Airasia Case Study

Air Asia, Asia's first low cost carrier airlines was established in December 2001 by Tony Fernandez. This concept was based on other successful low cost airlines such as South West airlines in the United States and Dublin based Ryan Air, Air Asia with its tagline "Now everyone can fly" was quick to establish itself as Asia's leading Budget Airlines.

Introduction of concept:

Air Asia was the first to introduce a ‘no-frills' concept. A ‘no-frills' airline is defined as one "That uses charter and/or scheduled flights to offer bargain basement fares. Budget airlines usually land at and take-off from secondary airports, do not provide in-flight meals or refreshments, and may not even offer numbered seat allocation. Their ticket prices are fixed and non-refundable in case of a cancellation or no-show" (Cited http://www.businessdictionary.com/definition/budget-airline.html, 17 August 2011).

The Key element of Air Asia Success is its constant drive to lower costs. Looking at PORTERS 5 Industry forces:

The supplier power is high due to the fact of monopolization of 2 main companies, the Boeing and Airbus. Although there are only 2 companies, in order to lease or purchase a new aircraft requires huge amounts of capital as a result, restricted the new entrants from entering the Aviation market. However the Aviation industry has been taking a hit for the past few years due to the global crises and the volatility of fuel prices.

Buyer power is quite high as well mainly because potential customers have easy access to ticket information via the internet, where certain websites offer promotions in turn assisting the customer find cheapest available tickets.

Focussing on competition from rivals, since Air Asia focuses on stimulating demand by offering low cost tickets, It caters to price sensitive travellers who are willing to compromise on services, with ticket prices being the main criteria, Air Asia is able to withstand any competition.

Looking at Geographic point of view Due to the fact that Asia as a Continent is so vast, Air travel would be the most recommended mode of transport in terms of time saving and easily affordable ticket fares.

Finally threat of entry of new entrants is also in AirAsia's favour, due to high capital requirements and also the brand awareness created by various public relations events and the media; this has made Air Asia the number one choice of Airlines for customers.

PEST analysis is the study of external Macro environmental factors that affect the firm. PEST stands for Political, Economical, Social and Technological factors. Such external factors are not in control by firms and usually present themselves as risks to the organisation. Now let us look at PEST analysis for Air Asia.

Political:

The Bilateral agreement