Assignment on Air Asia

Submitted to
Sir Kamran Soomro

Submitted by
Faizan Javed
Wahab
Irfan
Ahad
MBA(36-E)1 H

Date 12/102018
 Critically analyze the Strategic decisions of Air Asia

In 2001, Air Asia was taken over by Mr. Tony Fernandes and was relaunched in 2002
as a low cost carrier. The airline made remarkable profits and it expanded flight operations
it expanded its flight operations in the following years. Within few years it became long-haul
service air line under the umbrella of Air Asia X from a short haul domestic airline.

Critical analysis of the Strategic decisions

Airline achieved its goal with the help of key strategic decisions. Which are critically
analyzed below:
1. Low cost strategy: The airline was relaunched as no frills, low cost carrier which
proved profitable. Despite difficulties they kept the strategy working with following
tactics;
a. Advance oil payments to cope price volatility,
b. Short haul up-down by the same Airplane on the same day
c. Charging meals separately
d. Checked baggage loading fees system
2. Differentiation strategy: the strategy included following different tactics:
a. Ticketless system
b. Free seating policy
c. Only one standard class cabin
3. Marketing strategy: The airline paid less for its marketing and it opted different low
cost ways of marketing. The strategy included following marketing measures:
a. On board lucky draws
b. Launched co-branded Citibank-airasia credit card which allowed free flights on
certain purchases.
c. Sponsored Manchester United Football Team
d. CEO himself was a walking advertisement as he wore official red-cap and T- shirt
in every official function.
 Competitive Profile Matrix (CPM)

Airasia South Asia Malaysia

Critical Success Factors Weight Rating Score Rating Score Rating Score

1 Advertising 0.03 2 0.07 3 0.10 3 0.10

2 Financial position 0.15 1 0.35 4 0.24 2 0.20

3 Global Expansion 0.05 2 0.09 1 0.10 3 0.10

4 Product quality 0.04 2 0.15 2 0.10 3 0.15

5 Customer Service 0.13 2 0.02 1 0.08 2 0.13

6 Organization structure 0.04 2 0.09 2 0.14 2 0.11

7 Employee dedication 0.03 1 0.10 1 0.12 3 0.10

8 Management Experience 0.06 3 0.20 2 0.25 4 0.23

9 Customer Loyalty 0.08 3 0.14 1 0.28 2 0.10

10 Market Share 0.20 3 0.35 4 0.40 3 0.31

11 E-commerce 0.02 1 0.17 1 0.07 3 0.19

12 Price Competitiveness 0.27 3 0.31 3 0.37 4 0.40

Total 1.00 2.48 2.25 2.58

As the Matrix shows Airasia has the best financial position. The South Asia has the best
market share. The Malaysia has the best price competitiveness.

Explain the rivilary between Air Asia and Malaysia Airline

 The successful relaunch of Air Asia created a competing situation and signs of future
rivilary between Air Asia and already existing Malasia Airline (MAS). MAS was fully
operational airline and the Air Asia launched as domestic short haul service airline in 2002.
Domestic success and impressive profit making encouraged Air Asia to launch its
international operations as Air Asia X. The succes of Air Asia created rivilary with Malaysia
Airline and MAS launched firefly a domestic low cost airline to compete with Air Asia. The
rivilary reached its peak when MAS introduced “every day low price” 1 Million free flights,
which was strongly opposed by Air Asia CEO Fernandes. He urged the government to stop
subsidizing MAS & provide level playing field and fair competition. Finally they brought
route rationalization of MAS to make both airlines to focus on their respective market
segment. In 2006 Air Asia took 96 out of 118 domestic routes of MAS, and they shared 19
domestic trunk routes.

Sustainability of Air Asia :

The increasing oil price at the first glance may appear like a threat for
AirAsia. But being a low cost leader, AirAsia have upper hand because its
cost will be still the lowest among all the regional airlines. Thus, AirAsia
has a great opportunity to capture some of the existing customers of full
service and other low cost airline’s customers. However, there will be also
some reduction in overall travel especially by casual or budget travelers.

Sustainable differentiation to be achieved through product innovation

and area that could be concentrated for the differentiation is quality and
service.

Due to AirAsia’s success in the industry, competition might one to adapt

the company’s business model. However, AirAsia had some advantages
over its competitors by the advantage of experience and its brand
enjoyed good recognition. AirAsia gain from the first mover advantage
which allows it to establish itself before competition perceive further in
this low cost segment, apart from competition that already exists across
segments (low cost vs full service carriers). AirAsia has the strength to lay
down the rules and framework in the industry for business and
operational suitability.