The Ascendance of Airasia

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Case: The ascendance of AirAsia

1. What is the macro and industry environment for new budget airlines in the Asia- Pacific region? What opportunities and challenges are associated with that environment? People in the Southeast Asian have low average incomes. The low average incomes should boost the cheap fares demands. In recent years, because of the government decreased the entry barrier of airline industry, more and more carriers entered the airline market. The Southeast Asian has very large populations; these carriers are attracted by the large number of potential travelers. This caused the Southeast Asian budget traveler increase very quickly. Otherwise, the fuel prices increased very quickly, and the higher demand of travelers also gave AirAsia a great challenge.

How might demand for low-fare service differ in the Asia-Pacific region from North America and Europe? The Asia-Pacific region has a huge population, because of their low level average income, their demand for low-fare are very sensitive. They are likely to choses the low-fare airline, just very small group of people are like to choses the expensive and the best service. The low-fare airline has smaller market share and larger demand than North America and Europe market. Most people likely to choses other traffic tools, like high speed rail. But the outlook of low-fare airline is very good, because in most Asia country, the highway and railway are not covered by most cities. The North America and Europe region has bigger low-fare airline market share, but because of customers’ habit, demand and their higher income, they likely to choose the traditional airline, they are more interested in the high quality of services, comfortable trip and good food.

Compare AirAsia’s generic strategy (cost leadership, differentiation, focus) with the strategies of other incumbent carriers and with Southwest and Ryanair. How is it similar to and different from the strategies...
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