Havard Business Case Study (HBS) Air Asia

CASE STUDY : AIR ASIA
N0W EVERY0NE CAN FLY




Briefly describe the trends in the global airline industry.
An airline provides air transport services for traveling passengers and freight. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit. Generally, airline companies are recognized with an air operating certificate or license issued by a governmental aviation body.




What is the business level strategy adopted by Air Asia?
Air Asia come out with logical business level. By ‘Flying Low-Cost With High Hopes’, AirAsia started out as a Malaysian government-controlled, full-service regional airline that offered slightly lower fares than its number-one competitor, Malaysia Airlines (“MAS”). In December 2001, private entrepreneur Tony Fernandes took over the debt-ridden airline for the symbolic sum of US$0.26. Despite the air-travel downturn following the 11 September 2001 terrorist attacks, Fernandes believed that the timing for entering the airline market was just right, as aircraft leasing costs had dropped sharply and experienced staff were readily available due to airline layoffs. Moreover, the acquisition was welcomed by the Malaysian government, which hoped to boost the under-used Kuala Lumpur International Airport (“KLIA”). Fernandes restructured AirAsia into the first no-frills, low-cost carrier (“LCC”) in Asia, and the new business model was a huge success.




How does Air Asia achieve cost leadership through differentiation?
As the chief executive officer of AirAsia, Fernandes himself was a walking advertisement for
the company. He wore AirAsia’s official red cap and T-shirt to almost every official function. He even gave his mobile phone number to all the media representatives he talked to, making it easier for them to approach him for company news. AirAsia gained free publicity on many occasions. Between 2003 and 2008, AirAsia received several local and international accolades for its service excellence and success in brand-building, business management and leadership [see Exhibit 9]. For example, it was recognised as the best LCC in the Asia region in 2007 by SkyTrax, By 2008, AirAsia maintained the lowest cost structure among all listed airlines in the world [see Exhibits 10 and 11]. It could break even by filling only 56% passenger load per flight, compared with 70% for MAS.






Identify the ways Air Asia can sustain its competitiveness through the business level strategy that is adopted?
To maintain and sustain business level strategy 0f Air Asia, they offering ticket prices below theprices offered by. As of 29 May 2008, AirAsia recorded its 25th consecutive quarter of profitability since 2002. Although AirAsia and MAS seemed to compete in different markets (ie, AirAsia targeted the budget segment, whereas passengers on full-service airlines were mostly businessmen or upper-middle-class consumers) this only held true at the beginning of AirAsia’s participation in the industry. AirAsia became a real threat to the former monopoly operator with the emergence of more value-conscious consumers who were more receptive to the low-cost, nofrills concept.