AirAsia Berhad (AirAsia) is a leading Low-Cost Carrier in the Association of Southeast Asian Nations (ASEAN) region. AirAsia focuses on providing high-frequency services on short-haul domestic and international routes. The main goal of this paper is to analyse the business strategy of AirAsia as a low-cost airline. This paper aims to apply the management process of strategy and analyse the three levels of strategy by which AirAsia is able to maintain its reputation as the top Low-Cost Carrier (LCC) in Asia. This paper will then show how innovation is a key aspect in AirAsia’s strategy, and will finally consider the external environment framework in which AirAsia is succeeding. AirAsia Berhad is a Malaysian low-cost airline based in Kuala Lumpur, …show more content…
This consists of competitors, suppliers, customers and the labour market. The major factor in AirAsia’s task environment is the strength of competitors in the saturated LCC market, all of whom are competing to offer customers the cheapest airfares in Asia. AirAsia’s corporate strategy directly reflects this factor, as they aim to outperform their competitors and be the cheapest airline in the market. In their current venture into India’s aviation market, the competition is fierce. The market is predominantly controlled by low-cost carriers, with almost 60% of the domestic market dominated by competitors such as SpiceJet Ltd. and IndiGo (Kotoky, …show more content…
2014. Aimia, AirAsia and Think Big Digital Form Partnership To Grow the AirAsia BIG Loyalty Program. [press release] 24 January 2014. Choudhury, C. 2013. Low-Cost Airline Joins the Dogfight for Indian Skies. [online] Available at: http://www.bloombergview.com/articles/2013-02-28/low-cost-airline-joins-the-dogfight-for-indian-skies [Accessed: 31 Mar 2014]. Kotoky, A. 2014. IndiGo, Indian Carriers Oppose AirAsia’s Local Discount Venture. [online] Available at: http://www.bloomberg.com/news/2014-02-20/indigo-indian-carriers-oppose-airasia-s-local-venture.html [Accessed: 31 Mar 2014]. Nikam, N. 2013. AirAsia announces expansion plans for India. Deccan Herald, 2 June. Samson, D. and Daft, R. L. 2012. Management. South Melbourne, Vic.: Cengage Learning. Shuk-Ching Poon, T. and Waring, P. 2010. The lowest of low-cost carriers: the case of AirAsia. The International Journal of Human Resource Management, 21 (2), pp. 197--213. Spiess, L. and Waring, P. 2005. Aesthetic labour, cost minimisation and the labour process in the Asia Pacific airline industry. Employee Relations, 27 (2), pp. 193--207. The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p.
It has stayed relevant to the market through its propelled philosophy of relationships to generate profits in the business. Since its establishment in Monroe, Louisiana the once tiny airline has stretched to greater heights serving in 6 continents. It has also established a distinguishable name among its competitors with a reputation of leading customer services. However, even as an established venture, the company needs to maximize its profits in order to stay in business and expand in to new territories beyond its conquered boundaries. A strategic analysis was carried out by our team to establish the company’s current situation. A SWOT analysis was performed to come up with three referenced, strategic alternatives. This alternatives are meant to act as a strategic guidance to the company in order to enhance growth. The strategic recommendation provided will improve and enable the business to cope with the competitors while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the
The U.S. airline industry experienced year-over-year growth in passenger revenues, in 2013, driven by strong demand for air travel.2 Additionally, on average, fuel costs were down in 2013 as compared to 2012.2 The U.S. airline industry is also a very competitive market. Due to government deregulation in 1978 there are few regulatory barriers to new entrants in the market, although there are other barriers to consider. Starting a new airline is very capital intensive. Purchasing a commercial airplane from Boeing can cost anywhere from $76million to over $300million.4 Another barrier to entry is risk in the industry. Airlines tend to experience volatile costs such as fuel prices, which can be difficult to predict in the long run. A regu...
According to the International Air Transport Association, 2001 was only the second year in the history of civil aviation in which international traffic declined. Overall, it is believed that the IATA membership of airlines collectively lost more than US$12 billion during this time (Dixon, 2002).
The airline industry has long attempted to segment the air travel market in order to effectively target its constituents. The classic airline model consists of First Class, Business Class and Economy, and the demographics that make up the classes have both similarities and differences to the other classes. For instance there may be similarities between business class travellers on a particular flight, but they will not all be travelling for the same reason. An almost-universal characteristic of air travel is that customers do not fly for the sake of flying; the destination is the important element and the travel is a by-product, a means-to-an-end that involves the necessity of an aircraft that gets the customer from point A to point B. Because the reasons can differ greatly in the motivations for a customer wanting to fly, it can be difficult to divide the market into discrete segments, that is, there is always going to be overlap in the preferences and characteristics of any given segment. With that in mind, the commonalities that are shared between the clientele that make up the respective classes can easily withstand analysis.
This is a representation that shows competitive markets of airlines. They differ in many different ways and they have been placed on the framework to contrast and compare each of the companies 4P’s : Product by Price by Promotion by Place as compared to Delta
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Tom, Y. (2009). The perennial crisis of the airline industry: Deregulation and innovation. (Order No. 3351230, The Claremont Graduate University). ProQuest Dissertations and Theses, , 662-n/a. Retrieved from http://search.proquest.com/docview/304861508?accountid=8364. (304861508).
Air India airline is one of the biggest airline in the India. It was established by the famous company TATA and since its incorporation. It has grown very well and has spread all over the world in the different destinations. It has become the reputable brand in the airline industry with having the operations over 152 destinations. It has link up connection in the 35 countries and it has currently having 137 fleets. This company becomes the public limited company in the 1946. The company has international and the local route and its performance is increasing day by day with the pace of the good growth as compare to the other airlines in the industries in the area and the channels in which this airline is working.
For instance, global economic downturn aircraft leasing costs were reduce by about 40%. Creating an environment with lesser competition and enabled AirAsia to lease their aircraft at a cheaper rate and it will leading to cheaper ticket prices for customers. Last several year, economic growth rapidly resulted in a burgeoning middle class within Asia’s large population. Demand for air travel increased together with increased. More people were willing to compromise on food and other services in exchange for lower prices. The attractiveness of budget airlines is primarily their lower ticket prices, which can be as low as 10-20% of those charged by full-service airlines. This presents AirAsia with opportunities to differentiate itself with competitors by adding customer services or operation as full service airline with low fare. It give it a competitive advantage and corporate travel services with its own branded credit card by further increasing brand awareness and value for
The current global competition among businesses has attracted an environment where companies or organizations must devise all the possible ways in order to make the most of profits and also ensure growth by concentrating on the strategic marketing methods. A good example of a competitive business is Classic Airlines. The company has the potential to change the general outlook of the airlines business. As a way of guaranteeing its success in the airline industry, the company must be in a position to suitably predict the market capacity as well as the impending demand through the creation of long-term marketing goals.
Air travel is a huge and tremendously flourishing industry. Globalization can be defined as the integration of national and local economics, culture and societies through a web of communication, transportation and trade. The current era considers globalization as the dominant driver of almost all business due to the influence or the international market. The emerging prosperity of the global aviation industry plays a substantial role in economic growth, tourism, global investment and world trade, which are the impacts of globalization. This essay portrays the negative and positive effects of this globalization on the airline industry.
AirAsia’s high frequency service ensures guest convenience is met. The airline practices a quick turnaround of 25 minutes, which is the fastest in the region, resulting in high aircraft utilization, lower costs and greater airline and staff productivity.
The next characteristic of service offered by AirAsia is inseparability. Inseparability refers to a distinguishing characteristic of services that reflects interconnection among the service provider, the customers involved in receiving the service and other customers sharing the service experience (Hoffman&Bateson, 2010). Based on this definition, it can be concluded that the inseparability in the service involves the participation by both the customers and also the service provider. Different from the goods that are manufactured prior to its sale, the services production includes the presence of the customers in its production process. For AirAsia, the production of the services started as soon as the passengers board the plane. Since the production and the consumption of the services happen simultaneously, then punctuality is very important especially for AirAsia, which is an airline. AirAsia must ensure that their flights depart on time and should try their best to avoid flight delays. This is because flight delays will cause dissatisfaction to the customers and might cause inconvenience to them.
Airline industry is affected by no. of factors such as fuel price fluctuations, high fixed costs, strong influence of external environment and excessive use of marginal costing by carriers. Recessions in the industry tend to last longer, while recovery periods are generally shorter. Over the past nine years, it is observed that industry has made losses for five years and during the profitable years margins were on a lower end. The airlines industry is acutely sensitive to external events such as wars, economic instability, government policies and environmental regulations.