AIR ASIA Case

Tony Fernandes of Malaysia had a dream to own an air lines. With a degree in Accounting, he had a
stint at Virgin before coming back in 1992. He found an opportunity in 2001 & bought financially
troubled Air Asia with a token sum of one ringgit.
He could persuade Ryanairs ex-operational head, McCarthy to join the board with some investment &
introduced Ryanair's low-cost operational strategy. Rest is history.
Air Asia today, is one the largest low-cost carriers (LCC). With about 85 destinations, it carried over
152 million in last 10 years. Starting with just 2 air-crafts, today it has over 106. It has been adjudged
World's best LCC for 4 consecutive years from 2009.
Tony who has an entrepreneurial bent of mind treats employees as a family in a non-hierarchical
structure & allows an atmosphere of openness, creativity & passion.
It's policy resembles South Wests people-oriented strategy but uses Ryanairs operational policies of
no-frills, landing in secondary airports etc. Limited competition & growing market in a new segment
(budget airlines) has helped Air Asia to succeed in South East Asian market so far.
Initially, Tony faced many problems like competition from Malaysian Airlines & Singapores rejection
to allow Air Asia to use Johor as an airport with bus-link to Singapore. But, with sound strategies, he
survived.
Air Asia has local Govt. support, positive brand image, customer loyalty & knowledge of Asian culture.
It has also acquired technology know-how & experience in airlines operation through McCarthy.
Business Environment is dynamic. Volatility of aviation fuel prices, economic upturn & downturn
makes air travel Uncertain, Airport availability, Government permissions & taxation makes Global air
travel business Complex while High fixed cost and non-availability of quality & motivated manpower
makes the business Ambiguous. Capacity utilization & Skilled & Motivated manpower are key factors.
Starting with no frill low cost strategy, Air Asia has now adopted a hybrid 4 step strategy for SouthEast Asian market: Eliminate, Reduce, Raise & Create. Thus, they eliminated complimentary food;
reduced seat-quality. Created online booking system, Raised flight frequency.
To obviate future competition, Air Asia is expanding in international markets & using local
collaboration in the host country to reduce political risk. Thus, in India, it has made strategic alliance
with Tatas and in Pakistan, it is perhaps, going with PIA (Pakistan International Airlines).
It must continually reduce costs like the use of internet booking, using linked in for recruitment, easy
operations etc.
Others may copy it in South East Asia. So it must expand in major international destinations. It must
also identify its own weaknesses and try to improve operations through Kaizen. It should try to
differentiate and excel in some areas like customer care. Finally, it has to acquire large carriers instead
of using small A 340s to reduce cost and give non- stop flights to US and Europe.