Air Asia : the World's Lowest Cost Airline

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Grant, Robert M.

Case Studies Section : case 9, Air Asia : The world's lowest cost airline

Grant, Robert M., (2010) "Case Studies Section : case 9, Air Asia : The world's lowest cost airline" from Grant, Robert M., Contemporary strategy analysis : text and cases pp.625-635, Hoboken: Wiley ©

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Case 9

AirAsia: The World’s Lowest Cost Airline*

By 2009, AirAsia had established itself as Asia’s most successful low-cost airline. Between January 2002 and March 2009, AirAsia had expanded from two aircraft and 200 000 passenger journeys to 79 aircraft and 11.8 million passengers. Its route network had grown beyond Malaysia to cover 10 South-East Asian countries. In addition to its hub in Kuala Lumpur (KL), Malaysia, it had replicated its system by establishing associated airlines in Thailand and Indonesia.

* Written by Robert M. Grant. The case draws upon a report written by Sara Buchholz, Nadia Fabio, Andres Ileyassoff, Laurent Mang and Daniele Visentin, AirAsia—Tales from a Long-haul Low Cost Carrier, Bocconi University (2009), and from an earlier case by Thomas Lawton and Jonathan Doh, The Ascendance of AirAsia: Building a Successful Budget Airline in Asia (Ivey School of Business, Case No. 9B08M054 2008). Used by permission of the authors. © 2010, Robert M. Grant.

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CASE 9 AIRASIA

FIGURE 9.1 Costs in U.S. cents per available seat kilometer for different low cost airlines

Average Trip Length Source: AirAsia Presentation. CLSA Forum, Hong Kong, September 2007

By 2007, UBS research showed that AirAsia was the world’s lowest cost airline with costs per available seat kilometer (ASK) significantly below those of Southwest, Jet Blue, Ryanair or Virgin Blue (see Figure 9.1). It was also one of the world’s most profitable airlines. In 2008, when very few of the world’s airlines made any profit at all, AirAsia earned return on assets of 4%.1 In 2009 it won the Skytrax Award as “The World’s Best Low Cost Airline.” AirAsia had built its business on the low-cost carrier (LCC) model created by Southwest Airlines in the U.S. and replicated throughout the world by a host of imitators. AirAsia had adapted the basic LCC model to the market, geographical and institutional features...
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