Case Study “Air Asia: Flying Low-Cost with High Hope”

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Strategic Management

Case study
“Air Asia: Flying Low-Cost with High Hope”

 
TengAmnuay Thanat

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1.
 How
 did
 AirAsia’s
 short-­‐haul
 business
 build
 its
 competitive
 advantage?
 
 
  LCC
 Value
 Chain
  Aircraft
 fleet
  Cost
 Leadership
  Using
 the
 same
 Airbus
 A320-­‐200
 
  -­‐ Lower
 cost
 in
 terms
 of
  buying
 large
 scale
  -­‐ Low
 maintenance
 cost
  -­‐ Efficient
 fuel
 consumption
  Secondary
 airport
  -­‐ Low
 slot
 fee
  Differentiation
 
 

Route
 Planning
 

Rapid
 expand
 route
  selection
  -­‐ In
 Domestic
 &
 SE
  Asia
  Innovative
 ticket
  reservations
  -­‐ Short
 message
  booking
  -­‐ Early
 booking
  Internet
 check-­‐in
 service
  Xpress
 boarding
  Free
 Seating
  Selling
 Light
 meal
 
 
 

System
 and
  ticketing
 

Electronic
 booking
 system
  -­‐ Reduce
 unnecessary
 staffs
 
 

Check
 in
  Boarding
  Inflight
  experience
  Baggage
  Handling
  Turnaround
 

Paperless
 boarding
 pass
  One
 standard
 seating
  Free
 Seating
  No
 in-­‐Flight
 service
 
  No
 entertainment
  Baggage
 Handling
 fee
  High
 Turnover
  -­‐ More
 flight
 per
 day
  -­‐ No
 crew’s
 accommodation
  and
 allowance
 
 

  AirAsia
 introduced
 themself
 as
 the
 first
 LCC
 in
 SE
 Asia
 region,
 by
 providing
  no-­‐frills,
 casual
 short-­‐haul
 service
 without
 serving
 meal,
 mileage
 point,
 or
 lounge
  etc.
 Which
 attracts
 newcomer
 customers
 who
 sensitive
 in
 price.
  AirAsia’s
 competitive
 advantages
 are
 comprised
 of
 both
 Cost
 Leadership
 and
  Differentiation
 with
 clear
 market
 positioning
 and
 brand
 image.
 Start
 from
  Acquisition
 from
 Malaysian
 government,
 Tony
 Fernandes
 restructured
 business
 

model
 to
 be
 low-­‐cost
 embedded
 down
 to
 corporate’s
 core
 similarly
 to
 the
 success
  LCC
 in
 the
 western.
 For
 example,
 acquired
 all
 new
 Airbus320-­‐200
 fleets,
 targeting
  on
 secondary
 airports,
 one
 standard
 seating
 without
 reservation,
 and
 short
 haul
  flight
 within
 4
 hours
 that
 mean
 higher
 takeoff
 frequency
 per
 day.
 For
 the
 fuel
 price
  concerns
 (accounted
 more
 than
 50%
 of
 operational
 expense),
 AirAsia
 using
  dynamic,
 layered-­‐hedge
 strategy
 to
 pay
 the
 fuel
 price
 in
 advance
 before
 the
 price
  increase.
 Because
 of
 these
 Operational
 Improvements,
 AirAsia
 can
 minimize
 cost
  substantially
 compared
 to
 Full-­‐service
 carrier.
 
  Apart
 from
 Cost
 leadership,
 AirAsia
 also
 provide
 differentiation
 competitive
  advantages,
 according
 to
 the
 ambition
 of
 being
 a
 low-­‐cost
 but
 high-­‐quality
 and
  innovative
 airline.
 AsiaAsia
 offer
 many
 new
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