1. Briefly describe the trends in the global airline industry.
In the global airlines industry these days, it's a trend to offer a no-frills low cost concept in their business. A low-cost carrier or low-cost airline (also known as a no-frills, discount or budget carrier or airline or cheap flight) is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc. AirAsia is one of the company that succeed in low cost carrier (LCC) business provides a full service regional airline that offered slightly lower fares than other airlines in Malaysia. Private entrepreneur Tony Fernandes saw great potential for no-frills LCC in Asia after saw a massive success of LCCs in the West. He restructured AirAsia into the first no-frills, LCC in Asia and the new business model was a huge success.
2. What is the business level strategy adopted by Air Asia?
Business level strategy adopted by AirAsia is a cost leadership strategy that target specific markets such as domestic services, short-haul regional services and long-haul regional services and selling their product below the average industry prices to gain market shares. AirAsia modified the low cost airline model and adopted a lot of actions to compete in the industry while maintaining the competitive level of differentiation in this business and AirAsia passenggers grew significantly.
AirAsia introduce the value-added services which is to provide ticketless travel and implement a free seating policy. In early 2007, AirAsia became the first airline in Malaysia to offer an internet check-in service that allowing the passengers to print their own boarding passes and paid extra money to board first so as to choose their seats with ease. Passengers also can pre-book their checked baggage and meals. Besides, instead of free meal and flight entertainment, they prepare food and beverages ready for sale on board.
3. How does Air Asia achieve cost leadership through differentiation?
AirAsia achieved cost leadership through differentiation through strategic action such as single class services with no frills and minimum lower fares without preferable seats, meals, entertainment and other utilities. Besides that, their priority is simplicity and safety for the passengers. AirAsia also always makes promotions to keep their customers coming back for their product such as regular fare promotions for specific travelling periods to encourage early booking. The tickets were through a telephone booking centre, sales offices, travel agent and partnerships with local bank and post offices. Passengers also can pre-book their checked baggage for a lower rate to encourage customer to travel lighter so less fuel was burned and less pollution was caused.
Its speedy expansion from domestic routes to regional flight was supported by its cheeky advertising strategy. For instance, in 2004, when it began the route from Singapore to Bangkok, its full-page newspaper ad read: “There’s a new girl in town: twice the fun, half the price”, poking fun at the iconic Singapore Airlines’s female flight attendants, who were widely known as “Singapore girls” and had an elegant image. AirAsia’s flight attendants, on the other hand, could style their hair and apply make up however they liked, projecting a muchmore relaxed and refreshing image than those of other airlines, which required cabin crew to assume a more uniform appearance. While all AirAsia advertisments focused on low fares, they also reflected the LCC’s intention to be seen as an airline of high quality. With the ambition of being a low-cost but high-quality and innovative airline, it signed on to become the official airline sponsor of the world-famous Manchester United football club and the AT&T Williams Formula One team, painting some of its aircraft with the club colours and sport stars. AirAsia further tied up with Tourism Malaysia to make AirAsia a sponsor of Manchester United’s training centre in Trafford, UK, enhancing AirAsia’s relationship with the tourism board. Philanthropic activities were also pursued, such as transporting aid to cyclone-hit Myanmar in 2008 and donating free seats to China’s Red Cross to raise funds for the Sichuan earthquake recovery. Addressing global concern about carbon emissions, AirAsia’s website illustrated how its operations conserved the environment, such as its ticketless system reducing paper waste. AirAsia gained free publicity on many occasions so they can reduce their cost in advertising their product.
4. Identify the ways Air Asia can sustain its competitiveness through the business level strategy that is adopted?
AirAsia can sustain its competitiveness by maintaining its no frills, low fared services and expand their business hubs through Asia and around the world. With their effective sales and marketing strategy, AirAsia can simply beat their competitors in airlines industry. Besides with their strong foundation and strategies, they continue to be the lowest cost airlines in the market and always be the people's choice to buy their services. The advantage of lowest price has made AirAsia sustainable growth through the business and succeed along its competitors.
