Case Study: Airasia – Now Everyone Can Fly

Topics: Customer relationship management, Low-cost carrier, Airline Pages: 8 (2526 words) Published: January 15, 2013



* What is Air Asia Business Model? How does information system support this business model? 1.0) AirAsia business model

AirAsia business model is low cost, low fare and no-frills air line. AirAsia Pan Asia plan targeted to million of Asians who wanted basic air transportation at cheap price AirAsia achieved low cost by following method:

1) Single class, no frills service
AirAsia operates on single-class service with no amenities such as complimentary in-flight meals and entertainment, loyalty programs and air lounges. AirAsia impose charging for snacks and drinks and passenger need to pre-book in advance. AirAsia seating configuration maximizes seating capacity by fitting 148 seats in its Boeing 737-300 aircraft (compared to the passenger seat capacity of 132 for typical Boeing 737-300 aircraft with a two-class configuration). 2) High aircraft utilization and efficient operations.

AirAsia uses its aircraft and staff efficiently. In general, AirAsia is able to make more round trips per aircraft per day because it operates point-to-point services and maintains low turnaround times (twenty five minutes). AirAsia also able to reduce administrative functions by hiring employees who are able to perform various roles. 3) Low fixed cost

AirAsia has negotiated lower lease charges for their aircraft, lower rates for long-term maintenance contracts and lower airport fees. AirAsia’s high safety and maintenance standards have allowed it to procure favourable rates on its insurance policies. 4) Low distribution cost

To encourage internet bookings, AirAsia offers lowers fares through the internet. Bookings on the internet have increased from 5% of reservations made when online reservations first became available in May 2002 to approximately 50% in August 2004. AirAsia employs a fully ticketless system, which saves administrative costs and related expenses and cut out travel agent commission. In 2003 SMS booking was introduced. The service is the first of the kind in the world for customer book flight via mobile phones. Subsequent 4 months 4000 tickets sold thru. This is how AirAsia using the IT technology to expand its business. 5) Single aircraft type

Operating a fleet of similar aircraft i.e. 737-300 leads to increased cost savings through simplifying maintenance and reducing spare parts inventory requirements. Recently AirAsia has switched the aircraft fleet to airbus A230. The airbus A320 aircraft acquired by AirAsia will come with Sharklets (device installed at the edge of the aircraft wing to save fuel). AirAsia is the first company to use the A320 with this fuel saving device. 6) Maximizing the benefits of regional media coverage

Because AirAsia has successfully implemented the low-cost carrier model in Southeast Asia, it receives regular coverage from regional media outlets. AirAsia utilizes such opportunities to promote and increase its brand awareness without incurring additional sales and marketing expenses.

2.0) IT system supporting AirAsia business model

AirAsia use IT system called Navitaire’s OpenSkies software for revenue management system to optimize passenger seat sales. Navitaire software has been used by 70 low cost airline worldwide including Ryanair, Virgin etc. Navitaire offers comprehensive, integrated solutions to support AirAsia innovative drive to capitalize on new revenue opportunities, increase operational efficiencies, enhance customer service and help optimize profits. Navitaire’s integrated solution includes reservations, distribution, ancillary revenue, loyalty, revenue management, business intelligence, revenue accounting, operation planning, operation management and operation recovery. AirAsia use Navitaire to increase the internet bookings by 50% in August 2004 and help achieve highest level of profitability in the industry...

References: Kotler, Keller, (2012), Marketing Management (14th edition), Pearson Education Limited, England – Fernandes: AirAsia ready for India; collaboration with Malindo sought. – Uneven path for AirAsia’s investment in Vietnam
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