Airasia - Flying High with Low Cost Hopes
Briefly describe the trends in the global airline industry.
Firstly, cost pressures on airlines continue to be high. The industry is facing many challenges on the cost side. For instance, jet fuel costs, which are directly correlated with oil prices, continue to rise. Airlines are generally unable to pass these costs onto the consumer, especially in the face of growing competition and price-sensitive markets. Nevertheless, these high fuel prices have motivated manufacturers to create more fuel-efficient aircrafts.
Secondly, airlines are becoming more environmentally conscious, partly (or mainly) due to stricter emission and noise regulations. Globally, governments are more concerned with the implications of air travel to issues such as global warming and climate change. This is seen by Australia being one of the first countries to implement a carbon emissions tax, and the EU’s plans to implement a similar initiative. Thirdly, customers have greater choice and bargaining power. This is due to deregulation and emergence of new carriers especially the low-cost carriers. More innovative pricing models and services are now available to compete for the consumers’ dollar. With growing affluence of regions such as Asia-Pacific, manufacturers such as Airbus have predicted passengers to double over the next 20 years. Finally, the use of technology (such as mobile applications and social media) to advertise, engage consumers, build customer databases, and sell travel deals/fares is becoming increasingly prevalent. Beyond just providing air travel, airlines will leverage more on mobile technology and social networks to foster deeper and more responsive interaction with customers and build brand loyalty.
Comment on the business-level strategy adopted by AirAsia. How has AirAsia achieved cost leadership or differentiation?
The business level strategy adopted by AirAsia is a cost leadership strategy that targets markets such as domestic flights, short-haul / regional flights and
Firstly, cost pressures on airlines continue to be high. The industry is facing many challenges on the cost side. For instance, jet fuel costs, which are directly correlated with oil prices, continue to rise. Airlines are generally unable to pass these costs onto the consumer, especially in the face of growing competition and price-sensitive markets. Nevertheless, these high fuel prices have motivated manufacturers to create more fuel-efficient aircrafts.
Secondly, airlines are becoming more environmentally conscious, partly (or mainly) due to stricter emission and noise regulations. Globally, governments are more concerned with the implications of air travel to issues such as global warming and climate change. This is seen by Australia being one of the first countries to implement a carbon emissions tax, and the EU’s plans to implement a similar initiative. Thirdly, customers have greater choice and bargaining power. This is due to deregulation and emergence of new carriers especially the low-cost carriers. More innovative pricing models and services are now available to compete for the consumers’ dollar. With growing affluence of regions such as Asia-Pacific, manufacturers such as Airbus have predicted passengers to double over the next 20 years. Finally, the use of technology (such as mobile applications and social media) to advertise, engage consumers, build customer databases, and sell travel deals/fares is becoming increasingly prevalent. Beyond just providing air travel, airlines will leverage more on mobile technology and social networks to foster deeper and more responsive interaction with customers and build brand loyalty.
Comment on the business-level strategy adopted by AirAsia. How has AirAsia achieved cost leadership or differentiation?
The business level strategy adopted by AirAsia is a cost leadership strategy that targets markets such as domestic flights, short-haul / regional flights and