Challenges Faced by AirAsia Airline
1. Asia’s Middle Class Growth
Low cost airlines are expected to have greater potential in Asia as there are many Asian cities with a population above one million people each as well as a rising middle class population. This growth of middle class in Asia provides a huge market potential for AirAsia to grow.
However, as the market is expanding further, more airlines or even new comers would like to get a piece of the action. For example, it is estimated that Budget Airlines will capture at least 25% of Asia’s air travel market within next 10 years and a lot of that will be new traffic.
Besides the low cost airlines, AirAsia still need to compete with the conventional carriers. Although extra passengers of the low cost airlines will be coming from new demand to be created by the low fares, the growth may not be entirely stolen from big flag carriers.
2. Actions of Existing Airlines
The existing airlines in south-east Asia have several actions to compete with AirAsia. For example, some have launched a low cost airline to fight with AirAsia.
Singapore airlines launched a low cost airlines subsidiary, Tiger Airways, in the second half of 2003, only months after the scheduled launch of Valuair, also known as Jetstar Airways, set up by one of its former executives.
Orient Thai Airlines launched a new low cost airline subsidiary, one-to-go. One-to-go operates with a fleet of six boeing 757-200s and matches any fares that Thai AirAsia offers. Thai airways have frequency and capacity to offer to their 13 domestic destinations. They also have worked to improve operational efficiency, slashing unprofitable domestic routes, increasing flights on busy routes, strengthening yield management and controlling costs.
3. Singapore Government Rejection
Initially, AirAsia wanted to start flights from the southern state of Johor, near Singapore. It hoped to attract passengers by running a convenient bus service to the...
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