Introduction

Air Asia, as the second Malaysian National Airline, provides a totally diIIerent type
oI service in line with the nation's aspirations to beneIit all citizens and worldwide travellers.
Such service takes the Iorm oI a no Irills - low airIares Ilight oIIering, 40-60 lower than
what is currently oIIered in this part oI Asia. Their vision is "Now Everyone Can Fly" and
their mission is to provide 'AIIordable AirIares' without any compromise to Flight SaIety
Standards.
The story oI emergence oI Air Asia is similar to Ryanair, since both carriers
underwent a remarkable transIormation Irom a money-losing regional operator to a proIitable,
low cost airline.
Air Asia was initially launched in 1996 as a Iull-service regional airline oIIering
slightly cheaper Iares than its main competitor, Malaysia Airlines. BeIore 2001, Air Asia Iail
to either suIIiciently stimulate the market or attract enough passengers Irom Malaysia
Airlines to establish its own niche market. The turnaround point oI Air Asia is in 2001, while
it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled some oI the
lending low-cost airline experts to restructure Air Asia`s business model. He invited Connor
McCarthy, the Iormer director oI group operation oI Ryanair, to join the executive team. In
late 2001, AirAsia was re-launched in Malaysia as a trendy, no-Irills operation with three
B737 aircraIt as a low-Iare, low-cost domestic airline.


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Indonesian habit
PreIerences oI Indonesian passengers are quite diIIerent Irom the concept oI cheap air
travel without extra service Ior the passengers (Iree snacks and drinks), and also their
reluctance to bring light baggage. Air Asia preIers passengers with very light and minimum
baggage. II this is the case, it may not last long. But Indonesian domestic airline companies
are able to provide value-added extras like Iood and beverages as part oI their service to the
passengers, although at a relatively higher cost.
The comparative edge oI Indonesian domestic airline companies compared to AirAsia
concerns habit (culture).Furthermore, Indonesian domestic airlines were already trained with
the low-cost air travel concept, known as tariII war. They have proved themselves as immune,
and managed to survive. Last but not least, the Indonesian government or domestic airline
companies had never announced the availability oI a low-cost airline company oI the country.
All these aIIect Air Asia growth in Indonesia.
Minimum air-Iare rates
Air Asia Iaces challenges Iinding open takeoII and landing slots at opportune times,
and Thailand`s regulation that sets minimum air-Iare rates. Although Transport Minister
Suriya Jungrungreangkit said the current minimum air-Iare regulations will be scrapped to
open up the market, he couldn`t name a date when this will be done. This seems to be
Iavoritism toward Thai Airways International`s domestic operations, and aIIects Thai Air
Asia to compete in the Thailand market.
Singapore government rejection
Initially, Air Asia wanted to start Ilights Irom the southern state oI Johor, near
Singapore, it hoped to attract passengers by running a convenient bus service to the city-state.
However, Singapore quickly quashed that idea. The Singapore government said it would not
approve a bus link Ior Air Asia because it was not in her national interest`, reIlecting Iears
that Singapore`s Changi Airport would lose business to Johor`s new Senai Airport. This
makes Air Asia cannot abandon the use oI Changi Airport, and thereIore suIIer Irom a higher
cost.
This is because Air Asia Ilying to Singapore needs to suIIer Irom Ilight congestion oI
Changi. Changi has drawbacks oI Ilight congestion that could prevent the quick turnarounds
essential to keeping down costs. Air Asia Iinds it stuck between big planes and circling to
wait Ior a slot to open up, which means extra Iuel costs. Moreover, the SGD$21 departure
and security tax oI Changi is too high Ior Air Asia low-cost operation. Air Asia had asked the
Singapore government to waive the Iees, however, a request that was not only rejected but
also criticized.
Besides Singapore Bangkok, Air Asia now provides an alternative route to travel to
Bangkok, by using Senai Airport in Johor Bahru, in southern Malaysia. Seeking to cater to
the diIIerent markets, Iares Ior Johor Bahru-Bangkok are generally 20 lower in comparison
to Singapore-Bangkok. Air Asia currently operated daily Ilights to Bangkok Irom Johor
Bahru. However, the choice proved unpopular, as the route Iailed to attract Singaporeans
because oI the additional cost and inconvenience oI having to travel in and out oI Malaysia
by road. All these aIIect Air Asia external growth.