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Air Asia Case Analysis

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AirAsia Case Study Analysis

I. PROBLEM

How to continue with its low-cost leadership strategy provided that market fuel prices are unstable and improve its competitiveness among competitors in the LCC segment

II. OBJECTIVES

To sustain its cost advantage and status as the top low-cost but high quality airline

III. AREAS OF CONSIDERATION

a. For the past 7 years, AirAsia has been the leading airline in the LCC segment b. In the mid-2008, fuel prices started to be unstable c. The competition became more intensive given that, after the relaunch of AirAsia in 2002, it soon inspired many LCC followers in the region. d. Malaysia Airline tried to penetrate the LCC segment with its “free ticket” strategy

IV. ALTERNATIVE COURSE OF ACTION

1. Invest in having its own direct supply of oil through backward integration strategy.

* Advantage:
Minimized cost on fuel

* Disadvantage:
Very Costly type of investment

2. Do not expand its long haul business and do not divert its classic business.

* Advantage:
No additional cost for manpower and other costs related to expansion of its business.

* Disadvantage:
Only short haul flights will be catered

V. RECOMMENDATION

It is recommended that the first alternative be pursued which is to invest in having their own direct supply of oil to minimize the cost of fuel needed by the airline even if it will cause a need for a massive capital investment. Also, by that kind of strategy, AirAsia can divert its classic business by adding up various long haul flights to cater more customers.

VI. PLAN OF ACTION

1. Find a company, preferably in the Middle East, to supply the fuel. 2. Look for a location to store the fuels. 3. Seek the approval of the…...

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