STRATEGIC ALLIANCES Strategic is a formal relationship build-up between two or more organization to pursue profit advancement and market

expansion while remaining its own companies and businesses. All parties need to provide and share in term of facilities, manufacturing capabilities, distribution, product, technical expertise, capital for project and R&D (resource and development). The alliances between parties will help to share revenue and spread over the risk while develop the project unlike individual is limited of resources. This needs a solid cooperation, integration and collaborative between the parties involved. The are four types of strategic alliances are Joint Venture (Which parties involved will develop a independent legally company to achieve competitive advantage while share resource with each others), Equity strategic alliance (Parties will share difference percentage of share for the firm they developed), Non-equity strategic alliance (Parties develop contractual relationship to share their resource),and Global strategic alliance (Parties working in partnership across the national and industries boundaries). AIRASIA As the second after Malaysia National Airline, AirAsia is totally provides different services with other airline companies. With the slogan Now Everyone Can Fly, it offer lower price of air ticket which 40% to 60% lower than the price offered by other companies in this of Asia and without any compromise to flight safety standards. With lower cost, AirAsia has successfully transform itself from a money-losing regional operator to a profitable. AirAsia was established in 1993 and started operating on 1996, it was originally form by Malaysia Government conglomerate with DRB-HICOM. On 2001, AirAsia was purchased by former Time Warner executive Tony Fernandes's companyTune Air Sdn Bhd for the token sum of one ringgit. Tony was lending some airline expert to restructure AirAsias business model. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $0.27). JETSTAR JETSTAR airway was established by Qantas in 2003. It operating from Australia and New Zealand, Express Ground Handling and partner carriers including JETSTAR Asia and Valuair in Singapore and JETSTAR Pacific in Vietnam. The headquarter of JETSTAR located Melbourne, Vitoria, Australia. As one of the budget airline services provider, JETSTAR operate over 1900 weekly flights to 15 countries and serving in excess of 50 markets across the Asia and Asia Pacific region. The mission of JETSTAR is to enable people fly more often and extend the air travel to those previously cannot afford to fly. The airline operates an extensive domestic network as well as regional and international services and using a mixed fleet of narrow- and wide-body aircraft. Unlike JETSTAR in Australia, JETSTAR ASIA is majority Singapore owned an based company which managed by Newstar Holding Pte Ltd. It majority owned 51 % and Qantas Group holding the remaining 49%. In Singapore, JETSTAR and VALUAIR merged on 24 July 2005, it was the first major consolidation of south-east asias crowded low-cost airline industry. STRATEGIC ALLIANCES BETWEEN AIRASIA AND JETSTAR In 6 Jan 2010, AIRASIA and JETSTAR decided to form alliances which will be focusing on cutting costs and pooling their expertise, putting pressure on the SIA-backed Tiger Airways as it begins briefing investors on its listing planned. both carriers will focus on a range of major cost reduction opportunities and potential savings in the Asia Pacific region. Key to the agreement is a proposed joint specification for the next generation of narrow body aircraft.

In the joint procurement of aircraft and pool their inventory arrangement. This brings to work together to gain better deals on the next generation of aircraft, sharing parts and ground handling services, and joint procurement of engineering and maintenance supplies. There will also be reciprocal arrangements to support each others passengers in the event of a disruption. Alliance that would reduce costs, pool expertise and ultimately result in cheaper fares for both carriers. No job cuts are planned and alliance could lead to increased synergies in Singapore. JETSTAR committed to 46% growth in Singapore this financial year and put out a lot more aircraft in Singapore at the moment. JETSTAR did apply also for traffic rights of Singapore to Tokyo as well, so JETSTAR are looking for long-haul routes out of Singapore. That's something that's definitely a possibility and something that's on its radar and could either have Australian operations through Singapore to Europe or Singapore to other destinations and all those are possibilities and that's the great thing about having this sort of partnership". JETSTAR, which is owned by Qantas Airways, and AirAsia jointly earned nearly 3 billion Aussie dollars in revenues in the 2009 financial year. THE ADVANTAGES OF AIRASIA AND JETSTAR ALLIANCES 1. Future fleet specification: By combining both companies resources and expertise, it will be much helpful for investigating joint procurement opportunities of next generation narrow body aircrafts. The common goal is to achieve economies of scale and hence be able to influence design for more efficient and less costly operations. Instead of using single source of R&D, the development will be more successful in term of sharing information from both parties. For example, both companies might have different perspectives and experiences for narrow body aircraft. In the end of day, result will be perfect by combining different companies ideals and cost would be reduced while sharing expertise and facilities. Risk will be shared to opposite part while alliance formed. 2. Airport passenger and ramp handling services: develop cooperative arrangements for the provision of passengers and ground handling in Australia and within Asia at overlapping airports by leveraging scale. AIRASIA and JETSTAR having different market share in term of different airline service. It is impossible to achieve 100% for customer services performance while serving so many customers from different countries and airports. However, this joint venture will help to opposite party to improve customer service. For example, JETSTAR has headquartered in Singapore and Australia as well. It could help to AIRASIAs passenger and ramp handling services.

3. Shared aircraft parts and pooling: pool inventory arrangements for aircraft components and spare parts. It will help to achieve economic of scale via buying in larger quantity from suppliers. AIRASIA and JETSTAR will be more bargain power to negotiate with their suppliers for the price of aircraft parts. Besides that, inventory management will be more efficiency by pooling practice for both companies. AIRASIA and JETSTAR might setup own warehouse for storing as over roll cost will be reduced by combining both companies storage. AIRASIA and JETSTAR might outsource to other warehouse company for those fast-moving parts. For higher volume, it will be easier to bargain lower storage price to warehouse company. Yet, economies of scale achieve. 4. Procurement: joint procurement, with a focus on engineering and maintenance supplies and services, with JETSTAR maintaining its existing use of and commitment to Australian facilities. Both companies could bargain with maintenance suppliers to achieve lower cost as higher volume by combining both companies. In Australia, JETSTAR could provide service to AIRASIA with existing facilities then increase revenue. Economies of scale will be achieved while all unit cost

decreased. Besides cost will be reducing, relationship believe will be solid in long term corporations. 5. Passenger disruption arrangements: reciprocal arrangements for passenger management (i.e. support for passenger disruptions and recovery onto the other airlines service) across both the AIRASIA and JETSTAR flying networks. Customer services will be improved from this alliance. Both companies customers will have back-up service from opposite site. For example, when a schedule forced to be shut up, the number of effected customer might be over hundred. Related companys counter and service centre might need to handle these frustrating customers. But, if corporate company can help to re-arrangement for these customers such as transfer some of effected customers to its own flight. Yet, customer service will be improved and more efficient for Just-in-case happens.

THE DISADVANTAGES OF AIRASIA AND JETSTAR ALLIANCES 1. Information leaking to opposite partner. When strategies alliance formed, information sharing is important for both companies. Without that, alliance will be seems like short slogan. But, potential of misusing information for opposite company may be happened. The confidential information such as customer details, pricing, flight arrangement method and company system will leak to opposite side. It is very dangerous for these information leak to opposite party (competitor as well). After alliance has ended, competitor might use the information to attack opposite party. 2. Unnecessary cost while conflicting. When alliance formed, cost will be reduced while both companies align to same aim. However, cost will be increased also when both companies having different objective for the strategies. Cost and time will be wasted for dispute between partners. For example, Malaysia and Singapore were discussing for new bridge develop to replace current JohorSingapore causeway. Due to disagree of cost divide between two countries, Singapore disagreed to the project. In the other hand, Malaysia has already insists to start early construction project for the new bridge. This has caused over hundred million loss for Malaysia government.

3. Market share being deprived. Revenue and customer might take over by opposite partner.Both companies currently having different market share of the countries. AIRASIA is mainly in ASEAN city; JETSTAR is focusing on Australia and some of the Asia country. In the long term of corporation by two companies, each company might make use of opposite resource and facilities to open new service. Thus, market share will be shared to opposite partner. It will lead to company loss its profit and customer to its partner. 4. Working Culture. Culture of companies will affect the success of partnership. Refer to previous cases of strategic alliance, human interaction will be the major factor to decide whether the alliance is successful. For example, both company staffs need to communicate and work together after alliance. If the working behaviour and culture are difference, it might be difficult to achieve efficiency from both corporations. It will take longer time to communication and decide for the project. Thus, decision making process might be more complicated and needed to be aware by both companies.

5. Scruple of strategies. Company need to consider about partner profit and avoid competition with each and other. As having partnership with other partner. AIRASIA or JETSTAR might need to think twice before launching new strategies to customer as it must not effects opposite partner profitability. This relationship restricted to the next move of company. This partnership seems to become burden to company. Strategic must always harmless to partner and make higher revenue at the same time.

In conclusion, the strategic alliance will help by enabling us to use economies of scale in joint procurement effort, customer service, warehouse control, supplier bargaining and R&Ds. This will be help both companies achieve annual cost savings of AUD$100 million (US$92.3 million) estimated. Solid relationship will be build after long period of cooperation. Both companies could kick away other competitors by combining their capital and resource. Relationship will brings more revenue and increase market share besides cost saving. However, this strategic alliance comes with some of the disadvantages as well such as information leaking. Both companies need to be aware to control the information flow and being filter before pass to opposite party. Conflicting between companies will increase unnecessary cost as well. Company need to be aware and take proper action to perform this relationship instead of relying on it.