ASIAN JOURNAL OF MANAGEMENT CASES, 3(1), 2006

SAGE PUBLICATIONS NEW DELHI/THOUSAND OAKS/LONDON

DOI: 10.1177/097282010500300104

AIRASIA: THE SKY’S THE LIMIT

Rizal Ahmad
Mark Neal

This case details the rise and expansion of AirAsia in South-east Asia. The company
employed a business model for low-cost airlines that was originally developed by
Southwest Airlines in the United States and subsequently employed with great success
by European companies such as Ryanair and EasyJet. The case thus documents the
successful application of a western business model in a previously unexploited Asian
environment, and raises issues about knowledge transfer, and the sustainability of
such a model in the face of increasing competition and market turbulence. In this
way, this case raises issues of innovation, adaptation, strategy and sustainability within
the Asian context.
Keywords: Low-cost airlines, Budget airlines, Business model, Knowledge transfer,
Innovation, Asian entrepreneurship

‘Now everyone can fly’—AirAsia had been drumming South-east Asians to take to the
skies by making air travel affordable to the masses. In October 2004, AirAsia successfully
attracted over USD 200 million in fresh capital through an Initial Public Offer (IPO) of
its shares.1 In December 2004, it announced its decision to purchase up to eighty Airbus
A320s (Defence-aerospace 2005). Arguably, AirAsia not only enabled many ordinary
people to travel by air, but also stirred up competition and encouraged the formation of
several low-cost airlines in South-east Asia (SEA). The financial market recognized its
impressive financial performance, and Morgan Stanley Capital International Inc. (MSCI)
included AirAsia Bhd’s2 shares, which were listed on the Kuala Lumpur Exchange, in its
global index, the MSCI Standard Index Series (The Star Online 2005). By February 2005,

1
Based on the price of RM 1.25 per share for institutional investors (560,407,500 shares) and RM 1.16 per
share for retail investors (140,101,900 shares)—as reported in Airline Industry Information Online
(M2 Communications Ltd). 1USD at RM 3.8.
2
Bhd is an abbreviation of the Malay word ‘Berhad’, which means ‘limited’. Bhd is thus used to indicate
limited companies.
its shares were traded at a 50 per cent premium (RM 1.78) to its offer price (The Star
Online 2005). How did AirAsia achieve such spectacular success?

COMPANY BACKGROUND

AirAsia was incorporated in 1993, with Hicom Berhad and Mofaz Air as shareholders.
In 1996, it became Malaysia’s second national carrier and commenced full-service do-
mestic operations with two Boeing 737–300s. It initially flew from Kuala Lumpur (the
capital of Malaysia) to four destinations—three in East Malaysia (Kota Kinabalu, the capital
of Sabah; Labuan, the Federal Territory and an offshore financial centre; and Kuching,
the capital of Sarawak) and one in West Malaysia (Langkawi, a duty-free island and holiday
destination). In December 2001, Tune Air acquired AirAsia from DRB-HICOM Bhd.3 for
RM1 (USD 0.26) and assumed its debt of RM 40 million (USD 10.5 million). The manage-
ment team, headed by its CEO, Tony Fernandes, transformed AirAsia into a successful
low-cost carrier and within two years expanded its fleet nearly eightfold to fifteen air-
crafts. Exhibit 1 shows the milestones of AirAsia’s progress. By 30 June 2003, despite its
limited operational and financial resources, AirAsia achieved a net profit of RM35 million
(USD 9.2 million) on the back of RM 400 million in revenues—a major turnaround from
a profit of RM 232,000 (USD 61,000) in 2002 and a loss of RM 19.1 million (USD 5.0 mil-
lion) a year earlier. Within three years, AirAsia had built a brand and become a household
name, not only in Malaysia, but also in Thailand, and increasingly in Singapore and
Indonesia.
AirAsia’s main operations remained in Malaysia, but it had shareholding interests
in Thailand through Thai AirAsia (a low-cost carrier based in Bangkok, Thailand) and in
PT AWAir (a low-cost carrier based in Jakarta, Indonesia). AirAsia operated from four
hubs: Kuala Lumpur International Airport (KLIA) in Sepang near Kuala Lumpur; Senai,
near Johor Bahru in the southern part of West Malaysia, close to Singapore; Don Muang
Airport (DMA), near Bangkok, Thailand; and Soekarno–Hatta International Airport, near
Jakarta, Indonesia. Exhibit 2 shows the air routes of the AirAsia group. Exhibit 3 provides
a profile of the AirAsia group; and Exhibit 4 details income, cost of sales and expenses.

3
DRB-HICOM was the result of a merger between two companies, DRB and HICOM.

26 RIZAL AHMAD AND MARK NEAL

 LOW-COST CARRIERS INDUSTRY BACKGROUND

Low-cost air travel was not a new phenomenon. Approximately 25 per cent of the domestic
departing passengers in the United States of America (USA) and Australia travelled by
low-cost carriers. In South-east Asia, there was thus room for low-cost carriers to increase
their market share. A low-cost carrier, as the name suggests, was run on the principle of
minimizing the costs of operations and maximizing sales revenues. Cost minimization
was the core business principle that drove the business. This business principle did not
imply that the products of a low-cost airline were always the cheapest in the market or
that its products were of low quality. ‘Low-cost’ as a business principle simply emphasized
the need to keep operating costs low. A low-cost business may have used high technology
and costly equipment. The product proposition that low-cost carriers offered to customers
was ‘value’, by delivering basic product functionality, that is, a cost effective means of
transport. Carriers or airlines that adopted this principle included the ‘original’ low-cost
carrier, Southwest Airlines (USA), as well as Ryanair (based in Ireland) and EasyJet (based
in the United Kingdom).

LOW-COST AIR TRAVEL MARKETS IN SOUTH-EAST ASIA

AirAsia was the first low-cost carrier in South-east Asia. In Malaysia, MAS (Malaysian
Airline System, the national airline of Malaysia) was AirAsia’s main competitor. MAS
was a full-service carrier that provided multi-class scheduled services to a network of
more than 100 domestic and international destinations. It provided complimentary in-
flight meals, a frequent-flyer programme, and airport lounges for business and first class
customers. In the past, MAS had offered ‘Supersaver Fares’ on almost all its routes within
Malaysia. Supersavers enabled passengers to save up to 50 per cent of the usual economy
class fares. On shorter routes, namely Kuala Lumpur to Senai and from Kuala Lumpur to
Penang or Alor Star (two cities in the north of West Malaysia), AirAsia was in competition
with ground transportation such as trains, express buses and self-driven cars. Driving
time from Kuala Lumpur to these cities took less than five hours. In addition to MAS, the
AirAsia group also faced competition from carriers based in neighbouring countries.
Thai AirAsia faced competition from Thai Airways International (THAI), Nok Air
(a budget airline associated with THAI) and One-Two-Go (a budget airline associated
with Orient Thai). On certain routes like, for example, Bangkok to Singapore, AirAsia
faced fierce competition from scheduled airlines that chose to exercise their ‘Fifth Freedom

AIRASIA: THE SKY’S THE LIMIT 27

Right’4 to fly and pick up passengers. Along this route, AirAsia was in direct competition
against two budget and twelve full-service airlines. Exhibit 5 shows the major players in
the aviation market, including low-cost carriers in South-east Asia. Exhibit 6 compares
AirAsia’s operational data with two of its main competitors, the scheduled airlines; Thai
Air and MAS. Although the cost and revenue per ASK5 for both of these scheduled airlines
was relatively higher than that of AirAsia, the net revenue per ASK of AirAsia was almost
the same as that achieved by Thai Air. Arguably, this shows that a low-cost model can
produce a reasonable, if not better, net revenue than the traditional full service model.
According to the S–A–P Group LLC (an independent aviation consulting company en-
gaged by the AirAsia Group), intra-regional passenger volumes in South-east Asia were
expected to grow at an annual rate of 8.6 per cent per year between 2003 and 2008.6 Five
factors that were expected to drive the aviation activities in South-east Asia were cited:

(i) A large demographic area: South-east Asia was a large demographic area with a
relatively ‘good’ per capita income growth. S-A-P, in its study, found that the number
of air travels (passenger round trips) was positively related to per capita GDP
(Gross Domestic Product). Exhibit 7 shows the relationship between per capita
GDP and air travel in selected countries of Asia-Pacific. In South-east Asia, more
than half of the population lived within a five and six hours flying radius from
Bangkok and Kuala Lumpur respectively.
(ii) Liberalized aviation industry: Countries in South-east Asia had liberalized their
aviation markets. Thailand and China, for example, agreed to open their skies to
each other’s airlines. Nearly unrestricted airline operations were allowed between
the two countries through the ‘open skies agreement’. Additionally, China relaxed
its travel restrictions and became more willing to issue exit visas for independent
and group travel. Thailand also entered into an ‘open-skies’ agreement with India.
(iii) The geography of South-east Asia: Many parts of South-east Asia were separated by
water and Indonesia had many islands. Surface (land and sea) transportation was
not extensively developed and low-cost air transport services were an attractive
substitute for land surface transport services.

4
‘Fifth Freedom of The Air—the right or privilege, in respect of scheduled international air services,
granted by one State to another State to put down and to take on, in the territory of the first State, traffic
coming from or destined to a third State (also known as the Fifth Freedom Right)’—International Civil Aviation
Organizations (ICAO).
5
Available Seat Kilometers (ASK) is the total number of seats available on scheduled flights multiplied
by the number of kilometers those seats are flown.
6
This was reported in AirAsia’s IPO prospectus.

28 RIZAL AHMAD AND MARK NEAL

 (iv) Growing numbers of business travellers: Further expansion in the economies of
South-east Asian countries and China increased the business activities within the
region. On certain air routes, such as between capital and commercial cities—
most notably along the Bangkok–Kuala Lumpur/Bangkok–Singapore corridor—
low-cost air travel, when combined with increased frequency and reliable air
schedules, was an attractive proposition to business travellers.
(v) Increase in urbanization: There was a strong trend towards urbanization in South-
east Asia. Growth in cities and the general population generated higher demand.

What was the potential market size and growth rate for air travel in South-east Asia?
This could be anyone’s guess, but the statistics seemed to point towards growth. The
markets of AirAsia could be seen from many different angles: nationality of travellers,
purposes of travel, types of needs (which required different products, for example, excess
baggage and air freight facilities) and destinations that involved intra and inter-country
travel by people from within the country and abroad. In this case, we highlight AirAsia’s
markets in terms of the countries where potential air travellers are based.

Market 1—Malaysia
Malaysia comprised West and East Malaysia, which were separated by the South China Sea.
By 12 October 2004, AirAsia operated 322 flights from Kuala Lumpur International Airport
(KLIA) to fourteen domestic and eight international destinations (three in Thailand and
five in Indonesia) and another sixty-three flights from Senai to four domestic and two
international destinations. Malaysia had a total population of approximately 24.3 million
with a per capita Gross Domestic Product (GDP) of USD 3,905.7 Malaysia’s per capita GDP
in 2005, in terms of PPP (Purchase Power Parity) was equivalent to USD 10,449 (Inter-
national Monetary Fund 2005). With a relatively high per capita GDP, Malaysians could
afford to travel more frequently. AirAsia had so far managed to get a fair share of domestic
passenger movement within Malaysia. From January 2002 to June 2004, AirAsia’s share
on all routes was 23.1 per cent (1.35 million persons) but this translated into a higher share
of 24.1 per cent on the routes that AirAsia flew. By 2015, the proportion of urban population
in Malaysia was expected to increase to 66 per cent, from a current share of 59 per cent
of the whole population. Knowing that AirAsia was based in Malaysia, foreign tourists
might consider using Malaysia as their base to travel within South-east Asia. Malaysia
was among the world’s top fifteen tourist destinations, which in 2002 attracted 13.3 million
visitors (World Tourism Organization 2005).

7
In 2002, based on S-A-P’s report and quoted in the AirAsia IPO prospectus.

AIRASIA: THE SKY’S THE LIMIT 29

Market 2—Thailand
Thailand had a population of 61.6 million and a per capita GDP of USD 2,060. Thailand’s
per capita GDP in 2005, in terms of PPP, was equivalent to USD 7,851 (International
Monetary Fund 2005). It covered a land area of 513,115 sq km and it offered many
tourist attractions (Tourism Thailand 2005). From its hub in Don Muang Airport (DMA),
Bangkok, Thai AirAsia commenced operations in February 2004. In the first five months
of operations, Thai AirAsia carried 380,400 passengers to or from DMA, the majority of
which (86.7 per cent) were travelling on Thailand’s domestic routes. Within five months
of operations, Thai AirAsia managed to build a market share of 11.9 per cent of domestic
passenger movement. Domestic passenger movements at Thailand’s major airports
(Bangkok, Phuket, Chiang Mai, Chiang Rai, and Hat Yai) grew at a compounded average
annual growth rate of 10.6 per cent between 1985 and 2003. This growth rate gave Thai
AirAsia a tremendous opportunity to carry more passengers. In the international market,
Thai AirAsia was in a competitive position to serve destinations in India, Burma,
Bangladesh, Cambodia, Vietnam and Southern China. In 2002, 10.9 million foreign tourists
entered Thailand (World Tourism Organization 2005). Moreover, Thailand’s open sky
policy was likely to facilitate airlines in bringing in more foreign tourists.

Market 3—Indonesia
Indonesia was a populous country. It had a population of 211.7 million (three and a half
times that of Thailand) and per capita GDP of USD 817. Indonesia’s per capita GDP in
2005, in terms of PPP, was equivalent to USD 3,661 (International Monetary Fund 2005).
It had a land area of over 1 million sq km (twice that of Thailand) and was the largest
archipelago in the world, with over 17,500 islands spread in an area between the Asian
continent and Australia, and between the Pacific and the Indian oceans (Tourism Indonesia
2005). Indonesia’s urban population, which was AirAsia’s potential market, accounted
for 43 per cent of its total population (World Bank 2005).

Market 4—Singapore
Even though Singapore had a comparatively small population of 4.16 million, it was among
those countries with the world’s highest per capita GDP. Singapore’s per capita GDP in
2005, in terms of PPP, was equivalent to USD 25,385 (International Monetary Fund 2005).
It was a city-state and a well known international destination. More than forty airlines
flew in and out of Singapore (World Airport Guide 2005).
Although AirAsia did not fly into Singapore, travellers could, for about USD 1 (RM 4),
take a shuttle bus from Senai Airport to City Lounge in Johor Bahru and then change

30 RIZAL AHMAD AND MARK NEAL

to another bus that would take them to Kranji (mass rapid transit (MRT)—a rail service)
station in Singapore (Senai Airport 2005).

Market 5—Other Countries

Several other untapped markets could also be served by AirAsia. These included
Cambodia, Vietnam, Laos, Southern China, Burma, Sri Lanka, Bangladesh, Southern India,
the Philippines and even Western Australia. Hubs in East Malaysia, Thailand and Indonesia
could serve destinations in these countries. News clips in Exhibit 8 show that AirAsia ar-
ranged to fly to China and the Philippines in April 2005. Thai AirAsia was also planning
to fly to seven other southern China destinations, that is, Guangzhou, Naning, Kun-ming,
Wuhan, Chengdu, Chongqing and Hankou by the end of 2005 (The Star Online 2005). In
2003, China was among the world’s top air passenger markets, registering 21.9 million
passengers, and that was expected to grow at an annual rate of 12.5 per cent until 2008,
according to the International Air Transport Association’s (IATA) forecast (IATA 2005).

AIRASIA BUSINESS STRATEGIES

AirAsia targeted markets (destinations) within a three-and-a-half hour flight-time from

its hubs. These destinations covered virtually the whole of South-east Asia. It was estimated
that approximately 500 million people would be able to travel through these destinations.
Short flight-time air routes would enable AirAsia to optimize the utilization of its aircrafts
and other ground support assets. AirAsia optimized both the frequency and turnaround
time (time between arrival and departure). It was one of the airlines that had the world’s
lowest cost per ASK (Available Seat Kilometers, which is the total number of seats available
on scheduled flights multiplied by the number of kilometers those seats are flown) at
US 2.5 cents.
AirAsia believed that it had six business strengths:

Single-class, No Frills Service

There was only one class in all AirAsia flights, and the service did not provide free in-
flight meals, in-flight entertainment, airport lounges or other amenities. Neither did it
have a loyalty programme for its customers. However, customers could purchase a wide
range of items aboard AirAsia flights, such as snacks and merchandise. AirAsia priced its
one-way travel seats based on expected demand and time of booking. On every route, its
fare structure comprised twelve tiers of fares, and offered customers savings depending

AIRASIA: THE SKY’S THE LIMIT 31

on how far in advance a particular booking was made and the level of demand for the
seats. Purchased seats were non-refundable and changes, when allowed, involved an
administration fee.

High Aircraft Utilization and Efficient Operations

AirAsia maximized the utilization of the Boeing 737–300, which it operated in a number
of ways. It fitted an additional sixteen seats to the typical 132 seats on a two-class config-
uration. It operated on a longer working day, which commenced at 0700 hrs, and it main-
tained a low turnaround time of approximately 25 minutes compared to the 45–120 minutes
that was typical of full-service airlines. AirAsia planned its routes and operations so that
on average its aircrafts were used for a 12–13 hour block, compared to the 8 hour block
typical of full-service airlines. This higher aircraft utilization rate enabled AirAsia to
mount five additional round trips per aircraft per week or more than 200 per aircraft per
year. AirAsia also multi-tasked by hiring employees who were capable of carrying out
varied jobs.

Low Fixed Costs

AirAsia negotiated and obtained lower lease charges for its aircrafts, lower rates for long-
term maintenance contracts, lower airport fees and lower rates on its insurance fees, be-
cause of its high safety and maintenance standards. Employees were not unionized and
a large portion of their remuneration was tied to their productivity. Pilots were provided
with incentives to keep flight and operation times to a minimum and to cover as many
flight sectors as possible on a given day. Cabin crews were rewarded for punctuality,
availability for duty and standby, and fewer leaves. Ground crew remuneration was based
on both basic salary and productivity-related compensation, which was measured by
performance and commission from the sale of seats, as well as linked to factors such as
service skills, product knowledge, attendance, punctuality and the ability to perform
multiple tasks. In addition to basic salary, type-rating allowances were awarded to the
engineers in recognition of the individual’s technical qualifications. In the area of infor-
mation technology, AirAsia invested in the necessary technology that would not only
improve efficiency but also cost less to use. Instead of purchasing software, AirAsia sub-
scribed for it on an annual basis, using OpenSkies for inventory and sales management,
Microsoft’s Axapta for financial management, the Geneva Optimum Airline Performance
for flight scheduling and crew rostering, and ASPrecise’s Engineering Software Solution
for managing aircraft maintenance engineering and logistics.

32 RIZAL AHMAD AND MARK NEAL

Low Product Distribution Costs
AirAsia did not issue tickets, and that helped save administrative costs and related ex-
penses. It sold its seats through the Internet, its agents, sales offices, mobile phone SMS
and a Nationwide Call Centre (NCC). Customers, however, had to pay a nominal surcharge
on bookings made through the mobile phone SMS and call centre. Seats sold through the
Internet were priced at a discount to seats sold through other channels. By August 2004,
the Internet channel accounted for 50 per cent of all bookings/sales. Customers could
also pay for their seats through credit cards, or through cash at banks, post offices and
other third party outlets in various countries, such as mobile telecommunication oper-
ators. In addition to this, AirAsia also maintained a network of ‘preferred’ travel agents,
‘sky agents’, sales stations and sales offices located at airports and throughout Malaysia,
as well as in the countries it operated in. ‘Preferred’ travel agents were those that had
registered with AirAsia. They maintained a pre-paid account with AirAsia, from which
purchases were made while customer payments were secured. ‘Sky agents’ did not have
accounts with AirAsia but they could book and pay for purchased seats with their own
credit cards or the credit cards of their customers. ‘Preferred’ and ‘sky’ agents did not
earn any commission from AirAsia, but they were allowed to charge customers for their
services.

Using a Single Aircraft Type

AirAsia operated a fleet of similar aircrafts, that is, Boeing 737–300s. Simplified mainten-
ance (that resulted from using one type of aircraft and engine) and reduced spare parts
inventory requirements helped AirAsia to increase cost savings.

Maximizing the Benefits of Regional Media Coverage

AirAsia’s success in South-east Asia attracted publicity and the group used these oppor-
tunities to promote and increase its brand awareness without additional promotional
costs. It was awarded ‘Superbrand’ status in Malaysia by Superbrands International.
AirAsia continued to find ways to reduce its cost of operations without compromising
safety and customer service. Like other airlines, fuel was a major component of its cost
of operations, and AirAsia implemented a number of strategies to keep its fuel costs to a
minimum. For example, it hedged its fuel purchases (approximately 83 per cent of its
purchases in the year 2003–04). Whenever permissible, its aircrafts carried minimum
fuel, and purchased fuel from suppliers at destinations where it was less expensive.
AirAsia paid for its fuel upfront, which gave it bargaining power to obtain better prices. It

AIRASIA: THE SKY’S THE LIMIT 33

also had clear policies and guidelines covering all areas of flight operations that, among
others, aimed at minimizing fuel consumption. For instance, its pilots took their aircrafts
to their optimum height within the shortest period of time and they took straight-line
paths. AirAsia also decreased the overall weight of its aircrafts by eliminating unnecessary
load, such as ovens in aircraft galleys and built-in steps. Its efforts in reducing costs re-
sulted in a 50 per cent overall reduction in cost per ASK (from USD 0.050 or ½ cent, to
USD 0.025 or ¼ cent within the four years and three months from March 2000 to June
2004). However, during the same period, lower average fares resulted in a 30.7 per cent
reduction in revenue per RPK, from RM 0.205 (USD 0.0539) to RM 0.142 (USD 0.0374).
In addition to the above, AirAsia prided itself on building a strong, team-focused cor-
porate culture. AirAsia’s core strategy involved maintaining low costs while achieving
high productivity. It also had a proven management team that had been together since
the company commenced operations in 2002. The Centre of Asia Pacific Aviation awarded
AirAsia the title of ‘Asia Pacific Airline of the Year’ in 2003. Since June 2002, AirAsia
employed over 1,800 people in Malaysia and 322 in Thailand.

WHAT WAS NEXT?

AirAsia’s goal was to establish itself as a leading low-cost carrier in Asia. It had seven
strategies:

Stimulating Demand by Offering Low Fares

It believed that its success in attracting air travellers and building customer loyalty de-
pended on the ability to continue to offer low fares—fares that were, on average, sub-
stantially lower than the published fares of full-service competitor airlines in the countries
in which it operated.

Expand within Asia

AirAsia planned to do this by focusing on routes that were under-served by other airlines
within Malaysia, Thailand, Indonesia and other countries in South-east Asia and China.

Increase Flight Frequencies

AirAsia considered this as a key strategy because it expected that air travellers would not
only want low fares, but would wish to benefit from convenience in terms of the availability

34 RIZAL AHMAD AND MARK NEAL

of flights. It planned to increase the frequency of flights in its established markets, and
those with high growth potential.

Continue to Minimize Operating Costs

Cost minimization could be achieved by several measures. The first was to encourage
air travellers to book their flights online. Second, it would continue to contract out air-
craft maintenance services, ground handling and ground support services at airports in
Indonesia, Macau and Singapore. Contracts would be awarded through a competitive
bidding process or negotiation. Third, it would continue to adhere strictly to its ‘low-cost
carrier model’ and leverage its economies of scale to further reduce the per unit cost of
input by negotiating better terms with suppliers and airports.

Invest and Enhance AirAsia’s Brand

AirAsia regarded its brand as an important asset. It planned to refine its branding strategy
and increase brand awareness, particularly in Malaysia, Thailand, Indonesia and
Singapore. AirAsia wanted to be ‘the people’s airline’ and its tag line ‘Now everyone can
fly’ underscored that objective. It was very selective in choosing its media of commu-
nication—it normally used print, supported by radio and outdoor advertising. It also par-
ticipated in community and charity projects, and helped to promote local and international
artists. AirAsia allocated up to 3 per cent of its revenue for marketing campaigns and
activities.

Continued Focus on Customer Service

Despite its low fares, AirAsia emphasized high-quality service that was friendly and per-
sonal. This was achieved through effective recruitment and staff training. AirAsia
embarked on initiatives that sped-up bookings and check-ins, improved handling services,
and provided rapid and effective responses to customer feedback. It monitored its punc-
tuality performance and published it on its website.

Optimization of Revenue and Development of New Revenue Streams

AirAsia used a revenue management system that was geared to optimize revenue from
passenger seat sales. It also worked towards increasing revenues from other sources,
such as freight and charter services, holiday packages and hotel rooms. It sold food and
beverages under its own brand, ‘SnackAttack’, and worked towards acquiring exclusive

AIRASIA: THE SKY’S THE LIMIT 35

or more advantageous concessions at airports, particularly those airports where AirAsia
contributed more than 50 per cent of the total traffic. In addition, AirAsia also worked in
alliance with other organizations. It teamed up with RHB Bank in Malaysia to launch
AirAsia Credit Cards; and with Singapore’s DBS to issue debit cards, credit cards and
charge cards bearing the AirAsia logo. In its efforts to attract corporate customers, AirAsia
launched ‘GoCorporate’—a product, which offered services to companies that purchased
more than 500 point-to-point sectors a year. Corporate customers not only enjoyed cost
savings on fares, but also flexibility and convenience when they chose to purchase
AirAsia’s fully flexible fares. In addition, AirAsia’s system allowed companies to track
and manage their employees’ travel details. Advertising was another source of income.
‘TIME dotcom Berhad’, for instance, paid RM 800,000 (USD 210,000) to use AirAsia aircrafts
as its ‘flying billboard’ for three years. Other revenues came from excess baggage fees,
administration fees, and cancellation charges.
There were a number of risks faced by AirAsia, particularly increased competition.
Aircraft maintenance costs could also increase and there was a risk that its ground support
service contractors might not be able to deliver services that were integral to its inter-
national business operations. For the year ending June 2004, fuel costs accounted for ap-
proximately 31 per cent of AirAsia’s cost of sales. Its ability to contain this cost was
crucial to its future success. AirAsia relied on the Internet to minimize its distribution
costs, but the group’s primary markets, particularly new markets in Thailand and
Indonesia, had low Internet penetration and credit card usage. Historically, South-east
Asia’s economy had experienced economic upturns and downturns, as well as currency
depreciations and appreciations. A recurrence of economic upheavals in the South-east
Asia regions was potentially devastating. Finally, yet importantly, demand for air travel
was sensitive to adverse news such as terrorism, or the recurrence of illnesses like SARS
(Severe Acute Respiratory Syndrome) and the bird flu.

THE FUTURE

AirAsia had decided to acquire eighty Airbus 320s through forty purchase obligations
and forty purchase options (Defence-aerospace 2005). Delivery of the new aircrafts was
to commence in 2006. In the light of growing competition from other low-cost carriers,
semi-low-cost carriers and full-service airlines (see Exhibit 5), the air travel market had,
in general, become more competitive. There were mixed comments from travellers who
had used AirAsia (see Exhibit 8). The airline now faced a number of issues that could
enhance or inhibit future growth. First, it had to identify further opportunities to reduce
costs, so that it could continue to offer lower prices. Second, it had to identify new markets,

36 RIZAL AHMAD AND MARK NEAL

so that it could increase the number of customers and revenues. Third, it had to find new
sources of revenue other than from fares.
The Sky’s the Limit! What further specific actions could AirAsia take?

Please address all correspondence to Dr Rizal Ahmad and Dr Mark Neal at Depart-
ment of Marketing, Sultan Qaboos University, Oman. E-mail address: rizal@squ.edu.om,
markneal@squ.edu.om

Exhibit 1
The Milestones of AirAsia’s Progress
2001
• Lease agreements for two aircrafts are renegotiated resulting in a significant reduction of average
monthly aircraft leasing costs.

2002
• AirAsia’s Nationwide Call Center (NCC) at Kelana Square commences operations, enabling guests to
pay for their reservations by phone.
• Ticketless services are launched.
• Internet booking and on-line payment services commence operations.
• Fleet expands to four Boeing 737–300 aircrafts by leasing two additional aircrafts.
• Operations at Kuala Lumpur International Airport (KLIA) commence.

2003
• Fleet expands to eleven aircrafts, nine of which are leased and two of which are purchased.
• IDBIF Malaysian Investments Ltd, Crescent AirAsia Investments II, Ltd (CAAL) and Deucalion Capital
II Ltd (DCL) acquire a 26 per cent shareholding for RM 98.8 million.
• The world’s first airline booking by SMS from a guest’s mobile phone is introduced.
• AA International Ltd (AAIL) forms a joint venture with Shin Corporation8 to invest in Thai AirAsia.
• Operations from Senai commence.
• International flights between Kuala Lumpur and Thailand begin.

2004
• Fleet expands to twenty-four aircrafts (of which sixteen aircrafts are operated by AirAsia, four leased
to and operated by Thai AirAsia and four are expected to be in operation, two in Malaysia and two in
Thailand, by the beginning of November 2004) of which eighteen are leased and six are purchased.
• Thai AirAsia, managed by AirAsia, commences operations with flights to Chiang Mai, Phuket, Hat Yai,
Khon Kaen and Singapore.

8
Shin Corporation: a Public Limited Company based in Thailand.

AIRASIA: THE SKY’S THE LIMIT 37

 • AirAsia commences international flights to Indonesia.
• AirAsia acquires a 99.8 per cent interest in AA International Ltd.

Awards and Accolades

The Group and its CEO, Tony Fernandes, have received the following awards and accolades:

AirAsia
ü Asia Pacific Airline of the Year 2003 by the Centre for Asia Pacific Aviation, an independent private
aviation consultancy company.
ü Air Finance Journal’s Development Airline of the Year 2003.
ü Top 100 Company, CIO 100 2004, by CIO Asia, a subsidiary of International Data Group.
ü www.airasia.com voted as the most popular website for online shopping in the 11th Malaysia Internet
User Survey conducted by AC Nielsen Consult.
ü Awarded Malaysian SuperBrand status by SuperBrands International based on an evaluation by profes-
sionals from the branding and media industry and, more importantly, results from a consumer evalu-
ation from a regional study conducted by SuperBrands International.

Tony Fernandes, CEO of the Group

ü Emerging Entrepreneur of the Year 2003, Ernst & Young Entrepreneur of The Year Malaysia 2003.
ü CEO of the Year 2003, American Express Corporate Services & Business Times.
ü International Herald Tribune award for the Visionaries & Leadership Series in 2003.
Source: AirAsia’s IPO prospectus, 2004.

38 RIZAL AHMAD AND MARK NEAL

 Exhibit 2
The Air Routes of AirAsia Group as of 12 June 2004

Source: AirAsia’s IPO prospectus, 2004.

AIRASIA: THE SKY’S THE LIMIT 39

 Exhibit 3
Corporate Structure of AirAsia Berhad

Notes: (1) Operating company for ‘Go Holiday’ and ‘Get A Room’
(2) Effective July 1 2004, the Company will equity account for Thai AirAsia’s results (Please
refer to Section 13.2.7 ‘Management’s discussion and analysis of financial condition and
results of operations—Results of Significant Associate’).
(3) Thai Crunch Time is effectively 49.4% owned by the Company
(4) Leasing entity
No. of aircrafts AirAsia operates as of 30 June 2004: 13.
No. of employees as of 30 June 2004: 1,382. This includes AirAsia’s cabin crew and pilots seconded
(loaned) to Thai AirAsia and crunch time employees.
[Thai AirAsia has 436 employees including Thai AirAsia’s cabin crew and pilots seconded to AirAsia.
Additionally, AirAsia and Thai AirAsia have arrangements for sharing and/or loaning their pilots and
cabin crews to each other, as when that becomes necessary].
No. of destinations: 28 (18 domestic and 10 International). In addition, Thai AirAsia serves 10
destinations (7 domestic and 3 international destinations).
No. of hubs: 2 in Malaysia. (Thai AirAsia has a hub in Bangkok).
Source: AirAsia Berhad IPO prospectus, October 2004, p. 66.

40 RIZAL AHMAD AND MARK NEAL

 Exhibit 4
Details on Income, Costs of Sales and Operating Expenses
13.3 Income Statement
The table below shows AirAsia’s, income statement, the components of which are expressed as a percentage of total revenue, for
the periods indicated.
For the 15 Months
For the Year Ended March 31, Ended June 30, For the Year Ended June 30,
2000 2001 2002(1) 2003 2004
% of total % of total % of total % of total % of total
revenue revenue revenue revenue revenue
(RM (RM (RM (RM (RM
Revenue: thousands) (%) thousands) (%) thousands) (%) thousands) (%) thousands) (%)

AIRASIA: THE SKY’S

Passenger seat sales ........ 41,181 27.6 44,041 26.3 87,856 40.4 195,864 59.3 347,971 88.6
Chartered flight revenue 105,844 70.9 118,409 70.6 123,179 56.7 123,061 37.3 24,514 6.3

THE
Other revenue ................. 2,260 1.5 5,299 3.1 6,386 2.9 11,115 3.4 20,205 5.1
Total ................................. 149,285 100.0 167,749 100.0 217,421 100.0 330,040 100.0 392,690 100.0

LIMIT 41
Cost of sales .................... (171,994) (115.2) (176,463) (105.2) (208,147) (95.7) (288,490) (87.4) (279,119) (71.1)
Gross (loss)/profit .......... (22,709) (15.2) (8,714) (5.2) 9,274 4.3 41,550 12.6 113,571 28.9
Sales and marketing
expenses ...................... (640) (0.4) (409) (0.2) (1,499) (0.7) (4,361) (1.3) (9,411) (2.4)
Administration expenses (2,862) (1.9) (3,523) (2.2) (7,936) (3.6) (23,061) (7.0) (34,351) (8.7)
Other operating expenses (2,573) (1.8) (2,048) (1.2) (1,445) (0.7) (3,758) (1.1) (13,054) (3.3)
Other operating income 566 0.4 136 0.1 307 0.1 1,175 0.3 4,563 1.1
(Exhibit 4 contd )
(Exhibit 4 contd )
For the 15 Months
For the Year Ended March 31, Ended June 30, For the Year Ended June 30,
2000 2001 2002(1) 2003 2004
% of total % of total % of total % of total % of total
revenue revenue revenue revenue revenue
Revenue: (RM (RM (RM (RM (RM
thousands) (%) thousands) (%) thousands) (%) thousands) (%) thousands) (%)

(Loss)/profit from
operations .................... (28,218) (18.9) (14,558) (8.7) (1,299) (0.6) 11,545 3.5 61,318 15.6
Finance costs .................. (3,075) (2.1) (4,559) (2.7) (308) (0.1) (84) – (3,131) (0.8)

42 RIZAL AHMAD
Share of losses of an
associated company .... – – – – – – – – (116) –

AND
(Loss)/profit before
taxation ........................ (31,293) (21.0) (19,117) (11.4) (1,607) (0.7) 11,461 3.5 58,071 14.8
Taxation ........................... (35) – (21) – (56) – 7,375 2.2 (9,052) (2.3)
(Loss)/profit after taxation (31,328) (21.0) (19,138) (11.4) (1,663) (0.7) 18,836 5.7 49,019 12.5

MARK NEAL
Minority interests ........... – – – – – – 2 – 48 –
(Loss)/profit attributable
to shareholders ............ (31,628) (21.0) (19,138) (11.4) (1,663) (0.7) 18,838 5.7 49,067 12.5
Note: (1) In 2002, the Company changed its financial year-end from March 31 to June 30 to coincide with the financial year end
of Tune Air.
13.3.2 Cost of Sales and Operating Expenses
The following table presents AirAsia’s cost of sales and operating expenses, which are also expressed as a percentage of total cost
of sales and operating expenses, for the periods indicated.
For the 15 Months
For the Year Ended March 31, Ended June 30, For the Year Ended June 30,
2000 2001 2002(1) 2003 2004
% of total % of total % of total % of total % of total
cost of cost of cost of cost of cost of
sales and sales and sales and sales and sales and
operating operating operating operating operating
expenses expenses expenses expenses expenses
Cost of Sales and RM RM RM RM RM
Operating Expenses Thousands % Thousands % Thousands % Thousands % Thousands %
Cost of sales
Aircraft fuel expenses 34,477 19.4 41,417 22.7 63,980 29.2 93,581 29.3 102,707 30.6
Aircraft operating
lease expenses 68,898 38.7 72,858 39.9 74,492 34.0 78,986 24.7 42,790 12.7
Maintenance and

AIRASIA: THE SKY’S

overhaul expenses 19,598 11.0 17,828 9.8 13,804 6.3 55,876 17.5 73,778 22.0
Staff costs 8,248 4.6 8,340 4.6 10,626 4.9 25,496 8.0 48,403 14.4

THE
User charges and station
expenses 23,287 13.1 18,669 10.2 24,071 11.0 21,837 6.7 9,579 2.9
Others 17,486 9.8 17,351 9.5 21,174 9.6 12,714 4.0 1,862 0.5

LIMIT 43
Total cost of sales 171,994 96.6 176,463 96.7 208,147 95.0 288,490 90.2 279,119 83.1
Operating expenses
Sales and marketing
expenses 640 0.4 409 0.2 1,499 0.7 4,361 1.4 9,411 2.8
Administration expenses 2,862 1.6 3,523 1.9 7,936 3.6 23,061 7.2 34,351 10.2
Other operating expenses 2,573 1.4 2,048 1.2 1,445 0.7 3,758 1.2 13,054 3.9
Total operating expenses 6,075 3.4 5,980 3.3 10,880 5.0 31,180 9.8 56,816 16.9
Total cost of sales and
operating expenses 178,069 100.0 182,443 100.0 219,027 100.0 319,670 100.0 335,935 100.0
Source: AirAsia’s IPO prospectus, 2004.
Note: (1) In 2002, the company changed its financial year-end from March 31 to June 30 to coincide with the financial year and
of Tune Air.
 Exhibit 5
Major Players in the South-east Asia Aviation Market Including Low-cost Carriers
Current Low-cost Carriers and Low-fare Carrier Market Shares (Estimated)
Departing Seats
as at June 1, 2004
Domestic Activity International Activity (a)
Country Share Carriers Included Share Carriers Included
India 1% Air Deccan – –
Indonesia 21% Lion Air 8% AirAsia, Lion Air, Valuair
Malaysia 25% AirAsia 5% AirAsia, Lion Air
Philippines 33% Cebu Pacific Air – –
Singapore n.a. – 2% Thai AirAsia, Lion Air, Valuair
Thailand 20% Orient Thai(b), 2% AirAsia, Thai AirAsia, Valuair
Thai AirAsia
Source: AirAsia’s IPO prospectus, 2004.
Notes: (a) within Southeast Asia region, (b) operating as One-Two-Go. n.a. = not applicable

Low-cost airlines in Asia

Thailand: Bangkok Airways, NOK Air, and One-Two-Go.

Singapore: JetStar Asia, Value Air, and Tiger Airways.
Indonesia: Adam Air, Lion Air, and Citi Link.
Philippines: Air Philippines and Cebu Pacific Air.
Pakistan: Aero Asia and Air Blue.
India: Air Deccan, Air India Express, Kingfisher, and Spicejet.
Japan: Air Do, Air Next, Ibex Airlines, JAL Express, Skymark Airlines, and Skynet Asia Airways.
Source: http://www.attitudetravel.com/lowcostairlines/asia/

44 RIZAL AHMAD AND MARK NEAL

 Exhibit 6
Comparative Operational Data on AirAsia, MAS and THAI*
Malaysia Airline System Thai Airways International
AirAsia1 (MAS)2 (THAI)3
2004 (as of 2003 (as of 2004 (as of 2003 (as of 2004 (as of 2003 (as of
June 30) June 30) 31 March) 31 March) Sept 30) Sept 30)
No. of aircraft 13 7 109 99 83 81
No. of types of aircraft 1 1 8 9 9 9
No. of passengers
carried (‘000) 2,839 1,481 15,375 16,325 19,540 17,048
ASK (mil) 3,592 2,086 55,692 54,266 69,830 63,826
RPK (mil) 2,771 1,539 37,659 37,653 50,633 44,396
Cost per RM 0.094 RM 0.109 RM 0.154 RM 0.163 THB 1.837 THB 1.893
ASK USD 0.025 USD 0.029 USD 0.041 USD 0.041 USD 0.037 USD 0.038
Revenue RM 0.142 RM 0.151 RM 0.233 RM 0.235 THB 3.014 THB 3.030
per RPK USD 0.037 USD 0.040 USD 0.061 USD 0.062 USD 0.061 USD 0.061
Revenue RM 0.109 RM 0.111 RM 0.158 RM 0.164 THB 2.108 THB 2.185
per ASK USD 0.029 USD 0.029 USD 0.042 USD 0.043 USD 0.042 USD 0.044
Difference between USD 0.004 USD 0.000 USD 0.001 USD 0.002 USD 0.005 USD 0.006
Revenue and Cost
per ASK
Notes: *Exchange rate used = 1 USD = RM 3.8 = THB 49.594.
1. Figures were obtained and, when relevant, calculations were based on data published in AirAsia
IPO prospectus, 2004, p. 73. The stated figures were based on AirAsia’s operating information for
its scheduled flights to and from KLIA and Senai—its hubs in Malaysia.
2. Figures were obtained and, when relevant, calculations were based on data obtained from Malaysia
Airline Annual Report 2004. (Also available on http://hq.malaysiaairlines.com/mys/eng/about_
us/investor_relations/annual_reports/annual_reports.asp, accessed 2 July 2005.) In calculating
Cost and Revenue per ASK and per RPK, revenues refers to total revenue; and operating expenses
refers to total expenditure stated under the performance highlights.
3. Figures were obtained and, when relevant, calculations were based on data obtained from Thai
Airways International Annual Report 2004. (Also available on http://www.thaiair.com /About_
Thai/Investor_Relations/annual_reports.htm, accessed 2 July 2005). In calculating Cost and
Revenue per ASK and per RPK, revenues refers to total operating revenue; and operating expenses
refers to operating costs stated in the account.

AIRASIA: THE SKY’S THE LIMIT 45

 Exhibit 7
The Relationship between Per Capita GDP
and Air Travel in Selected Countries of the Asia-Pacific
The figure below highlights this relationship for 13 countries in the Asia-Pacific region.
RELATIONSHIP BETWEEN PER CAPITA GROSS DOMESTIC PRODUCT (GDP) AND AIR TRAVEL
Select Countries in Asia-Pacific
Per Capita 2002
GDP Total
(in Current passenger
Country US$) roundtrips
Australia $ 20,822 1.11
Brunei $ 18,151 1.29
China $ 989 0.04
India $ 487 0.01
Indonesia $ 817 0.05
Japan $ 31,407 0.55
Malaysia $ 3,905 0.42
New Zealand $ 14,872 1.53
Pakistan $ 408 0.02
Philippines $ 975 0.08
Singapore $ 20,886 3.30
South Korea $ 10,006 0.42
Thailand $ 2,060 0.26
Source: S-A-P Group LLC, reported in AirAsia’s IPO prospectus, 2004.
Notes: Amounts include domestic and international air travel to/from reporting airports in the countries
shown and may include some transfer passengers. Roundtrips represent double one-way passanger
movements.

Exhibit 8
Selected News Clips on AirAsia
AirAsia spreading wings to Philippines
PETALING JAYA: AirAsia will commence flights to Diosdado Macapagal International Airport (formerly
the Clark Angeles Airport) in Manila beginning April 5. According to a statement, daily flights for this new
service would begin simultaneously out of KL International Airport and Kota Kinabalu International Airport.
‘By connecting Clark to Malaysia, and linking it to our network of flights serving Thailand, Indonesia, and
Macau, AirAsia is indirectly bringing the people of Asean closer and thus one step nearer to achieving a
borderless Asean policy,’ said the airline group CEO Tony Fernandes. The one-way fare for the Kuala Lumpur–
Clark route starts from RM129.99 while the Kota Kinabalu–Clark service will start from RM119.99. Seats for
the respective flights would be available for sale from March 19.
Source: The Star Online (2005), AirAsia spreading wings to Philippines, http://www.thestar.com.my/news/
story.asp?file=/2005/3/22/nation/10479833&sec=nation. Accessed 22 March 2005.

46 RIZAL AHMAD AND MARK NEAL

AirAsia to fly to Xiamen from Bangkok
XIAMEN: Malaysia’s budget carrier AirAsia will begin daily flights to this Chinese city next month through
its Thai sister company, making it the first no-frills airline in Asia to enter China. The Bangkok–Xiamen
route, starting April 25, is the first in a string of new destinations. Flights to seven cities in southern China—
Guangzhou, Naning, Kunming, Wuhan, Chengdu, Chongqing and Hankou—and four Asean countries—the
Philippines, Laos, Cambodia and Vietnam—are due to take off by September. ‘These flights may take off
from Kota Kinabalu and Penang as well, not just from Kuala Lumpur and Bangkok,’ said AirAsia group CEO
Tony Fernandes. ‘Coming to China is a huge step. Another major step will be to enter India—but not right
now,’ he said, adding that Thai AirAsia was offering 8,888 seats at a special launch fare of 388 yuan (RM178)
or 1,899 baht for one way. These fares, which exclude airport tax and fees, are valid from April 25 to Oct 29,
he told a press conference, after a ceremony to announce the airline’s entry into China, here yesterday.
Fernandes said the company had secured most of the aircrafts required for its new routes. On the company’s
inroads into China, he said: ‘The market is right, the airport (Xiamen) is right, Thai AirAsia is strong.’
Source: The Star Online (2005), AirAsia to fly to Xiamen from Bangkok, http://archives.thestar.com.my/
last30days/default.asp?Query=airasia&NewSearch=True. Accessed 21 March 2005.

AirAsia considers flying to Darwin from Kota Kinabalu

AirAsia and Australia’s Northern Territory officials are willing to hold talks on flights between Sabah and
Darwin. ‘We never turn down any offer. We are keeping an open mind,’ AirAsia executive director Kamarudin
Meranun told Agence France-Presse. Kamarudin said the route between Sabah capital Kota Kinabalu and
Darwin in the Northern Territory is within the three-hour time horizon of the carrier. Meanwhile, Northern
Territory International Trade Director Quentin Kilian told AFP such a link would promote tourism and
trade and help make state capital Darwin a departure point for Australian tourists. ‘We’re certainly interested
in discussing it ...everything hinges on it being a commercial reality,’ Kilian said. ‘The opportunity is very
much there,’ he added. Northern Territory officials were in talks with a number of airlines about expanding
Darwin’s currently limited international reach of direct flights to Singapore, Denpasar in Bali and Brunei
only, he added. ‘What we want to do is open up both trade and tourism links within the near region,’ he said,
adding that this could include Malaysia and Brunei. Kamarudin said AirAsia’s Indonesian unit, PTAWAIR
International (AWAIR), was also keen to launch flights from Bali to Darwin. ‘We can also do the Bali–Darwin
route,’ he said, adding that AirAsia would have to conduct a feasibility study before making a decision.
AirAsia operates in Malaysia, Thailand, Indonesia, the Philippines and Macau and will become the first no-
frills foreign airline to fly to China next month with daily services between Bangkok and Xiamen in South-
eastern China. – AFX-Asia
Source: The Star Online (2005), AirAsia and Australia ready to discuss Kota Kinabalu–Darwin flights,
Wednesday 30 March 2005. http://biz.thestar.com.my/news/story.asp?file=/2005/3/30/business/
10543154&sec=business. Accessed 30 March 2005.

Passenger opinions
AirAsia—by Wouter Gijs
5 August 2004
We used AirAsia on 3 internal flights. Booking was done through the internet which was swift and correct.
At the airport, you just show the booking printout and the passports. You get a flimsy boarding pass looking
like a supermarket bill. They are serious about overweight luggage because you are allowed just 15 kg—but

AIRASIA: THE SKY’S THE LIMIT 47

the extra charge is just 50 baht /kg. Airplanes are modern Boeing 737’s. One class configuration, all leather
seats. Seat pitch is narrow. Families with children board first. The seats are not allocated. Drinks and
snacks (and even AirAsia souvenirs) are sold at economical rates. Toilets are clean, the airplane is clean
enough. Staff is friendly and correct. Prices were 300 baht to Udorn and 500 baht on the Phuket stretch.
These prices seem to have increased a bit recently. Be aware about the fact that AirAsia doesn’t guarantee
connections on their own flights. You have to get out of the airplane and check-in again for the next flight.
This forced us to take a Nokair ticket on the Phuket–Bangkok–Udorn Thani stretch—otherwise we would
have had to wait 5 hours! AirAsia advertises itself as ‘now everyone can fly’. It is very economical and the
quality is there. Good alternative from Nokair and Orient Thai (and Valuair on the Singapore stretch for
visa runs). Each flight the plane was full. Each flight had a small departure delay of about 10–20 minutes.
But arrival times were almost correct. You can book by phone, internet and also at regional small offices.
Domestic terminals of Bangkok, Phuket and Udorn Thani are small and convenient.

AirAsia—by K. Kwan
18 September 2004
I’ve flown with AirAsia a few times. Their airfares are the talk of the town and I must agree these are rock
bottom prices; hence, this is the main reason I chose to fly with them. Services rendered, on board and
ground, are comparable to more established airlines. Their call centres for ticket bookings are efficient and
helpful. However, I’ve noticed that AirAsia has one blatant flaw that’s given the airline immensely
bad publicity. This airline will simply postpone or cancel a scheduled flight at the very 11th hour. Most of
this occurs either during when its patrons are on their way to the airport or during check-in. I’ve experienced
this ‘stunt’ twice myself and it messed up one of my family vacations. No apology was given, they will
simply put you in the next flight out. And when I questioned them about the incident, the check-in staff
simply replied that they’ve sent a text message to my mobile to inform me about the delay. I was given no
option but to accept this unacceptable explanation and then tortured myself by waiting for a few more
hours for the next flight. I really hope that AirAsia can seriously look into this matter, as people hate it
when their trip itinerary is ruined, be it a vacationer or a business traveller.

AirAsia—by Stephen Blakey

5 January 2005
Despite sending frequent emails to AirAsia since December 1st, requesting information on a specific
scheduled routing for April 2005, I have still not received the courtesy of a reply or an acknowledgement
from them. This draws into question how customer focused they may be in other areas as well and I would
therefore be very wary of booking with them.

AirAsia—by Al Patok
28 January 2005
I’ve flown AirAsia around 10 times, international, domestic Malaysian, and domestic Thai, including just
last weekend (BKK–UTH–BKK for less than US$30 return). I have usually been quite happy: the value for
money is amazing by any standard. Usually flights depart on time and everything goes like clockwork, but
like all low-cost carriers, the tight scheduling can cause problems: a single mechanical problem (even on a
different plane) can cause multi-hour delays to cascade through the schedule for the rest of the day. Don’t
take AK/FD if you have a tight connection to catch, but for leisure travel it’s more than OK in my book.

48 RIZAL AHMAD AND MARK NEAL

AirAsia—by Paul Hotchan
2 February 2005
I flew AirAsia from MFM (Macau)–KLIA–MFM on the 27th of Jan. The reason why I chose this flight is
because it’s timings allowed me to have two full days in KL for meetings whilst only staying one night.
Make sure you get an early check-in from your hotel! Outbound from Macau, the flight left bang on time.
Very competent and personable cabin and flight crew. Full of smiles and laughs which was surprising as
they were turning around after a 4 hour flight from KUL. Hot meals (Nasi Lemak) were available for
purchase, in addition to the usual drinks & snacks. Noticed that the majority of passengers were mainland
Chinese who probably expected a full service airline—many of them asked for blankets, and were surprised
to see a menu with prices. Return flight was a different story however. Flight delayed over 45 minutes due
to technical problems. Boarding was very confused and chaotic as there was a flight to Kuching departing
after us from the same gate. However, the Kuching passengers were in the boarding area together with us.
The boarding screens showed that the Macau flight was on final call whilst the Kuching flight was not yet
boarding according to the monitors—but infact it was the other way round. Many of the Macau passengers
boarded the Kuching flight. Once the ground crew realized what was happening, they had to check everyone
on the Kuching flight and this led to a further delay. The crew onboard this flight wasn’t as professional as
the previous flight.

AirAsia - by Karin Ho
23 February 2005
I have flown with AirAsia 6 times and suffered no delays yet. Booking through their online website was
convenient and time saving. I would like to add that since this IS a BUDGET Airline, do NOT expect first
class bells and whistles service. Paying peanuts and expecting a SIA/MAS full service is not fair to AirAsia.
I like the crew’s crisp red uniforms and the Thai AirAsia’s leather seats. Just wish we could meet the pilots.
I just returned from Bangkok on Feb 18, 2005 and will be flying to Trengganu on Feb 28. April 25, 2005 will
be my maiden flight to Macao. Thank you AirAsia for providing us with an affordable way to fly.

AirAsia—by Roger Mathastein

7 March 2005
Would like to agree wholeheartedly with Karen Ho. Recently flew with my wife from Bangkok to Chiang
Mai and return. On time both journeys. No faults at all as far as I am concerned. It is a budget airline. Some
of the budget airlines closer to home could learn a lot from AirAsia. Very pleasant experience. Would book
again with absolutely no hesitation.

AirAsia—by Dominik Choy

15 March 2005
HKT-KUL and KUL-BKK.9 Both flights departed and arrived on time. Check-in staff was efficient, friendly
and helpful, for a moment you thought it was a non–budget airline. The staff was very efficient in turning
the aircraft around—20 mins back to back. The seats were comfortable enough, no complaint because we
paid only £5 to KUL and £60 to BKK—my fault booked it last minute.

Source: Airlinequality.com (2005), Airline forum on AirAsia, http://www.airlinequality.com/Forum/

air_asia.htm. Accessed 24 March 2005.

9
HKT = Hong Kong. KUL = Kuala Lumpur. BKK = Bangkok.

AIRASIA: THE SKY’S THE LIMIT 49

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2005.
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50 RIZAL AHMAD AND MARK NEAL