Case Study: Air Asia
Problem Statement AirAsia’s attempts to expend its service offering into long-haul flights and gaining additional recognition and market share is consistent with owner Tony Fernades’ company goal; however, the strategy changes required to be a successful long-haul airline significantly differ from and conflict with its current resource base (i.e. aircraft types, hubs, employee skills) and core competencies and capabilities (i.e. cost and efficiency optimization/utilization) as a low-cost carrier (LCC) airline.
Analysis
The airline industry as a whole is quite competitive with multiple players and various elements effecting the industry environment. AirAsia has developed a specific set of resources and core competencies that it has exploited in order to become the leading short-haul LCC in South East Asia. AirAsia’s strategy employs cost and efficiency optimization by utilizing its key resources; thus, possessing capabilities necessary for success. AirAsia’s tangible resources, including its fleet and hubs, enhance the company’s low cost capabilities. Due to AirAsia’s selectivity in the type/model of aircrafts it purchases, both cost and efficiency can be capitalized. By limiting the variability in aircrafts, AirAsia is able to obtain economies in purchasing, its pool for spare parts is narrowed, thus reducing costs; mechanics and pilots’ specialized knowledge of the planes increases allowing for greater efficiency and reduced cost in maintenance, repairs, and flying. Although this strategy is ideal for AirAsia as a short-haul LLC, it is not transferrable to long-haul flights. By expanding into the long-haul market, AirAsia is required to increase its resource base adding newer, larger aircraft models in turn requiring expansion of spare parts, loss of purchasing economies (until sufficient growth has been achieved), additional training and loss of specific specialized knowledge possessed by pilots and mechanics resulting in increased costs and reduced
Analysis
The airline industry as a whole is quite competitive with multiple players and various elements effecting the industry environment. AirAsia has developed a specific set of resources and core competencies that it has exploited in order to become the leading short-haul LCC in South East Asia. AirAsia’s strategy employs cost and efficiency optimization by utilizing its key resources; thus, possessing capabilities necessary for success. AirAsia’s tangible resources, including its fleet and hubs, enhance the company’s low cost capabilities. Due to AirAsia’s selectivity in the type/model of aircrafts it purchases, both cost and efficiency can be capitalized. By limiting the variability in aircrafts, AirAsia is able to obtain economies in purchasing, its pool for spare parts is narrowed, thus reducing costs; mechanics and pilots’ specialized knowledge of the planes increases allowing for greater efficiency and reduced cost in maintenance, repairs, and flying. Although this strategy is ideal for AirAsia as a short-haul LLC, it is not transferrable to long-haul flights. By expanding into the long-haul market, AirAsia is required to increase its resource base adding newer, larger aircraft models in turn requiring expansion of spare parts, loss of purchasing economies (until sufficient growth has been achieved), additional training and loss of specific specialized knowledge possessed by pilots and mechanics resulting in increased costs and reduced