Welcome on board!

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The Entry Strategy of in Dubai

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About Air Asia

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Air Asia: Company HistoryFriday, July 4, 14

Air Asia in Brief

AirAsia  is  one  of  the  award  winning  and  largest  low  fare  airlines  in  Asia.Has  a  fleet  of  165  aircra8s  and  flies  to  100  des:na:ons  spanning  over  22  countries.Operates  from  hubs  located  in  Malaysia,  Thailand,  Indonesia,  Philippines  and  India.Affiliate  airlines:

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Air Asia: Revenue (26 February 2014)

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Characteristic of Air Asia

Boss

No#extra#charges�

Above#80%####

on45me#departur

es�

High#safety#&#quality#

standards�

Low#fares�

132#routes,#40#offered#by#no#other#

airline�

Easy4check#in#online�

Frequent#flyers#

offerings�

Now$Everyone$can$Fly�

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Entry Strategy to Dubai 2016!

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Dubai: Introduction

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INTRODUCTION

Demographics  Popula:on  2106177  (1  January  2013)  Indian  (51%),  Emira:  (17%),  Pakistani  (16%),    Bangladeshis  (9%),  

             Filipinos  (3%),  Others  (4%)  

Area:  4,114  km2  Average  household  income  (monthly):  $3186  (2009)Average  household  income  (yearly):  $35910  (2009)

Economic  CriteriaGDPDisposable  Income

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INTRODUCTION

Poli%cal  &  Legal  Environment1.Federal  presiden:al  elected  monarchy.

       2.No  poli:cal  par:es,  poli:cal  par:es  are  forbidden.     3.Dubai   is   subject   to   the   federal   law   of   the   UAE   but   retains   the   right   to  

administer   its   own   internal   affairs   and   enjoys   certain   other   exclusive  rights.

Legal  representa:on1.Easy  legal  representa:on.  2.The   full   spectrum   of   regional  and   interna:onal   law  firms   operate   in  Dubai,  with  many  of  the  larger  interna:onal  firms  choosing  to  operate  from  the  DIFC

Corporate  governanceWith  the  mission     to  develop  corporate  transparency  and  principles  of  good  corporate   governance   and   an:-­‐money   laundering   Hawkamah   Corporate  Governance  Ins:tute,  has  been  established.

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INTRODUCTION

Tax  System1.No  federal  corporate  or  income  tax  levied  in  the  UAE  (except  on  oil  companies  and  foreign  banks).  

2.Free  zone  en::es  are  subject  to  a  number  of  tax  concessions.3.There  is  no  value  added  tax  or  sales  tax  in  Dubai  or  the  UAE.4.There  are  no  exchange  controls  on  the  remieance  of  profits  or  repatria:on  of  capital  and  there  are  virtually  no  restric:ons  on  foreign  trade.

The  Court  System1.Dubai  has  retained  its  own  independent  courts  (and  judges),  which  are  not  a  part  of  the  UAE  Federal  Judicial  Authority.  2.Dubai’s  courts  will  first  apply  federal  laws,  such  as  the  Companies  Law  or  the  Civil  Code,  as  well  as  the  laws  and  decrees  enacted  by  the  Ruler  of  Dubai,  where  federal  law  is  absent  or  silent.  

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INTRODUCTION

Structuring  and  licensing  for    interna%onal  businesses  wishing    to  do  business  in  Dubai(FDI  Regula%ons)

1.Register  a  local  en:ty  under  the  Companies  Law  or  the  Civil  Code2.51%  of  the  share  capital  must  be  held  by  UAE  na:onals3.Register  a  branch  or  representa:ve  office  of  a  foreign  company4.Must  appoint  a  UAE  na:onal  to  sponsor  the  office  for  its  license  applica:on  and  for  various  other  maeers.5.Enter  into  a  commercial  agency  rela:onship  with  a  UAE  na:onal.  

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Landmark   developments   in   Dubai   in   terms   of   law   and   regula:on,   most  notably,   in   the   crea:on   of   the   many   free   zones   in   Dubai   (Dubai  Interna:onal  Financial  Centre  (DIFC))

                       Condi:ons  for  doing  business  in  free  zones1.Businesses  wishing   to   set   up   in   the   free   zones   are   required   to   establish  places   of   business  physically  within  the  geographical  boundaries  of  the  par:cular  free  zone.

2.100   percent   foreign   ownership   of   companies   allowed   (compared   to   49   percent   for   most  companies  incorporated  outside  the  free  zones).

 3.Tax  concessions,  no  restric:ons  on  the  repatria:on  of  capital  and  profits.Freedom  from  currency  restric:ons  and  import  du:es.  

Why Dubai?

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Why Air Asia drew back from Dubai on 2010?

       “We  will  resume  once  we  are  able  to  have  a  more  economical  aircra8”                  “We  believe  with  the  right  aircra8,  it  can  be  very  promising”

         “Underwhelming  demand  for  :cket,  uneconomical  aircra8”

“Could  have  reached  out  more  to  local  travel  agents,  many  UAE  are  s:ll  unable  to        purchase  :ckets  online  via  credit  card”

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Entry Strategy of AirAsia in Dubai

Joint venture agreement with Citibank UAE

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Why Citibank?Since  1812.A  global  bank  with  3,777  branch  loca:ons  in  36  countries.Provides  insurance,  credit  cards  and  investment  products.Its  online  services  division  is  among  the  most  successful  in  the  field  claiming  about  15  million  users.

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Market Analysis

Market growth ratesForecasted demandCompetitorsPotential barriers to entry

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Market Analysis: Market Growth Rate

Dubai  Interna%onal  Airport-­‐Over  7,000  weekly  flights  operated  by  140  airlines  to  over  230  des:na:ons  across  every  con:nent  except  Antarc:ca.  (February  2014)-­‐7th  busiest  airport  in  the  world  by  passenger  traffic.  (Passenger  Traffic  Hub)-­‐2nd  busiest  airport  in  the  world  by  interna:onal  passenger  traffic.-­‐5th  busiest  cargo  airport  in  world  handled  2.44  million  tons  of  cargo.(2013)      (Cargo  Traffic  Hub)

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Market Analysis: Forecast Demand

Interna%onal  Passenger  DevelopmentUAE  will  add  29.2  million  passengers  (6.6%  CAGR).  Routes  between  the  Middle  East  and  Asia-­‐Pacific  will  see  the  strongest  growth.

Regional  Outlook  over  the  2013-­‐2017  forecast  periodThe  Middle  East  will  report  the  strongest  interna:onal  passenger  growth  with  6.3%  CAGR.

15  Million  tourists  by  2015  (40,000  visitors  per  day)Airline  Industry  Forecast  2012-­‐2016

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Market Analysis: Competitors

CompetitorsPassenger!Emirates (64%)!Flydubai (LCC) (10.4%)Iran Aseman AirlinesQantas

CargoAl Rais CargoEmirates Skycargo

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Market Analysis: Potential Barries to Entry

-­‐Highly  compe::ve  market-­‐Excellent  infrastructure-­‐Joint-­‐venture  with  the  local  partner  holding  at  least  51%  of  the  equity.  -­‐100%  foreign  ownership  permieed  in  the  many  free-­‐trade  zones.-­‐-­‐Only  one  LCC  (flydubai).

However,Exis:ng  airlines  highly  cost  compe::ve.Most  of  the  airlines  are  state  owned  hence  can  be  quite  difficult  to  enter  the  market

Friday, July 4, 14

Market Analysis: Potential Barries to Entry

-­‐Highly  compe::ve  market-­‐Excellent  infrastructure-­‐Joint-­‐venture  with  the  local  partner  holding  at  least  51%  of  the  equity.  -­‐100%  foreign  ownership  permieed  in  the  many  free-­‐trade  zones.-­‐-­‐Only  one  LCC  (flydubai).

However,Exis:ng  airlines  highly  cost  compe::ve.Most  of  the  airlines  are  state  owned  hence  can  be  quite  difficult  to  enter  the  market

UAE  ranked  46  Ease  of  doing  business  survey

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Risk Analysis

1.Regulatory  risks(unan:cipated  government  interven:on)  2.Unan:cipated  environmental  or  social  impacts  as  a  result  of  the  venture  3.Market  risks  (compe::on)  4.Opera:onal  (maintenance,  suitability,  safety)5.Currency  fluctua:ons6.Infla:on7.Changes  to  taxa:on8.Credit  card  debt  problems

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Profit Potential Estimates

Produc've*&*skilled*employees,*simple,*

aggressive*and*focused*management*structure�

High*aircra;*u'liza'on�

Standard*fleet*of*aircra;�

Frequent*reliable*schedules�

Short*haul,*pointBtoBpoint*routes,*o;en*to*secondary*airports�

Courteous*but*limited*passenger*service****(e.g.*no*meal)�

Compe''ve*Advantage*LOW$COST�

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Porter Strategy

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Porter Strategy

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Porter Strategy

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TOWS AnalysisS1.Limited Type of Aircraft2.Established Brand3.First Mover Advantage4.Low Cost5.Strong Management Team6.Excellent Utilization of IT

W1.Problems in punctuality2.No own maintenance, repair & overhaul facility3.Secondary Airport location4.New market5.Depends too much on IT

O1.World Expo 2020 Dubai2.`Asia Pacific Labor` Market3.Open Skies Regulation4.High Cost Competitors5.Increase in fuel price may eliminate unprofitable competitor

T1.Oil price fluctuation2.Tax & Subsidies regulations3.Strong competition4.Political & Economic Situation

SxO1.Promotion Package for World Expo 2020 Dubai2.Special package for labor workers/ groups 3.Establishing Dubai Tour Package & keep the price low

WxO1.Expanding fleet, purchase bigger aircraft3. Keep the price low

SxT1. Maintain a good relationship with government officials2.Allow seat allocation for groups

TxW1.Training ground staffs2.Recruiting Staffs for maintenance, repair, and overhaul facility

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BCG Matrix

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BCG Matrix

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BCG Matrix

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Marketing Strategy

Promotion Package for Labor worker/ group

Promotion of Air Asia-Citibank

Establishing good network with local travel agent

Becoming an official partner for EXPO 2020 Dubai

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Concluding Remarks

Why do we think AirAsia Dubai will work?

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1.New  land  of  opportuni:es:  Strategic  loca:on2.One  of  the  inspira:onal,  exci:ng  and  successful  countries  in  the  world  with  huge  growth  poten:al.3.Immensely  aerac:ve  des:na:on  for  tourists  and  business  alike.4.Expo  2020  in  Dubai  (  increase  in  visitors  of  at  least  25  million  and  up  to  100  million)  and  the  2022  FIFA  World  Cup  in  Qatar.  

5.Poli:cal  and  economic  stability.6.Fewer  compe::on.

Dubai

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Ci:bank  Dubai  is  the  branch  of  interna:onal  financial  group  –  Ci:bank  Group  in  the  United  Arab  Emirates,  the  leading  bank  in  the  country’s  credit  card  market.One  of  the  oldest  banks  with  diversified  services  and  a  very  strong  online  banking  network.

Perks  on  ground  and  in  the  air  -­‐  a  world  full  of  privileges.  Beau:ful  Harmony  

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Internet&users&and&its&&penetra-on�

Country&or&area� Internet&users� Rank� Penetra-on� Rank�

!United!Arab!Emirates! 4,517,169� 64� 85.0%� 20�

Internet&users&by&region!�� 2005b! 2010b! 2013a,b!

Africa! ������2%!!!!!!! ������10%!!!!!!! ������16%!!!!!!!

Americas! 36%! 49%! 61%!

Arab&States! 8%! 26%! 38%!

Asia&and&Pacific! 9%! 23%! 32%!

Europe! 46%! 67%! 75%!a!Es<mate.!b!Per!100!inhabitants.!

Sustainability of AirAsia Dubai

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Internet&users&and&its&&penetra-on�

Country&or&area� Internet&users� Rank� Penetra-on� Rank�

!United!Arab!Emirates! 4,517,169� 64� 85.0%� 20�

Internet&users&by&region!�� 2005b! 2010b! 2013a,b!

Africa! ������2%!!!!!!! ������10%!!!!!!! ������16%!!!!!!!

Americas! 36%! 49%! 61%!

Arab&States! 8%! 26%! 38%!

Asia&and&Pacific! 9%! 23%! 32%!

Europe! 46%! 67%! 75%!a!Es<mate.!b!Per!100!inhabitants.!

Sustainability of AirAsia Dubai

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See you on 2016!

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TOWS AnalysisStar%ng(a(Joint(Venture(in(Dubai�

Perhaps(the(easiest(way(for(a(foreign(investor(to(establish(a(business(presence(in(the(UAE(is(to(enter( into(a( Joint(Venture( (JV)(with(a(UAE(Na>onal( (Local)(or(a(company(100%(owned(by(UAE(Na>onals.(((A(Joint(Venture(can(be(arranged(on(the(following(basis:(((•  All(aspects(of(the(business(and(stock(of(products(remain(the(property(of(the(foreign(investor.(•  The( foreign( investor( controls( the(management( of( the( business( including( opera>ons( of( its(

bank(accounts.(•  The(foreign(investor(effec>vely(receives(all(profits(except(for(an(agreed(fee(paid(to(the(Local.(•  The( UAE( Na>onal( provides( sponsorship( to( the( foreign( investor’s( employees( for( residence(

visas(and(work(permits.(•  The( UAE( Na>onal( must( have( a( license( to( operate( the( Joint( Venture( in( the( name( of( the(

foreign(investor.(•  Licenses(are( issued(by( the(Municipality(or(Economic(department(of( the(Emirate(where( the(

business(will(be(set(up.(•  A(Joint(Venture(is(not(suitable(for(manufacturing,(contrac>ng(or(similar(businesses.((�

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Star%ng(a(Joint(Venture(in(Dubai�Perhaps(the(easiest(way(for(a(foreign(investor(to(establish(a(business(presence(in(the(UAE(is(to(enter( into(a( Joint(Venture( (JV)(with(a(UAE(Na>onal( (Local)(or(a(company(100%(owned(by(UAE(Na>onals.(((A(Joint(Venture(can(be(arranged(on(the(following(basis:(((•  All(aspects(of(the(business(and(stock(of(products(remain(the(property(of(the(foreign(investor.(•  The( foreign( investor( controls( the(management( of( the( business( including( opera>ons( of( its(

bank(accounts.(•  The(foreign(investor(effec>vely(receives(all(profits(except(for(an(agreed(fee(paid(to(the(Local.(•  The( UAE( Na>onal( provides( sponsorship( to( the( foreign( investor’s( employees( for( residence(

visas(and(work(permits.(•  The( UAE( Na>onal( must( have( a( license( to( operate( the( Joint( Venture( in( the( name( of( the(

foreign(investor.(•  Licenses(are( issued(by( the(Municipality(or(Economic(department(of( the(Emirate(where( the(

business(will(be(set(up.(•  A(Joint(Venture(is(not(suitable(for(manufacturing,(contrac>ng(or(similar(businesses.((�

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Al  Maktoum  Interna:onal  Airport  DWC    Jebel  Ali,  Dubai  Emirate,  United  Arab  Emirates  No  airline  service  |  Pilot  info  |  1  comment  |  1  visitor  

Al  Minhad  Air  Base  NHD    Dubai,  Dubai  Emirate,  United  Arab  Emirates  No  airline  service  |  Pilot  info  |  2  comments  |  4  visitors  

Dubai  Creek  SPB  DCG    Dubai,  Dubai  Emirate,  United  Arab  Emirates  No  airline  service  |  Pilot  info  |  1  comment  

Dubai  Interna:onal  Airport  DXB    Dubai,  Dubai  Emirate,  United  Arab  Emirates  Routes  |  Flights  |  Pilot  info  |  7  comments  |  120  visitors  

Dubai  Skydive  AE-­‐0003    Dubai  Emirate,  United  Arab  Emirates  No  airline  service  |  Pilot  info  

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flydubai(annual(seat(capacity:(200942014� flydubai(annual(ASK(capacity:(200942014�

flydubai  des%na%ons  and  overlap  with  Emirates:  2009-­‐2014

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