1) Private entrepreneur Tony Fernandes took over struggling Malaysian airline AirAsia in 2001 and relaunched it as Southeast Asia's first low-cost carrier, adopting the no-frills business model of Western LCCs.
2) By 2007, AirAsia had increased profitability, expanded routes, and maintained the lowest costs among competitors, innovating services like online check-in.
3) In 2008, as oil prices surged and competition grew, Malaysia Airlines launched price cuts on routes dominated by AirAsia, posing a challenge to AirAsia's competitiveness.
1) Private entrepreneur Tony Fernandes took over struggling Malaysian airline AirAsia in 2001 and relaunched it as Southeast Asia's first low-cost carrier, adopting the no-frills business model of Western LCCs.
2) By 2007, AirAsia had increased profitability, expanded routes, and maintained the lowest costs among competitors, innovating services like online check-in.
3) In 2008, as oil prices surged and competition grew, Malaysia Airlines launched price cuts on routes dominated by AirAsia, posing a challenge to AirAsia's competitiveness.
1) Private entrepreneur Tony Fernandes took over struggling Malaysian airline AirAsia in 2001 and relaunched it as Southeast Asia's first low-cost carrier, adopting the no-frills business model of Western LCCs.
2) By 2007, AirAsia had increased profitability, expanded routes, and maintained the lowest costs among competitors, innovating services like online check-in.
3) In 2008, as oil prices surged and competition grew, Malaysia Airlines launched price cuts on routes dominated by AirAsia, posing a challenge to AirAsia's competitiveness.
1) Private entrepreneur Tony Fernandes took over struggling Malaysian airline AirAsia in 2001 and relaunched it as Southeast Asia's first low-cost carrier, adopting the no-frills business model of Western LCCs.
2) By 2007, AirAsia had increased profitability, expanded routes, and maintained the lowest costs among competitors, innovating services like online check-in.
3) In 2008, as oil prices surged and competition grew, Malaysia Airlines launched price cuts on routes dominated by AirAsia, posing a challenge to AirAsia's competitiveness.
__________________________________________________________________________ Mohd Iskandar Illyas Tan Semester 1 (2011/12) HARVARD BUSINESS SCHOOLS CASE STUDY 1
AIRASIA: FLYING LOW-COST WITH HIGH HOPES
A. Synopsis Private entrepreneur Tony Fernandes took over the debt-ridden AirAsia airlines from the Malaysian government in December 2001, just months after the 11 September 2001 terrorist attacks. One month later, he relaunched the airline as South-East Asias first low-cost carrier (LCC). By adopting the no-frills concept used by leading LCCs in the West, AirAsia became an instant success. By 2007, not only was the airline ranked as the best LCC in Asia, but it had also managed to increase profitability and expand its routes. Under the tagline Now Everyone Can Fly, AirAsia has been able to maintain the lowest cost structure among its competitors. Being innovative all the way down to the corporate bone, the LCC has also pioneered several services for its operation, such as Internet check-in, Xpress Boarding and on- time guarantees. It has also kicked off an ambitious plan that many other low-cost, short- haul carriers view as risky: extending services to include long-haul routes through its sister airline, AirAsia X. On 6 May 2008, AirAsias major local competitor, Malaysia Airlines (MAS) initiated an unexpected price war by launching its Everyday Low Fare campaign, offering free fares for domestic and short-haul flights on routes that were largely dominated by AirAsia. Amid surging global oil prices and intensifying competition in the Asia- Pacific region, how can AirAsia increase its competitiveness?
B. Learning Objective 1. To give an overview of the airline industry, especially in Asia. 2. To examine the business-level strategy adopted by AirAsia (ie, integrated cost- leadership/differentiation strategy). 3. To determine the suitability of the strategy adopted by AirAsia by analysing the five competitive forces of the industry. 4. To identify the risks associated with the integrated strategy. 5. To explore ways to sustain competitiveness through AirAsias strategy by studying the primary and secondary activities, and cost structure of an airline company.
C. Questions 1. Briefly describe the trends in the global airline industry. 2. Comment on the business-level strategy adopted by AirAsia. How has AirAsia achieved cost leadership or differentiation? 3. Referring to Porters model of the five forces of competition, is the above strategy suitable for AirAsia to achieve a better position in the industry? What are the risks of using the strategy? 4. Identify the ways AirAsia can sustain its competitiveness through the business- level strategy it has adopted.
