Dela Cruz, Marielle Socorro BSMGT 4-A

Javier, Andrea Megan FIN 427 TTH 4:10-5:40 PM

Poblador, Eillen
Sayre, Syed Omar
Tupas, April Shane

Written Analysis of a Case Can the Budget Airline Model Succeed in Asia?

I. Background of the Study

AirAsia is a Malaysian airline that offers no frills operation or a low cost operation.
They demonstrated that the low fare model epitomized by Southwest and JetBlue in
the United States, and by Ryanair and easy Jet in Europe, has great potential in
Asian marketplace. AirAsias success produces more competitors in which they
developed strategies to continually compete in market. They mostly follow the
traditional low-fare approach: only different fare types are offered. They focus on
ensuring a very low cost structure as the basis of their business strategy. Because of
their very competitive fare offers they was able to influenced Malaysian consumer
through making them switched from bus travel to air travel.

AirAsias was also being supported by the Malaysian government but due to their
plan of entering cross borders markets in other countries created less enthusiasm
from the government. They started entering to international market last January
2004. With their performance that shows impressive growth causes concerns
because other LFAs attempted to expand too fast

Furthermore, with their slogan Now everyone can fly. Were bringing cheap
travel to the masses. the airline was still eager to expand more in their Bangkok and
 Senai hubs. Fernandes believes that since Asia has no regional high ways and
no high speed international rail Air travel is the only way to develop inter connectivity
in Asia. However, the negative side is that the competition is continuously growing.
Regardless to the upstart carriers and joint ventures with majors their were some
investors invest to low cost operations in Asia.

II. Statement of the Problem

How will AirAsia increase its profit as a low fare airline and maintain competitive
advantage against its competitors?

III. Objectives
1. To determine possible ways in increasing profit.
2. To identify strategies to be competitive.
3. To sustain their competitiveness in the airline market.
IV. SWOT Matrix

Strengths Weaknesses
Short average flight lengths Few international routes
Offers cheaper flight than the Poor customer service
competitors. Less comfort to passengers
Strong brand name
Opportunities Threats
Increase the number of potential There are many competitors
customers. present in the market.
Exposure in the Airline industry as Competitors offering low cost
a low-fare airline. fares.
Online Market is emerging Government regulations of other
countries.

V.
VI. Alternative Courses of Action

1) AirAsia should expand their international flights to increase their profit.

Pros:
There will be an increase in the number of their customers.
There will be new routes and destinations.
Increase in revenue will be expected.

Cons:

Additional permanent cost to AirAsia.

There are government regulations that could affect their expansion.
There are established competitors in the international market.

2) AirAsia should have additional aircrafts in order to accommodate large

numbers of passengers and also, to help them with their expansion.
Pros:
AirAsia can accommodate large number of consumers/passengers.
Increasing the number of flights will lead to increase in revenue.
There will be more flights and destinations.
Cons:
Additional aircraft is costly and needs a bigger capital.
There is a need of additional labor.
More maintenance costs will incur.

3) AirAsia should increase their marketing effort by advertising and

promotions on their airline fares.
Pros:
Additional number of potential consumers.
There is an increase in exposure of their company and services they offer.
Consumers will be informed of the said promotions that AirAsia offers.

Cons:

Costly.
Time-consuming.
Needs more effort from the employees/staff.

VII. Recommendation

For AirAsia to increase its profit and maintain competitive advantage, we choose
to recommend Alternative 2 which is, AirAsia should have additional aircrafts. We
chose this alternative because it satisfies all the objectives mentioned above. We
see it as a possible way to increase profit and to be competitive in the airline market
because it can already accommodate large number of passengers and there will be
increase in number of flights and destinations.

VIII. Conclusion

Being able to produce additional aircraft could benefit the airline. Since they
are planning to have expansion they obviously need to increase their resources for
them to accommodate properly their potential customers. Being able to address and
meet the needs of their customer would help them to develop a good brand image.
With the added aircraft they will be able to satisfy their customers for it can offer
more destinations. It can also attract more new potential customers. Managing to
attract more customers could increase the airlines profit. Also, adding aircraft can
reduce the possibility of delays which is the most common problem of the
customers. With that, they would have positive feedback from their customers and
gain their loyalty.

Furthermore, adding resources to meet the demand of their customer is

important so that they will continue to be competitive in the market since they have
numerous competitors. Being able to offer additional aircraft and more destinations
for low fare can be their competitive advantage against their competitors. Thus, it is
good for the airline to add more aircraft in order to maintain their competitive
advantage and increase their profit.

IX. Implementation Plan

Here are the following steps and proceedures for the execution of the recommended
alternative:

1.) There shall be a board of directors meeting which will gather all the top
executives of air asia to discuss the purchase of a new aircraft and its return on
investment.
2.) The agenda should be the additional aircrafts and the new
destinations and routes.
3.) The top management will assigned a personel to research further on this
recommendation and he/she will manage along with the committees assign
for canvassing of new aircrafts, r&d of what destinations and new
routes to have, and employment of new workforce.
4.) After the recommendation of this researcher, the top management shall
purchase an aircraft for the accomodation of more passenger and will also
ensure other governmental and labor related compliance.
5.) The top management will have a time to time status report on the new aircraft
being purchase.
6.) The foreman and supervisor assigned in the new aircraft shall report to the top
management on its current performance and its sales to assess if the
investment in new aircrafts give them a competitive advantage
against its competitors.