Saturday, 26 May 2012

Air Asia-Bussiness Model

AirAsia is one of the award winning and largest low fare airlines in the Asia expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international destinations with 108 routes, and operates over 400 flights daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown over 55 million guests across the region and continues to create more extensive route network through its associate companies. AirAsia believes in the no-frills, hassle-free, low fare business concept and feels that keeping costs low requires high efficiency in every part of the business. Through the corporate philosophy of “Now Everyone Can Fly”, AirAsia has sparked a revolution in air travel with more and more people around the region choosing AirAsia as their preferred choice of transport. AirAsia creates values through the following vision and mission:

AirAsia makes the low fare model possible and create values through the implementation of the following key strategies: 

AirAsia has fostered a dependency on Internet technology for its operational and strategic management, and provides an online ticket booking services to traveler online. The following shows the home page of as the company key channel of marketing and sales.

Exhibit 1 – Home Page
To book a flight with AirAsia, customers can either choose the following channels or simply visit the home page and follow the below 5 steps.
1. Call centre
2. Sales office and airport sales counter
3. Authorized travel agents
4. Mobile booking via or
5. Online ( in 5 easy steps as shown below.
Step 1 - Search
Step 2 - Select
Step 3 - Guest & Contact
Step 4 - Payment
Step 5 - Itinerary

The low cost airlines like AirAsia have changed the definition of airlines that air travel is a luxury and it is only for the upper segment of the population. The key objective of low cost carriers is to increase their reach and provide the services to a large segment. However, the low cost carriers are now facing some challenges in the market. 
AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry, which can be characterized as below: 

Figure 1 :  Low Cost Carrier Business Model 

     With the Low Cost Carrier business model, AirAsia has the following competitive advantages over the competitors in the airline industry, which can be summarized in the following diagram.

Figure 2 : AirAsia Competitive Advantages

     To figure out the internal factors such as strengths and weaknesses, and external opportunities and threats to business objectives, a SWOT Analysis of AirAsia can be conducted and shown below. 

• Increasing competition because of increasing number of low cost airline competitors, and aggressive
competition against the large or traditional airline companies
• Customer decrease because of poor economy
• Rising of the fuel prices
• Higher labor cost
• Inadequate infrastructure
• Route and flight utilization
• Safety and security issues of aircraft crash or being attacked

To better understand and analyze the specific activities through which AirAsia can create a competitive advantage, a value chain analysis for airline industry has been conducted as below to model AirAsia as a chain of valuecreating activities. The goal of these activities (Inbound logistics, Operations, Outbound logistics, Marketing and Sales, and Service) is to create value that exceeds the cost of providing the product or services, thus generating a profit margin.

 Figure 3 : Value Chain Analysis of Airline Industry