Critical Analysis of Airasia Case Study

INTRODUCTION
1.Opportunities
A. Airasia get support from Malaysia government
- Malaysia government supported the establishment of Airasia to help the under-
used Kuala Lumpur International Airport. Airasia can provide an alternative flight
to travel to Bangkok by using Senai Airport in Johor which is a transport hub to
rival Singapore.

B. Partly owned by Shin Corp in Thailand

-Shin Corp has financial strength, synergy in information technology and
telecommunication which support Airasia internet and mobile phone bookings.
Meanwhile, Shin Corp allows its subscribers to book ticket through short-
messaging service (SMS).

2.Challenges
A. Indonesian Culture
-Food and beverage is expected by Indonesian as part of service to the
passengers. Indonesian is unlikely to carry light and minimum as what Airasia is
offering.

B. Bus service and Security Tax

-Airsia faced a challenge to attract passengers by running a convenient bus
service from Singapore to Johor, which flies passenger from Senai airport to
Bangkok without using Changi Airport. Singapore refused them to do so as it will
affect the business of Changi Airport. Airasia might be suffering by the
congestion in Changi Airport in Singapore which means Airasia has to spend
more on their fuel. Besides that the security tax in Changi Airport is too high for
them as a low-cost airline. Because of the significant obstacle they fail to attract
passenger from Singapore not to mention the additional cost and inconvenience
of having to travel in and out of Malaysia by road.

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C. Minimum air-fare rates
-Thailand’s regulation that sets minimum air-fare rates

3. Success factor
A. Low cost per average seat kilometer
-Airasia has been able to achieve a cost per average seat kilometer (ASK) of 2.5
cents and it is half of Malaysia Airlines and Ryanair. The operating cost of Airasia
is dropped drastically as it is using the second-hand aircraft.

B. Low distribution cost

-Airasia focuses on Internet Bookings and ticketless travel and this allow it to
lower the distribution cost.

C. Attractive ticket price

-Airasia could give lower fare to its customer by a reduction of 40 to 60 percent if
compared to its competitor charges. The effect of attractive low fare is more
travelers switching from bus to air.

D. Good Management team

-Airasia value proposition is more sophiscated than Ryanair placing equal
emphasis on brand reputation and customer service/people management,

CRITICAL ANALYSIS
As the Shin Corp owned by the family of Thailand’s prime minister, it could be
opportunity and threat to Airasia. Shin crop has the financial power and information
technology and telecommunication and this means Airasia has risk to compete with
them.

Besides that, minimum air fare rate will affect the price setting of Airasia especially
offering a lower cost.

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By rejecting or not approving, it saves the business of Changi Airport because it will
abandon the use of Changi Airport or else they will suffer from a higher cost.

A low cost airline has many features such as ticketless travel, online ticket sales, no
international offices, no frequent flyer points, no club lounges and use of secondary city
airport. With all of these features it can make its air fare affordable and lower down its
operational cost and fulfill its everyone can fly.

RECOMMENDATION
I recommend Airasia to increase its brand image. This is critical as this place the
position of the company in their customer’s opinion. They could add something or
service that is unexpected or in the other word value-added to passengers such free
drinks or similar things.

Besides that, Airasia should target the medium class of passenger rather than lower
class. This will increase their sales and expand their business

CONCLUSION
As a conclusion, Airasia could still improve their operation and management by looking
into the value-added.

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