Airasia Case Study

 1.0 Introduction

Why do people travel, be it domestically or overseas? According to Adam(2012), the four main reasons people travel are to meet people, experience new things, taste new foods and to learn. The most common purpose of travelling is to meet people, may it be visiting family and old friends or meeting new business partners on corporate trips. People also travel to experience new things such as visiting new cities and atmosphere. Food and culture are often intertwined hence there is a lot to learn about one’s culture from their local delicacies and specialties. Besides that, some people travel to seek adventure and challenges in foreign places which provides many learning opportunities for them. The airline industry provides the only worldwide transportation network, which makes it important for travels. Statistics shows that 40 percent of international travelers travel by airplanes and the airline industry transports nearly 2 billion passengers per year, highlighting the significance of this industry (Air Transport Action Group, 2005). The most obvious reason why people choose to travel by air is the speed. The airplane is the fastest mode of transportation available up to date. The other factors why people prefer to fly are the convenience and comfort, the safety record of air travel and its accessibility to many different destinations. Air travel is deemed as the safest means of transportation for passengers, not forgetting the comfort and service of commercialized airplanes.

1.1 Low-Cost Carriers (LCC)

A low-cost carrier refers to airlines that offer air transport service at a relatively low price. These airlines are also known as no frills carrier or discount airlines. The low ticket prices are often achieved by reducing customer facilities such as airport lounges and in-flight entertainments. These airlines commonly conduct direct flights only, which means there are no transits and seat bookings are mostly done through the Internet to save on cost. Furthermore, these airlines offer only single class for all its passengers with smaller airports as their destination. Arrival and departure times are also regulated to avoid peak hours, which causes air traffic and delays.

1.2 AirAsia

AirAsia is a low-cost airline based in Kuala Lumpur, Malaysia that mainly serves the Southeast Asia and its surrounding regions. This low-cost carrier started off in 2001 with only 2 old aircrafts by buying over the then loss making AirAsia from its Malaysian owned DRB-Hicom (AirAsia.com, 2015). The acquisition fee was RM1 but the company also inherited a RM40 million debt accumulated from its previous owner. Since then, the airline has grown quickly into one of the best low-cost carrier in the region, owing much of its success to its CEO Tony Fernandes. Tony Fernandes managed to transform a loss making airline into a powerhouse in the low-cost carrier industry and cultivated a public persona that is often compared to that of Virgin Airlines’ boss, Richard Branson (Worland, 2014). AirAsia was the first airline in Asia which established cross border joint ventures, enabling them to be the market leaders. AirAsia also form partnerships with investors and other airlines to tap into foreign markets. For instance, AirAsia forms corporate partnership with Indonesian investors to penetrate the Indonesian carrier market by introducing AirAsia Indonesia. Philippines AirAsia was also formed through similar arrangements. AirAsia has now extended its presence into many Southeast Asian countries, including Thailand, Indonesia, Philippines and India.