a.Economies of Scale
•Can be achieved by maximizing passenger number per flight •MAS, under Idris Jala cut several unpopular flight routes due to irregular number of passengers and increased number of flights in high demand routes to cut unnecessary expenses and costs •Air Asia benefits from the lowest flight cost, USD$0.02 ASK* (Southwest Airline [US LCC] – USD$0.04, MAS - $0.41, Cathay Pacific $0.59)
i.Technology is a key determinant however change is not very rapid ii.Releases of new aircraft models A380 – USD$327.4m, Boeing 747-400 - $247m (http://www.flightglobal.com/articles/2008/04/22/223184/airbus-includes-surcharge-in-2008-catalogue-prices.html) iii.Additional cost to adept resources with changes:
2.Retrofitting aircraft, additional airport tax
iv.Online booking system heavily relies on IT development
i.Airline industry have very little or no differentiation between companies in perspective of consumers ii.Skytraxx recognition awards companies with excellent quality of service iii.Main concern of consumers is price (Price Sensitive)
iv.Air Asia implement differentiation and price strategies to attract market segment – creating LCC market in Malaysia as first mover
d.Number of Rivals
i.Malaysia – Air Asia (AIrAsiaX), Malaysian Airlines (Firefly) ii.Regional – over 50 airlines uses KLIA as a transit, hub, or satellite for regional and international routes iii.Apart from MAS and Air Asia, none of the other airlines are permitted to operate intercity routes within Malaysia (malaysiairports.com.my)
Attractive in the short run but may become unattractive in the long run. Main attractiveness factors are low threat of new entrants and low competitive rivalry. Unattractiveness factors are threat of substitutes and buyers bargaining power.
a.Threat of new entrants (Short Run, SR: LO – Long Run, LR: HI)...