Air Asia: A Brief Review, Case Study Example

Last Name 1

Five highly relevant facts about the case are: the company’s strategic emphasis on low cost and high productivity; in 2008, when very few of the global airlines were making any profits at all, Air Asia earned returns on assets of 4%; in 2007, Air Asia departed from its original model by expanding into long-haul flights; the Airbus A 320, the only plane operated by air Asia, provided savings in purchasing, maintenance, pilot training, and aircraft utilization; and Air Asia’s decision to launch Air Asia X was a miscalculation, because in order to succeed, it needed to take business away from already established international airlines whose business models presented competitive advantages over those of long-haul airlines.

Three key issues regarding the case are: Air Asia’s many cost-reducing strategies such as offering a single class, which allowed more seeds per plain, its avoidance of paying commissions to agents, and offering minimal customer services; the expansion to Air Asia X required spending more money, particularly to purchase larger planes and the increase in the necessary fuel to operate them; and Air Asia Xs’ inability to increase its income by the revenues produced by first class and business class passengers.

Last Name: 2

Air Asia’s core competency involves the company’s strategy of low-costs and productivity in order to meet the demands of both the customers and the business. It was able to achieve these objectives by cutting costs in areas including retaining employees and motivating them to provide excellent service by rewarding them with bonuses, employee share ownership plans, and significant communication between management and staff; providing low fares with low frills service, high aircraft utilization, streamlining operations and “point-to-point” network, which kept its operations simple and their expenses low.

My strategy for improving the financial status of Air Asia X would involve adding different classes for passengers such as first class and business class which would charge higher rates for seats, but rates that would be competitive with those offered by already established airliners. This would increase the revenue for the airline, while at the same time, being able to maintain slightly lower cost flights than were available from its competitors, rather than charging the same fee for all passengers. Even if the first class and business class passengers received some minimal amenities, such as a beverage and snack, the higher price of their tickets would likely compensate for that cost as well as allowing the airline to make some profit from these classes of ticketholders. In that way, Air Asia X could avoid being a drain on the company and possibly bring in the sorts of revenues that the original company, Air Asia, had been realizing.