Air Asia Case Study

Case Study: AirAsia

History and Growth

Asia's first low-fare, ticketless airline was established in December 2001 when Tune Air Sdn Bhd officially acquired AirAsia, Malaysia's second national carrier, from DRB-Hicom, a Malaysian conglomerate. It was the brainchild of Tony Fernandes, a finance graduate from the London School of Economics and former vice-president of South-East Asia for Warner Music Group, who envisioned a no-frills, discount airline that would boost air travel in the region at a time when the worldwide airlines industry was still reeling from the 11 September terrorist attacks. Together with three other partners, Tony founded Tune Air Sdn Bhd and purchased a 99.25% equity stake in AirAsia which had two Boeing 737-300 jets and RM40million in debt. Modelled on other successful low-cost airlines such as Southwest Airlines in the United States and Dublin-based Ryanair, AirAsia, with the tagline 'now everyone can fly', was quick to establish its presence based on its philosophy of making air travel affordable, easy, fun and convenient for everyone.

Within the first year, it extended its fleet of aircraft to six, opened several sales offices around Malaysia and generated media awareness through a series of public relations events. It also increased convenience by accepting credit card payments for telephone bookings (March 2002) and introducing online bookings through its website (May 2002). In a series of firsts, it was Asia's first airline to go ticketless (April 2002) and introduce a multilingual website (July 2003) as well as the first airline in the world to introduce SMS booking (August 2003). In 2003, the airline introduced Go Holiday, its online holiday program, where guests can book holiday packages through its website.

Johor Bahru was launched as its second operating hub outside of Kuala Lumpur and the number of destinations was increased, including new ones outside Malaysia such as Bangkok and Phuket. In November of the same year, AirAsia established AirAsia Aviation Co. Ltd, a joint venture with Shin Corporate of Thailand, to launch Thai AirAsia, a low-fare carrier in Thailand operating from Bangkok. In 2004, AirAsia expanded its flights to several destinations in Indonesia such as Jakarta, Bandung, Surabaya, Denpasar (Bali) and Medan and launched its Indonesian associate budget airlines, AWAIR, in which it has a 49% equity holding. AirAsia currently has over 2,000 employees, a fleet of modern Airbus jets and operates over 100 domestic and international daily flights from hubs in Kuala Lumpur, Johor Bahru, Bangkok and Jakarta. Its routes are concentrated within three countries-Malaysia, Thailand and Indonesia-but it has started flights to Manila, Xiamen and Macau with plans to increase the number of destinations in China, Indo-China and the Philippines. It also developed Air Asia X to fly