leaders. In the other words, not every leader will have the same style in leading their followers. Hence, the leadership style and the way of execution definitely play an important role in writing the success story of an organization.
Tony Fernandes, the founder of Tune Air Sdn. Bhd., was the one who introduced the first budget airline, AirAsia in Malaysia. Holding the designation as the Chief Executive Officer of AirAsia, Tony Fernandes is the key leader to the staff and employees in the company, who has succesfully turned AirAsia from a highly-debted government-linked commercial airline, into a successful and winning low cost airline. The success of AirAsia in becoming a leading low cost carrier airline in Asia is attributable to the outstanding leadership ability of Tony Fernandes. In the hope of bringing triumph to AirAsia while leading the entire team of staff and employees, Tony Fernandes has embraced some distinct and important leadership modes.
Defined as a type of leadership style that will lead to positive changes in those who follow, Tony Fernandes is undeniable to be a transformational leader. Tony Fernandes sees his followers (staff and employees) as one of the key factors in defining the success of AirAsia. He once said “Our people are the ones who deserve credit for helping us get to where we are today; and for pushing us to even higher levels in the weeks and months ahead.” (Tony Fernandes, 2008). Therefore, the effort that he had invested in his staff and employees in order to develop positive changes on them is significant and it can be viewed from three perspectives:
Tony Fernandes likes to challenge the status quo of his followers and also encourages creativity among the followers. To reflect this, AirAsia offers training and development programs to all staffs of all designations and levels. For example, the AirAsia Academy which functions as a training and development centre for all the staffs constitutes the “One Stop Regional Training Centre”. One Stop Regional Training Centre offers comprehensice training facility to all AirAsia staffs.
Computer-based training and in-house instructors are provided to assist the learning and training processes. The AirAsia Flight Academy provides qualified aviation courses and training to the staffs in the hope of becoming pilots. In order to bring the intellectual stimulation to the higher level, Tony Fernandes purposed the Phase 2 of AirAsia Academy, which constitutes well-equipped learning and development facilities such as E-Library and bigger classrooms for better learning environment (Lai J. & Kenneth, 2007). With that, Tony Fernandes’s will to hone the staff skills is well achieved.
Tony Fernandes offers his support and encouragement to individual followers. One of his beliefs in running AirAsia is that, he keeps communication opened in order to enable followers to feel free to share their ideas. He said “Having that direct connection with staff and operations allows me to make dynamic and effective decisions as they are needed” (Tony Fernandes, 2009). Tony Fernandes would observe and understand how the staff in various departments at the Low Cost Carrier Terminal (LCCT) work so that he is able to experience firsthand on how his staff work and interact with the customers. With that, his observation and consideration have led him to intiative improvements in different areas, especially in Human Resource policies in order to bring satisfaction and motivation to his staff.
Besides, both Tony Fernandes and staff do not own an individual office in the headquarters situated at the Kuala Lumpur Low Cost Carrier Terminal. The aim of this open plan initiated by Tony Fernandes is to ensure that the staff of all levels are in constant contact with each other. Moreover, AirAsia’s intranet enables the staff to convey and share ideas, suggestions and critques throughout the company, which allows Tony Fernandes to address unfavourable issues promptly while gaining better understanding of his followers better.
Tony Fernandes has clear vision in which he is able to convey to his followers and to influence them to fulfill the goals. The leader’s vision is to make air travels more affordable to Malaysians. He is able to influence his staff to follow and realise his vision in many decision-making processes. For instance, the AirAsia X team denied to have the conventional in-flight entertainment because it will cost the company nearly RM 5 million, in which the airline would not be able to recover (Nasir S.M., 2008).
The additional costs of RM 5 million spent on the in-flight entertainment would increase the air-fares of the customers, which is inconsistent with the vision of providing affordable air travels to customers. As the followers are able to empathy with Tony Fernandes’s vision, they are providing better services and hospitality to the passengers as they believe that being on time, safe and efficient are the most important to the passengers. With that, the cabin staff are still providing their best services to the passengers.
All of these have proven that Tony Fernandes is a transformational leader who is ready to channel positive changes and enthusiasm to his followers, while helping his followers to succeed as well.
The success of AirAsia is deemed to be attributed to the leadership competencies in which Tony Fernandes possesses. Without the significant personal characteristics which present in his blood that will lead to superior performances in leadership roles, it is difficult to witness the success story of AirAsia and also the healthy dynamic of the workforce in AirAsia. Among the leadership competencies that are possessed by Tony Fernandes are:
Tony Fernandes is a sociable person who likes to meet with people. Before he started AirAsia, he worked as an auditor but gave it up after six months due to his adventurous spirit. Tony Fernandes seldom stays in the headquarters but travels to different places to seek for new opportunities for AirAsia. In order to update the public regarding his latest happenings and whereabouts, Tony Fernandes utilizes his blog “tonyfernandesblog.com” to stay intact with the people. Due to his unstuffy personality, he is proud of AirAsia’s lack of hierarchy which opens more opportunities to his staff to pursue their dreams and to gain higher achievements (The Economist, 2009). For instance, AirAsia employs competent pilots who started out as baggage handlers after receiving qualified training at the AirAsia Academy.
The goal of this leader has always been to offer affordable air travel to passengers. When Tony Fernandes first started out his idea of providing low fares air travel to passengers, the public and media were not positive on the practicability of this goal. AirAsia was expected to close in three months time due to bankruptcy, or due to the inability to compete with other existing and matured airline.However, when Tony Fernandes was directed with this question on the survivability of AirAsia, Tony Fernandes said, “Yes, it would.” (Tony Fernandes, 2002) Tony Fernandes’s strong drive to realize his goal was proven by the fact that AirAsia announced great news in December 2002/ AirAsia had generated RM113 million in revenue, RM19.4 million in profit, 1.1 million passengers and majority of the outstanding balances had been settled. All these happened when AirAsia was only seven months in operation.
Besides, Tony Fernandes once again proved the critics ealier were wrong as he was able to turn AirAsia into a profit-making company and was listed in the Kuala Lumpur stock exchange market on 22 November 2004 with one of the largest IPO offer, amounting to RM717.4 million (Nasir S.M., 2008). With all these, they proved that Tony Fernandes was determined enough to achieve his goals despite of the adverse conditions ahead.
The socialization power and the ability to motivate people around are one of the key competencies that Tony Fernandes demonstrates in leading the whole AirAsia and the team. Claimed to be the most accessible and socialized CEO around, Tony Fernandes remains intact with the public and media by allowing every media group to have his mobile phone number. Although he is unable to answer calls all the time due to meetings and travelling, he does reply and address the concern of the public and media via text messages. Besides, Tony Fernandes is able to motivate people to experience and to exercise new things.
For instance, Tony Fernandes believes that internet is the key tool in AirAsia’s low cost business because it does not require a lot of investment. People were not positive of the workability of the usage of internet to sell products in the aviation industry as people were used to going to the counters to purchase air tickets. However, Tony Fernandes was able to prove that his idea is right. Nowadays, almost all transactions ranging from booking air tickets to check-in can be done via internet through AirAsia’s website, www.airasia.com.my. Hence, all these had proven that Tony Fernandes is an outstanding leader with high socialization skills and the ability to motivate changes in people.
When people were negative about the future of the aviation industry, Tony Fernandes saw opportunities lying ahead. He expected a significant number of layoffs within the industry and that was where his pool of highly experienced staff was going to come from. He employed the laid-off staff into AirAsia and strengthened the intellectual capital of the company. AirAsia also incurred a huge saving from the September 2001 terrorist attacks where the cost of aircraft leasing went down by 40% (Nasir S.M., 2008) .
Besides, the SARS outbreak that happened in Asia had caused a negative impact to the tourism. However, Tony Fernandes noticed that when the Chinese press covered the outbreak widely, the Malay press did not cover the outbreak as widely as the Chinese press did. Viewing this as an opportunity, he began advertising heavily in the Malays newspaper when the other airlines did not share the same view on the future of the airline industry. Hence, AirAsia became more noticeable than the other airlines and it played a huge role in bringing where AirAsia is today. Hence, the leadership competencies that Tony Fernandes demonstrates are the key contributors to the on-going success of AirAsia while maintaining healthy relationship with the public.
Tony Fernandes focuses on his staff and employees in the route of achieving greater success for AirAsia. Often believes in the success of the company is attributed to his staff, Tony Fernandes diverts his attention to the development, needs and well-being of his staff. The leader’s approaches in ensuring the optimal development of the staff potential and well-being can be shown as follows:
Tony Fernandes offers equal opportunities to his staff who are competent and qualified enough to achieve higher success. Through the AirAsia Academy, staff who wish to hold higher position or designation could upgrade themselves with the well-equipped facilities and in-house instructors.
Training and development are offered to AirAsia staff. For example, there is a pilot (with unknown name) who started out as customer service agent and eventually became a pilot after enrolling himself in AirAsia’s first cadet pilot programme (refer to Appendix 1 for the email sent by this pilot to Tony Fernandes). Besides, Tony Fernandes pays close attention to high potential talent in which AirAsia was the first in Malaysia to recruit female pilot, the Senior First Officer, Shara Azlln Jalil. Thus, there displayed that Tony Fernandes is a leader who gives equal opportunities to talented people.
Embracing a fun, friendly and caring organizational culture Tony Fernandes reduced a lot of hierarchy in AirAsia, which permits open communication among the staff and thus, creating a friendly environment for the staff to work in. Tony Fernandes will occasionally give classes to his staff in the AirAsia Academy, and he conducts the class in a relaxing atmosphere which is able to strengthen the relationship between him as a leader, and the staff. Laying the credit of AirAsia’s success with his staff, it shows that Tony Fernandes acknowledges the staff’s contributions and dedication to their work. Besides, the AirAsia intranet dedicated to the staff is meant to facilitate open communication among the staff in order to enable the leader to have better understanding of his staff and to address staff issue. Hence, Tony Fernandes is concerned of his followers.
Tony Fernandes takes care of the remuneration and well-being of the staff. AirAsia offers competitive salary and benefits to the staff to ensure that their effort are well compensated and continuously motivated. Opportunities for career development are offered to the staff (Tony Fernandes CEO Blog, 2011). Hence, Tony Fernandes once denied the need for Unions for AirAsia staff because he believes that his management is taking care of the staff well (refer to Appendix 2 for further reading). The leader also gives bonus to the staff as a token of appreciation of their hard work. Thus, Tony Fernandes is also concerned about his followers in terms of their remuneration in order to stay satisfied and motivated.
All of these have demonstrated that Tony Fernandes is a leader who is people-oriented. Ensuring his followers are well treated, fully developed and well compensated are his aims in bringing encouraging the staff.
Societal cultural values and practices will affect the leader in terms of the leader’s values and norms, and also the decision and actions. As Tony Fernandes received his education in the United Kingdom since 1977, the values and cultures that he embraces have certainly played a role in shaping his leadership style.
AirAsia hires staff without prejudice against race and gender. Equal opportunities towards career is present in both AirAsia and Tony Fernandes. For instance, AirAsia is not skeptical in hiring female employees to hold significant positions such as pilot. AirAsia was the first one who employed female pilot in Malaysia. Todate, AirAsia has both Shara Azlln Jalil as the Senior First Officer, and Ilyana Nazli Shah as the First Officer in the pilot crew of AirAsia. Both of them are Malays.
Besides, AirAsia was als the first airline to extend the retirement age of female cabin crew to be on par with the other male colleagues. On the contrary, none of the other airlines in Southeast Asia is changing their retirement policies (Tony Fernandes CEO blog, 2009). Hence, it further proves that Tony Fernandes is firm on the race and gender neutral policies that AirAsia implements. b) Less stringent organizational culture
Often with his significant AirAsia cap, T-shirt and jeans, Tony Fernandes appears to be a leader who embraces casual and open culture. He minimizes the hierarchy level in AirAsia in order to encourage open communication and dialogue-way of communication among the staff. Tony Fernandes feels that open communication via intranet and no individual office are the optimal ways in enabling effective communication, creativity, knowledge pooling and better decision-making in an organization. Besides, the less stringent organizational culture also enables staff to develop their potential in ease because Tony Fernandes practices empowerment in his staff.
Hence, competent and capable staff are on the rise in AirAsia due to their ability to perform in the organization in a flexible manner. 2.3 Pros and Cons of The Leadership Styles Adopted By AirAsia The Chief Executive Officer (CEO) of AirAsia, Tony Fernandes has adopted his own package of leadership styles and behavior in the running of AirAsia as one of the most influential low cost airline in the Asia. As everything has its own good and bad sides, the leadership styles and behavior adopted by Tony Fernandes do possess a certain level of advantages and disadvantages to the company, as well as to the staff.
The strength of transformational leadership is that it can stimulate corporate learning due to the encouragement of changes and advancement in the followers. As a transformational leader, Tony Fernandes is able to motivate and become a role model to the followers. Thus is important because the followers will be encouraged to stimulate their creativity and to explore new ways in doing things. This can help the staff to become better and more creative. With that, AirAsia’s staff can focus in understanding consumer needs and problems. They are able to develop new services that solve the needs and problems by increasing their consumer insight. For example, the mobile check in implemented by AirAsia has facilitated the passengers in the check-in procedures, enabling them to save time and money spent on counter check-in (AirAsia, 2012).
With mobile check-in, the passengers are able to check-in at anywhere before their flight departure time as long as there is internet connection. Hence, it enhances the convenience of most passengers, especially those business travelers who are always facing time constrains. Furthermore, AirAsia’s followers will have the intention to work harder for the company and to make the brand name of AirAsia more established especially in Asia Pacific under the leading of transformational leader. In order to make AirAsia as an established and social friendly airline, AirAsia and the staff adopted the more responsive way of capturing the attention of the customers. For example, AirAsia’s top management capitalized on promotions through news by being very “media friendly”.
They freely share the latest information on Air Asia as well as the airline industry besides the normal and conventional way of print media advertising & promotions. Social networking sites such as Facebook, Twitter and Blogs are highly utilized by AirAsia as the media in channeling information to the public. The CEO of AirAsia, Tony Fernandes also shares his thoughts and updates via his blog, www.tonyfernandesblog.com. From this, we can see how the employees are being motivated by the top management to stay intact with the customers and to work together to explore better ways in providing better services to the customers. Besides, the staff in AirAsia are able to work in a more conducive environment by implementing transformational leadership. By this, any mistakes or problems can be resolved in a more amicable way such as the staff are able to observe the modus operandi of the other airlines and assimilate suitable values into their own system.
Furthermore, they are also able to think of ways and opportunities to strengthen the brand name of AirAsia in other countries. For instance, Air Asia’s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) has successfully strengthened the brand to become a regional brand beyond just Malaysia. The links with Manchester United which is one of the world’s most famous football teams and AT&T Williams Formula One team have further boosted their image to a greater extend. Hence, with the guidance under transformational leadership, AirAsia and the staff are able to work in a less stringent environment, as well as bringing benefits to the airline itself. Con: Uncalculated risk may lead to adverse outcomes
AirAsia is a company which runs or operates under the transformational leadership and this may drive the company to adverse and undesirable outcomes if transformational leadership is overused or misused. The leadership style of Tony Fernandes as a leader who possesses an open and adventurous mindset might drive AirAsia to the brink of bankruptcy if the transformation leadership style is not managed or used properly. This is because he will not hesitate to take drastic, if not controversial, actions in order to steer the company ahead. As long as a plan guarantees a large profit, he will strike to carry out the plan.
For instance, Tony Fernandes was determined to get the route between Kuala Lumpur and Singapore because he knew that this is a profitable route. Before 2008, this route was served by Tiger Airways. However, Tony Fernandes did not give up on this plan of serving this route due to the high profitability. After 5 years of on-going negotiation and actions in which some of them spiked some controversies, AirAsia finally succeed to serve this route (AirAsia blog, 2008). If AirAsia did not succeed in obtaining the route between Kuala Lumpur and Singapore but Tony Fernandes was still determined to carry on with his plan, it will possibly caused AirAsia to suffer huge loss, either explicitly or implicitly because new plans will not be able to execute as all the efforts will be directed towards Tony Fernandes’s will on obtaining the route between Kuala Lumpur and Singapore.
These moves may backfire as taking uncalculated risks is equivalent to playing with fire. In the worst case scenario, the whole company may collapse as it may involve a hefty sum of money and the inability to generate new plans for the future operations. Solution: Synergy Effect through The Implementation of Transformational and Transactional Leadership. As a transformational leader, Tony Fernandes has changed the organizational culture by introducing new beliefs and goals of AirAsia, as well as changing how the members of the company in defining their roles (Cherry, 2007). In other words, these kind of leaders are agents of change.
However, a leader with only transformational characteristics is not enough to lead an organization towards success. Hence, Tony Fernandes has adopted both transformational leadership and transactional leadership to achieve synergy effect. Transactional leadership helps organizations to achieve their current objectives more efficiently and emphasizes corrective action, mutual exchanges, and rewards only when performance expectations are met (McShane & Glinow, 2010).
Tony Fernandes motivates his employees through a system of rewards and punishment rather than depending solely on changing the perception of his employees in order to achieve organizational goals. If a subordinate does what is desired, he will get a reward, and if he does not go as per the wishes of the leader, he will get punishment. Here, the exchange between leader and subordinates takes place to achieve routine performance goals. Tony Fernandes applies this to improve the employee’s performance, because in general, a relationship between two people is based on the level of exchange they have.
For example, employees work hard to increase productivity, and as a return, they get rewards from management. This is a win-win situation because the company will get higher profit when productivity increases. Besides, the transactional leaders are found to be effective in increasing efficiency in terms of cutting costs and improving productivity. This is because the relationship between transactional leaders and their employees tend to be action oriented and not based on emotional bond. The reason is because when the employees are clear with the “carrot and stick” policy in the organization, they will be committed with their job and therefore, could improve productivity. Therefore, implementing transactional leadership along with transformational leadership will seal the lacking part of transformational leadership.
Pro: Proven business model that consistently delivers the lowest fares Tony Fernandes possesses leadership competencies such as strong drive in pursuing goals and leadership motivation. Under Tony Fernandes’s leadership, AirAsia has swiftly broken travel norms around the globe since 2001 and has risen to become the world’s best. AirAsia has been expanding rapidly since then to become an award winning and the largest low cost carrier in Asia. The strength of AirAsia is where it is able to deliver the lowest fare consistently and this is proven through a proven business model.
Therefore, this is the reason why by today, AirAsia is able to fly over 55 million guests across the region and continues to create more extensive route network through its associate companies. With a route network that spans through more than 20 countries, AirAsia is able to pave the way for low-cost aviation through their innovative solutions, efficient processes and a passionate approach to business. In order to provide low fares, by following Tony Fernandes’s leadership, the staff have the motivation and strong drive in cutting down unnecessary expenses. The management will invest wisely on those essential areas without overspending too much as well.
Tony Fernandes as CEO of AirAsia said his philosophy is very clear: “Before a business can grow, it needs to have its costs under control. It must be cost-efficient and profitable, and it must create value. Costs that do not add value must be contained, reduced and even eliminated.” (Tony Fernandes, 2006). Besides, together with their associate companies such as AirAsia X, Thai AirAsia and Indonesia AirAsia, AirAsia is able to take low-cost flying to an all new high with their belief, “Now Everyone Can Fly” which has also successfully positioned itself in customers’ mind. Thus, AirAsia has become one of the businesses that have successfully adopted cost leadership through operational effectiveness and efficiency. The cost advantages have enabled AirAsia to become the Asia’s leading low fare airline.
As the leading low cost carrier airline, the main con is where the service resources of AirAsia are limited by lower cost. This is mainly because Tony Fernandes’s emphasis on lower fares decreases earnings which could be used for other activities such as maintenance, and better in-flight service. Due to limited service resources, AirAsia is unable to provide better service to the passengers for greater satisfaction and reputation. Despite of their constant innovation and sustainable low air fares, AirAsia still receives a lot of complaints from customers on their services. Most passengers complained that they are being charged for a lot of things.
For an example, food and drinks will not be provided for most of the flights during the whole journey unless passengers requested and are willing to pay extra for the food and drinks. Besides, passengers are allowed to check- in their baggage only if they requested it during ticket booking and have to pay an amount of fees for this service. During baggage check in, if the weight of the baggage exceeds the weight that the passenger has paid for, the passenger will have to pay another extra fee according to the weight of the baggage exceeded. Furthermore, passengers used to complain that they are not able to change flight or to get a refund if they could not board the airplane.
The reluctance of AirAsia to provide entertainment to the passengers in order to save cost may cause some dissatisfaction among the passengers, especially for those travelling in long-hour flights. Thus, AirAsia is still lacking in terms of customer service and in-flight management which require resources to bring these up to the next level. AirAsia will still need to figure out some alternatives or methods to address these concerns as good customer service and management is critical in nowadays especially when competition is getting more intense.
Solution: Application of Relative Alternative Revenue Generation To overcome the problem of limited service resources, AirAsia applied the “relative alternative revenue generation” to improve the services. It means that an organization can generate revenue from other areas while having transactions with the customers. AirAsia implements this alternative revenue generation by charging a premium for late bookings. As a low cost carrier airline, every seat is considered an opportunity to maximize revenue. Seats are made available at various prices in different points of time. The earlier that a customer books the air ticket, the cheaper will be the air fares. A premium can be charged on late reservation for the same seat. By implementing this method, AirAsia not only can get higher profit, it also helps to shift the demand from high period to low period.
Besides, AirAsia allocates capacity to maximize expected revenues by adjusting prices for destinations that have a higher demand as compared to others. However, this method is to combine these two approaches (premium charging and price adjustment according to demand) for all flights so that the seats are effectively priced for all the flights. All the extra profits gain from the alternative revenue generation can be used to improve the services to provide more comfortable air travel to AirAsia’s customers. In a nutshell, the application of the relative alternative revenue generation will help AirAsia to generate extra earnings to finance the service resources, as well as to give competitive advantages to AirAsia as compared to other airlines in terms of the low fares.
Pro: Fewer management levels, more effective and focused management People-oriented behavior that presents in a leader often energizes employees. This is because there are fewer management levels which are more effective and focused. When the hierarchy is reduced, employees feel empowered and meaningful in their work. This will lead to the rise of job satisfaction levels and faster decision making.
Employees will feel that they have the right in decision making. Tony Fernandes often develops a much better understanding of his staff, workplace conditions and enjoys new ideas and suggestions for improvement by encouraging employee feedback and ideas. By hearing true and honest comments from the employees allows him to have better understanding of the positives and negatives. Thus, the employers will be able to carry out their work in a more friendly environment without much pressure from the higher-ups. Besides, the employers from every hierarchy will be able to communicate and voice out their opinions regarding the working system of the company.
Tony Fernandes puts more attention on his employees compared to his customers. He used to say, “Employees come number one, customers come number two. If you have a happy workforce they’ll look after your customers anyway.” (Tony Fernandes, 2007). Hence, this will lead to a quicker decision and better communication in an organization or a company. Con: Employee receiving too much responsibility without proper management guidelines Although it is good to empower the employees, the decision-making duty can become overwhelming for the employees. This will occur when employees are having too much freedom in making decisions or receiving too much responsibility without management guidance. Misunderstanding may occur as the employers do not have a clear idea on their job responsibility.
Although decision making process is speeded up, employees often feel confused with the job description and this will cause ineffective decisions and ultimate job dissatisfaction. When all these happen, it will lead to lower performance because the best idea or the best choice is not chosen during decision making and conflicts will happen. For instance, some of the staff at the check-in counter will not charge the passengers for extra charges on the overweight baggage because those staff felt that they have the right to make the decision for the company. However, this is in conflict with the other staff’s decision and inconsistent with the company’s policies on passengers’ baggage. This will also cause customer dissatisfaction due to wrong decision making which involved the customers.
Besides, it will also lead to high employee turnover. High employee turnover may be harmful to the company because when employees just in time to understand the flow of the company, they are already preparing to leave. AirAsia will have to hire another group of new employees in which they have to undergo training and learn everything all over again. Employee turnover is high because there are certain employees who will feel overwhelmed and pressured by the need to make decision for a big company. Hence, all of these will decrease the efficiency and effectiveness of AirAsia’s operations and performance, which in overall will reduce the company’s profitability. 2.3.4 Cultural Issues In Leadership
Pro: Multi – cultural, gender and skilled staff provides efficient and effective workforce AirAsia is a multi cultural company where the employees are from different races, religions, backgrounds, gender, and age group. AirAsia employed quite a number of skilled workers where they are able to increase the efficiency and workforce incentive. It takes a quality team to get a job done.
By this, employers and employees in AirAsia are able to have a greater pool of knowledge, better understanding of different circumstances, culture and norms. The main advantage for the multi-cultural, gender and skilled workforce is that they are able to respond immediately to any emergency circumstances because each of them have their competencies and understanding to different circumstances due to their unique background. Besides, employees can serve the passengers of all races and religions in respectable way. This is mainly because they can speak different languages as well.
Air cabin crews will get to know which type of food is suitable for the passengers according to their religions. For an example, Indians and also Chinese who are praying to “Guan Yin” do not take beef and where the Malays do not take pork. Therefore, it is important for the AirAsia’s air cabin crews to be aware that serving either fish or chicken is the best. It shows that AirAsia is an airline which is able to understand customers from various origins and backgrounds. With that, the airline can be promoted to the people from all walks of life and customers will feel more attached to the hospitality that AirAsia is able to provide to the customers. Con: High reliance on human resource and workforce
One of the main problems faced by AirAsia is the high reliance on human resource or workforce. As AirAsia stresses on employing quality staff regardless of culture and gender concerns in order to provide better understanding to the day to day operation and better services to the passengers, AirAsia needs to constantly outsource and search for new staff or new talent in order to maintain the multi-cultural, gender and skilled workforce dynamic of the company. One of the reasons is due to high employment turnover. In order to search for new talents, more money is needed to pump in for recruitment purposes in different places all over the country because quality human capital is important to AirAsia.
When outsourcing efforts increases, more money is also needed to be invested in recruiting talented instructors to develop the new employees as well. With that, AirAsia will have to spend more money and resources in AirAsia Academy to develop the staff. Furthermore, new staffs will have to undergo more training before they can serve the customers effectively. The training period usually is not short as well, sometimes even up to one or two years. After a certain period, when the contract ended, the staffs might leave the company and jump to work for a better airline. This will be a loss to the company as the employees may not be loyal to the company and the only purpose of them is to get free trainings under AirAsia. Hence, the high reliance on workforce and human resource may place a threat to AirAsia.
Tony Fernandes who can be defined as a transformational leader has the power to influence and motivate his employees to achieve the company’s goal. The greater the power a leader has, the bigger the responsibility to ensure the operations of the company runs smooth (Curran & Seaton, 2003). Therefore, Tony Fernandes needs to be rational and cautious when making decisions to eliminate or to minimize adverse outcomes.
Sustainable Flexible Organizational Structure. It is advisable that AirAsia to have a sustainable flexible organizational structure despite of the open communication that AirAsia is currently having. This is because flexible organizational structure enables streamlined communication and also knowledge transferring between various levels management and also employees. Useful information should be shared or distributed among the subordinates. By this way, any new implementation problems or problems that arise due to new changes introduced can be identified in the early stage (Ormerod, 2001). As transformational leadership will always introduce changes to the company and to the employees, AirAsia’s employees are always exposed to new environment and implementation.
In order to cope with a certain level of resistance or fear to changes among employees, the flexible organizational structure where employees have easier and closer interaction with the top management will ease these concerns. In a company with flexible organizational structure, the top management of AirAsia should provide executive support to the employees to ensure a decision or a project can be successfully carried out because employees might be afraid to make decision in new environment. This will boost the employee’s motivation and lead them to be more positive. Top management is also responsible to emphasize the benefits to their employees and implement supporting policy to ensure the improvement of the performance of company.
With that, changes can be introduced for the benefits of both the company and the employees while maintaining employees’ motivation in an optimal level.
Application of Incremental Approach It is recommended that Tony Fernandes should apply incremental approach when making decisions. Incremental approach helps people to identify conflict, break down the complexity and uncertainty to reduce the risk of making a wrong decision (Little, 2005). It involves the following steps, which are: gather all costs associated with each alternative, drop the sunk costs, drop those costs that do not differ between alternatives and select the best alternative based on the remaining cost data.
This obviously can solve the uncalculated risk that may lead to unwanted outcomes. There are many benefits can be gained by adopting this approach. First of all, incremental approach will divide the decision making process into smaller scope, thus complexity and conflicts can be reduced and the risk of making wrong decision will then be more likely to be lowered down. Furthermore, the negative consequences incurred if the decision fails are less as compared to take drastic actions in order to steer the company ahead. With the application of incremental approach, it is believed that drastic and negative outcomes resulting from changes introduced could be minimized for the on-going success of the company. 3.2 Leadership Competencies
Con: Service resources are limited by lower cost
Tony Fernandes’s leadership competencies have successfully brought AirAsia towards the success route as a leading low cost carrier. However, the leadership competencies of this leader has also lead AirAsia to some weakness. As a low cost carrier, AirAsia will try to reduce costs as much as possible in order to provide the lowest fares to the customers. Cutting down on costs includes cutting down on in-flight services to the passengers. The downside of reducing cost is that it will limit the services provided to the passengers. Hence, AirAsia receives a lot of complaints about their services.
Having Business Deals With Suppliers It is recommended that AirAsia should have business deals with some suppliers in order to provide better in-flight services to the passengers. For instance, most passengers complained that no food and drinks are provided and they will be charged for food and drinks. Since the provision of food and drinks is the area that receives the most dissatisfactions from the passengers, it is advisable that AirAsia can provide light refreshment to the passengers in order to reduce the complaint about they are being charged for food and drinks.
Taking into consideration about providing light refreshment will increase the costs, AirAsia should take the initiative to have business deal with some food and drinks suppliers. AirAsia can offer to have advertisement for its food and drinks suppliers by utilizing its entertainment system on the flight. As a consideration, AirAsia would be granted discount or sponsorship on the food and drinks. With this, AirAsia can meet the demand of its customers without incurring higher cost. Therefore, having business deals with suppliers can reduce the cost constrains that will limit the quality of services provided by AirAsia, as well as can rebuild the image of a low cost carrier.
Adopting Knowledge of the Business as Leadership Competence Other than the four categories of leadership competencies discussed earlier, it is also recommended that Tony Fernandes can adopt knowledge of the business as his another leadership competencies. The rise of competition caused by the knowledge economy and globalization will bring significant changes in the leadership strategies for organizations. Therefore, Tony Fernandes needs to know more about the business environment in terms of tacit and explicit knowledge.
For example, Tony Fernandes can obtain assistance and knowledge from experts in the aviation industry such as the GE Capital Aviation Services (an aircraft leasing and financing organization). When Tony Fernandes has more knowledge on the airline business, he would be able to respond to changes in the internal and external environment faster, as well as will have greater resistance to uncertainty. In fact, since both the leader and the management understand the nature of business well, they can make more intuitive decisions.
Besides, AirAsia can create a leadership brand to bring confidence to stakeholders. A leadership brand can be defined as a reputation for developing exceptional managers with a distinct set of talents that are uniquely geared to fulfill customers’ and investors’ expectations (Intagliata, Ulrich, & Smallwood, 2000). Researchers have found that when investors have confidence in the leadership talent of an organization, share price will increase (Ulrich & Smallwood, 2007). By creating a unique leadership brand via having knowledge of the business, Tony Fernandes would be able to produce impressive results to the stakeholders. By gaining knowledge of the business, AirAsia can gain competitive advantage and thus increase its reputation and also obtain higher profit.
Cons: Employee receiving too much responsibility without proper management guidelines Organizational leaders can shape and influence corporate culture for the good and bad (Ferrell, Fraedrich, & Ferell, 2010). Tony Fernandes has practiced people- oriented behavior in the organization in order to increase the employees’ level of satisfaction and also be able to have faster decision making process. But each leadership style has its advantages and disadvantages. As mentioned, employees will lose direction because they have no clear idea on their job responsibilities due to no guidance is provided by management and employees will have too much freedom to make decision. 3.3.1 Recommendation 1: Introduction of Team Management
To be more effective, Team Management should be introduced and applied in the organization. Team Management is a combination of people- oriented behavior and task- oriented behavior, which means that the manager is concerned of the employees and also the production (McShane & Von Glinow, 2010). As a leader of an organization, Tony Fernandes should not only concern for employees only.
This is because it will lead to low job performance and overwhelm the decision making duty due to employees receiving too much responsibility without guidance by management. For instance, task- oriented behavior is concerned for performance and it includes formulating the work activities, analyzing the role and controlling the operation and performance. Team Management leadership includes setting rules, regulation and procedure in the organization for employees to follow and leaders have to ensure that they are followinh the company rules.
In addition, leader will assign the employees to a specified task, make sure all employees are clear in direction and push employees to achieve company’s goal. A suitable punishment and rewards should be given to employees in order to monitor the level of performance. If the employees perform well, rewards will be given; if employees’ performance is poor then punishment will be given. This can help to increase the level of job performance and able to motivated employees to achieve their goal. Besides, leader should concern the relationship between employees, showing mutual trust on employees, respecting employees and listening to their opinion (Wynn & W., 1984). Hence, by applying both people-oriented and task-oriented behavior in leadership, AirAsia can ensure that the employees are being concerned while ensuring that the productivity of the employees is not compromised.
Providing Proper Guidelines to the Employees Apart from that, proper guidelines should be provided by management in order to lead the employees in doing work. Guidelines such as job description, code of conduct and code of ethics should be clearly delivered to the employees of AirAsia before the commencement of job, as well as along the period of serving the company. This is because new employees do not know anything about the company and the organization culture. Management need to appoint senior employees to lead and guide new employees so that they can know the right technique in performing the work. Clear guidance can lead to a clearer direction for employee to know what they are supposed to do for AirAsia and also direction to let them know how to make a right decision in their job. (Billett, 2001) Furthermore, if no guidance is provided by management, those new employees will misunderstand, hence a wrong and unethical decision might be made.
In order to make a right decision, guideline provided by management is important because if employees are making an unethical and wrong decision will make an organization to face huge losses and affect the reputation. For example, in the case of Denver International Baggage Handling System, the organization faced huge expenses in order to save the condition due to ineffective decision making (Calleam Consulting Ltd, 2008 ). The Denver Airport has been elected to construct a new state- of- the- art airport that would strengthen Denver’s position as an air transportation hub. The airport’s baggage handling system was a main component in the plan. This is because by automating baggage handling, aircraft turnaround time was to be reduced to as little as 30 minutes.
It is the comparative advantage for the airport because it means more efficient operation. But the system was only a shadow of the original plan and other baggage handling was performed using simple conveyor belts plus a manual tug and trolley system that was hurriedly built when it became clear that the automated system would never achieve its goals. Hence, the organization’s monthly $1 million maintenance costs exceeded the monthly costs of a manual tug and trolley system because the system is scrapped in favor of a fully manual system in order to save costs. Therefore, making the right decision is important because it can help to save cost and increase the company reputation. By providing proper guidelines to the employees, AirAsia will be run and operate in a more effective and efficient manner while minimizing defective decisions being made.
A multi-cultural company has its advantages which the employees in the company have better understanding of different cultures and norms because employees are from different background, culture, gender, races and religions. However, the sources of money become significant because company has high reliance on human resources and lot of money is needed in the recruitment process.
Recruiting Investment Team for Proper Investment To make the leadership style more effective, it is recommended that Tony Fernandes should recruit an investment team to help AirAsia do investment in order to get extra resources to operate the company (Baumal, 2000). Since the recruitment process and training program need a lot of money to train more talented employees, AirAsia will incur constrain in financial means which could restrict the employees’ development process. The recruitment process is important to select and employ the right employees to work for company because it will help to reduce the chances of defective outcomes and will increase productivity if the right people are doing the right job.
Therefore, AirAsia should have a stronger support of funds in order to run the training and development process more effectively. By doing a proper investment, it can help AirAsia to generate more funds to operate the company especially in the aspect of human resources and intellectual capital development because AirAsia are highly relying on these due to the company emphasis on employing quality staff. When the company has sufficient funds to operate the company, then the training and development activities can be run smoothly and effectively without huge concern on financial problems. Thus, proper and stable investment would give a green light to AirAsia to continue to enhance its training and development activities on the employees as a driving factor to lead AirAsia to greater achievement.
Effective and Attractive Compensation Program As mentioned, one of the reasons that cause AirAsia needs to constantly search for new employees is due to high employment turnover.To overcome the problem, AirAsia should have an effective and attractive compensation or remuneration program for employees (Galbraith & Merrill, 1991). AirAsia should constantly review the level of performance and give appropriate rewards for employees who achieved the target. Rewards can encourage and motivate the employees to work harder. This is because once the employees have motivation and positive emotions such as being happy and enjoyable in workplace, their work performance will increase and will be loyal to the company since they have positive view on the company.
For example, the employees at Mott MacDonald have plenty of fun because the team has an annual desert safari for employees who performed well, which made the employees felt relieved from stress and the work environment, as well as felt being appreciated (McShane & Von Glinow, 2010). Hence, the employees are always happy and loyal to the organization. Besides, AirAsia should organize annual trips to compensate employees and this is also able to generate positive emotions among the employees. With this, it is a plus point for the AirAsia because employees can have better understanding on the culture and norms of their colleagues from different countries. Hence, this can help to strengthen the bond among the employees and the management level resulting from the interaction and communication during the annual trips. In a nutshell, better compensation and treatment to the employees will help to retain the quality employees in AirAsia as their hardwork is appreciated and acknowledged.
The achievement of AirAsia as a leading low cost carrier in this globalized world is definitely a bright light to people all around the world, especially to the Asians. The success of AirAsia as one of the strongest low cost carrier airlines in the Asia region is contributed by various factors. Particularly, the outstanding leadership of the Chief Executive Officer (CEO) of AiAsia, Tony Fernandes has undeniably lived up the spirit of AirAsia’s well-know slogan of “Now Everyone Can Fly”. As a transformational leader, Tony Fernandes has introduced a lot of changes to the company, together with stimulating improvement and development in the staff. The leadership competencies of this leader which includes strong drive to pursue goals and leadership motivation have paved a way to realize the goals of providing affordable air travel to the passengers.
Meanwhile, the people-oriented behavior of Tony Fernandes has enabled him to take care of the employees’ concern and needs so that the employees will feel comfortable working with AirAsia. Besides, Tony Fernandes’s distinctive view in treating cultural and gender issues have lead him to bring in quality staff to AirAsia.
The success story of AirAsia will not be limited and restricted if constructive advises and practices are implemented to the company. Tony Fernandes can be both a transformational and transactional leader to bring a better balance in the operation of AirAsia. Having greater knowledge on the aviation industry will certainly bring more merits in improving the operation and management of the company.
On top of that, team management is a feasible practice to be executed in AirAsia in order to ensure both productivity and employees’ well being are taken care. Furthermore, proper and stable investment will generate a more concrete financial means to develop the skills and potential of the employees, while giving appropriate compensation to the employees can possibly reduce employment turnover in AirAsia. In a nutshell, an effective leader together with the leadership styles adopted is the pillar of the success and triumph of AirAsia.