AirAsia was originally launched to compete with Malaysian Airline by offering low-priced air travels. It was, however, unable to liberalize the market to beat its rival and win and maintain its own niche. In 2001, Fernades bought AirAsia and hired experts in low-cost airline business to restructure the business model in use at AirAsia airline. This was the turning point for AirAsia. AirAsia is currently the second largest Airline in Malaysia and offers low-cost airfares. This is in consistence with their mission of providing affordable airfares and their vision that claims that everyone can now fly.
The aspect of market liberalization impacts heavily on Airasia airline as it operates not only in Malaysia but also in other Asia Pacific countries. This has made AirAsia rise fast towards being a successful and budget-friendly airline in the region earning a title like the domestic airline of choice in Malaysia (Man & Justine 2011). This paper tries to perform a SWOT analysis of AirAsia airline as well as get to know the effects of the macro industry forces facing AirAsia.
SWOT Analysis of AirAsia Airline
A SWOT analysis is a framework applied by an organization in determining its internal strengths and weakness towards its competitors and the opportunities and threats that it is bound to encounter over time. A SWOT analysis helps a company determine its present and future competitive abilities within the local and global market.
As a result of AirAsia implementing a low-cost fare model geared towards client satisfaction, the airline boasts low operational and maintenance costs. The airline has implemented a self-ticketing system by means of online ticketing and reservation which translates to low operational cost. In addition, the airline has a no-frill scheme and ensures quick customer checks leading to reduced costs of operation. A major strength of AirAsia airline lies in its strong and capable management team. The implementation of its no frill scheme, also called Ryanair’s strategy of operation, has greatly lowered its expenses translating to reduced costs of operations. The airline has highly embraced technology as a means to increasing its operations efficiency and effectiveness.
There is a prominent threat towards the airline’s operation costs due to the rising fuel prices and high investments in technology. The airline may opt to raise its fares and thereby reducing its customers gradually. As Hahua (2013) notes, when a company employs few employees, they are unable to withstand pressures of the peak season. AirAsia has few employees to be in line with its low operational cost approach. They are likely to lose customers during peak seasons while other clients may raise concerns of dreadful services at the peak season or even increased delays. In addition, AirAsia lacks an MRO (maintenance, repair, and overhaul) facility which was a strategy embraced during the airline’s first set up in Malaysia as it had few planes. However, AirAsia currently has extra hubs in Indonesia and Thailand and owns over 100 planes and would therefore be economical to service their own planes if they are to offer continuous cost-effective maintenance.
An opportunity is the likelihood of an organization to grow upon realizing a market niche. The increase in the number of customers and middle-income earners in the Asian market creates an opportunity for AirAsia to grasp by maintaining its low fare approach. More customers will be attracted to its low fare levels. The high cost of fuel will likely pull out losing competitors leaving AirAsia to dominate the airline business.
Threats are the external factors that a company should be worried about as it may cripple its operations. The increasing number of new airlines in the Asia-Pacific region is likely to cause competition to AirAsia which will negatively affect the company’s growth in future. To curb competition, AirAsia will have to increase its marketing strategies and come up with new ways of ensuring customer satisfaction. The case of Indonesia flight QZ8501 going missing also led to people losing trust with AirAsia (Reddick, Chatfield & Brajawidagda 2016).
PESTLE Analysis of AirAsia Airline
PESTLE analysis is a marketing framework geared towards analyzing and scrutinizing the external marketing setting (macro-environment) affecting an organization (Boermans & Roelfsema 2012). An analysis of AirAsia airline is discussed below.
In an attempt to operate beyond Malaysia, AirAsia faces bilateral agreement challenges and as such, its expansion and development are inhibited. The failure of bilateral agreements within the Asia-Pacific regions negatively impacts on low-cost carriers of that region leading to their underdevelopment (Hooper, Duangphastra & University of Sydney. 1998 ). In addition, landing charges imposed on AirAsia and other low-cost airlines negatively affect their growth within the region. Conversely, liberalization within southeast Asia has greatly helped in eliminating air transport charges thus giving AirAsia and other airlines the reason to operate beyond Malaysia.
A research conducted by the Word Bank shows a steady increase in Asia-Pacific countries GDP per capita income implying a rising purchasing influence (2014). Such economic growth has made AirAsia offer affordable tickets to middle-income earners. Subra and Gopal (2001) notes that AirAsia airline has been able to offer reduced air ticket pricing to its customers and other low-income earners.
Asian passengers value the quality of airline services more than the prices. Flights have to meet quality standards expected by the passengers. As well, the rising number of local and foreign tourists in the Asia-Pacific region highly support the growth of AirAsia. According to Shaw (2012), AirAsia has high-quality policies and standards aimed at availing excellent services that are in line with their philosophy of safety first.
Public transport systems, domestic, and international airports proof to be complicated within the Asia-Pacific region. In Malaysia for instance, almost every state has an airport while larger cities may have both local and international terminals. The presence of internet services across Malaysia has made it easy to purchase air tickets by online means which is cost effective and accessible. AirAsia offers online base air ticketing services and has lately brought forth a competitive online facility in which guest and customers can easily book holiday bouquets (Barry & Torres 2008).
The prevalent market liberalization in Asia has led to vast growth opportunities for AirAsia airline. However, the same liberalization has raised more legal considerations for the airline as they have to meet all legal obligations and procedures required to run business operations domestically and internationally.
Airlines are a major air pollutant and should have proper laws and measure for protecting the environment. AirAsia has implemented measures geared towards managing environmental protection from any negative form of pollution as a result of its operations. Also, since Malaysia lacks high-speed rails and roads, land traveling is difficult and time-consuming and as such people result to low budget airlines like AirAsia to travel between countries and large cities.