Havard Business Case Study (Air Asia)

The trends in the global airline industry.

The global airline industry is currently characterized by slack passenger demand, soaring fuel prices, and a slowdown in the global economy (the industry is cyclical, and its performance is closely linked to the GDP growth). Instead of engaging in competition and turf wars, currently, companies in the industry are focusing on improving profitability, especially in markets where they already have a strong presence. Mergers, joint ventures, and other strategic alliances are slowly becoming the norm for airline industry participants who are focusing on cost cutting and excess capacity reduction in order to combat the rising fuel prices and recession.

Business level strategy adopted by Air Asia.

Air Asia wants to be the lowest short-haul airline in every market  it goes in. To achieve the goal, it has some strategies such as lean cost structure, different ways of promotion, keeping safety, satisfying  guests, and developing human resources.

They always tries to keep their operations simple and efficient to keep the low cost. Example like online booking ticket. Another way is not to provide food and drinks on the plane as the goal is to move someone  from one to another place cheaply. Air Asia also  tries to keep the low cost by recruiting  only numbers of workers needed and selecting only capable and hard workers. The company also give multiple task to some employees.

One of the characteristics of no frill airline is to do fuel hedging program, where advance purchase of fuel at fixed price for future delivery is done to anticipate rises in prices. Rises in price will hit oil prices at the first time because it is the most important material in most industries.

Air Asia also maintains the safety of the airplane by complying with the highest International Aviation Safety Standard and practices. To guarantee the safety of the airplanes, all the machines are taken care by GE Engine Service since July 2002 for 5 years. They also partnership with Volvo Aero who will provide plane structure and machine spare parts for all Air Asia planes.

They realized that satisfying customers is the key for long term success and that is why it always tries to satisfy its customers by flying on time and to be friendly to every Air Asia customers.

Air Asia achieves customer leadership through differentiation