Airasia's Strategic Management

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Case Study: AIRASIA
AirAsia was launched in 2002 by Tony Fernandes, at the time a pioneer of low-cost flights in Asia. At first, the company operated three Boeing 737s. In 2004, after a very successful public offering, AirAsia was listed on the Malaysian Stock Exchange and from there grew rapidly. As of 2011, the AirAsia Group has 93 aircraft spread across 12 hubs (see appendix 1) and is flying to more than 60 destinations in 16 countries with 130 domestic and international routes. AirAsia operates 3,500 flights every week on domestic and international routes from nine regional hubs in Malaysia, Thailand (Thai AirAsia) and Indonesia (Indonesia AirAsia). AirAsia’s head office and its main base is the Low Cost Carrier Terminal at Kuala Lumpur International Airport. This terminal handles 48.4% of AirAsia’s traffic (see appendix 2). AirAsia is the leading low-cost carrier in the world and won the Skytrax award for World's Best Low-Cost Airline in 2009 and 2010. In addition, the company is Asia's largest low-fare, no-frills airline and has a long-haul arm, AirAsia X, which currently flies to China, India, Iran, Taiwan, the UK and Australia with plans to launch services to Japan and South Korea. This report will use the PESTEL framework to evaluate the opportunities and threats presented by AirAsia’s external environment. It will then apply a SWOT framework to analyse the Strengths, Weaknesses, Opportunities, and Threats of the AirAsia group. Finally, this report will list three recommendations, to be evaluated by the AirAsia board of directors before implementation. To begin, a PESTEL framework will enable us to understand all the macro-environmental factors affecting AirAsia. 1. Political

Opportunities
Deregulation and privatization present Air Asia with opportunities for new routes. For example, the ASEAN governments signed the ASEAN Multilateral Agreement on the Full Liberalisation of Passenger Air Services (an open skies policy) in 2010. From 2015, designated airlines from ASEAN countries will be able to fly to any city with an international airport in a member nation. AirAsia will therefore have the opportunity to penetrate undeveloped markets in the ASEAN region by opening new routes. However, it should be noted that foreign competitors will have the same opportunity and new routes will require the utilization of more aircraft. The Malaysian Government has always supported the Malaysian airline industry. One example of this is the opening of the Low Cost Carrier Terminal at Kuala Lumpur International Airport. Further, the Malaysian Government has helped all low-cost carriers (LCCs), and in particular AirAsia, to develop a competitive edge by reducing their operating costs and improving their logistics. Secondly, the Malaysian Government has given AirAsia, along with all Malaysian airlines, significant tax incentives (see appendix 3). These tax-incentives in fact helped AirAsia to cover a substantial part of its loan interest when purchasing aircraft. It is also important to highlight that other Southeast Asian countries are often substantially state owned. This allows the government to control the airline and protect it from competition. As an example, AirAsia established a joint venture with Shin Corp when it began operating in Thailand with Thai AirAsia. AirAsia had a holding of 49% of Thai AirAsia while the remainder was held by Shin Corp., owned by the former Thailand Prime Minister Thaksin Shinawatra (2001 -2006). Threats

AirAsia and its competitors can also be negatively affected by government decisions. For example, unless the Malaysian government makes an effort to minimise crime, travellers may choose to visit other destinations. Low-cost carriers are also suffering from recent delays in the construction of a new permanent low-cost carrier terminal (Expected to open in October 2012), work being undertaken by the Malaysian government. These delays reduce the ability for low-cost carriers to expand their...
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