The Sky’s the Limit

Topics: Airline, Low-cost carrier, AirAsia Pages: 10 (2944 words) Published: January 25, 2012
The Sky’s the Limit
Question 1
Air Asia was established in 2001 by CEO Tony Fernandes and his three partners. It is an Asia’s leading low fare airline. By using a strong slogan “Now Everyone Can Fly” AirAsia has successful created its image in passengers’ mind. Gerry, J., et al. (1993, pg 148), SWOT analysis is a valuable approach for AirAsia to review its strengths, weaknesses, opportunities and threats, aiming to identify the current strategy of AirAsia’s organization and hence target for developing new strategies in the aviation industry. Strengths

Low-cost carriers per ASK
First low-cost airline introduces “no-frills” airline concept Trademark
Minimal staff available
Quick aircraft turnaround of 25 minutes
Limited resource by lower cost
Minimal technical staff worker
Low technological equipment
Lack of marketing expertise
Consumer’s complaint on delay schedule

Great potential market
Diversification of market segment
Regional routes
Low fares as point to point network
New routes to never-served destination

High competition
Increased in fuel price
Network security
Government policy

According to Philip, K., et al. (1988, pg 70) “a business unit must manage key macro-environment forces and significant micro-environment factors that affects its ability to earn profits.” Environmental scanning – figure 1

Porter’s five forces are employed to analyse the microenvironment of LCCs industry in Asia. The threat of new entry is low due to high capital investment and government barrier for service approval. Yet the deregulation of Asia Pacific Aviation (APA) industry has allowed more competitors entering the market. Many full service airlines launch their LCCs version, for instance, Singapore airlines and Qantas launched Tiger and Jetstar Airways. The threat of substitution is low; there are several substitutions such as car, bus, and railway etc. Nevertheless, air travel is much faster and more convenient than other transportations. The bargaining power of customer is high owing to no switching cost since the passengers are able to discover and compare the price and services through the internet. The bargaining power of supplier is high caused by limited number of aircraft manufacturer .Ultimately, rivalry amongst existing competitors is high due to price competition and AirAsia is attempting to provide an excellent service to satisfy their customers by reaching differentiation and overall cost leadership. Macro-environment – refers to demographic elementary of mass middle class market with increasing leisure time caused by Asians are enjoying the benefit of rising income and good economic growth. In addition, if passengers cannot afford long-distances holiday, they will choose to travel to nearby countries. According to the Center for APA, air travel market is maintain growing as it was accounted for 15.7 percent of the total airline seats compared to 1.1 percent in 2001. Furthermore, archipelago geographical structure of Asia steps up aviation industry as there is not much workable and efficient mode of transportation other than by air. Although the impact of terrorist attacks in 2001 may cause negative growth in the LCCs industry, nonetheless it is unprecedented continue positive growth. Additionally, due to the economic crisis, there is uncertainty amongst passengers and their confidence is obviously declining. Passengers are being more careful on their spending. They will move away from an expensive airlines such as Singapore airline, Cathay Pacific towards the cheaper which can get them to the desired destinations. AirAsia makes it different by promoting “Free seat” campaign in June 2010; it offers one million free seats to its major destinations with passengers only pay the airport tax. Hence, AirAsia is able to bring back its customers during the economic crisis who...
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