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

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1. How did AirAsia’s short-haul business build its competitive advantage?

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 experiences to users, such as full-electronic booking system, Short-Messaging Service booking, and Self check-in counter, etc. Due to Joint Venture with local carrier in SE Asia countries, AirAsia can expand route’s variety rapidly and cover all major cities in both domestic and reginal routes. AirAsia also have a Distinctive brand image, which conveys message of young, energetic airline compared with full-service carrier, and attract young generation and newcomer customers whom need to travel with low budget and do not want any excessive services. With Intrusive marketing campaign, AirAsia attack competitor airline by offering lower price, which is...
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