Case Study: Air Asia
Identify the competitive advantages of Air Asia as a low cost carrier. Air Asia has a number of competitive advantages as a low cost carrier that fall into the following general categories; low cost operations, efficiency of operations, proven business model and management expertise and finally a distinctive corporate culture. Low cost operations:
Air Asia has gone to great lengths to ensure all of their operational costs are kept to an absolute minimum, and have passed on the savings to customers in the form of cheap ticket prices. One of their unique ways of doing this was by not ticketing through travel agents or other intermediaries. This reduced profit sharing and kept ticket prices as low as possible for customers. Secondly by not having business class on their flights they could increase the overall economy seating from 132 to 148, and charging for food and drinks again kept ticket prices low. Their image as a no frills carrier means that customers know they are paying purely for the cost of travel and has been a major driver in securing a strong grip on the market. While Air Asia is known for constantly cutting costs, it also places a very high importance on safety. Multiple contracts signed with respected global players in the industry such as Volvo Aero meant that the company could reduce its insurance premiums. Efficiency of Operations:
Air Asia is also known for having one of the most efficient operations in the airline industry. Their turnaround time of only 25 minutes is the best in the world meaning that the fleet spends more time in the air generating revenue, and also reduces costs associated with grounding fees. Also by utilising one type of aircraft the company reduces maintenance costs and expertise required by the ground staff, who are often employed directly by Air Asia to further reduce costs. In addition to this any pilot can fly any aircraft without additional training. Air Asia also strategically set up their...
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