StrengthsThe first stage of the swot analysis is the strengths analysis for Air Asia. There are some unique strengths of Air Asia that others company could not defeat them. First and foremost, Air Asia has a very cooperative and strong management team with strong connections with the government and the airline industry leaders. This is partly contributed by the diverse background of the executive management teams which consists of industry experts and ex-top government officials. Besides, customers can easily check out the time of fly schedule of Air Asia. With all the convenient, Air Asia become the most favourite airline in Malaysia for the customers.
On the other hand, Air Asia provides comfortable seats, secure safety and a cleanliness environment for the customer so those customers feel comfortable during their fly times with the low price.Furthermore, Air Asia have a very strong promoter and media of advertising. Air Asia always have promotions that attract customers interests. Besides that, Air Asia have good marketing skills employees and technology of advertising which can influence customers attractions and choice of purchase.
Moreover, Air Asia is a well-established LCC operating out of South East Asiaand it has operations in over 25 countries and over 400 international and national destinations, and the most famous destination is Bali- Indonesia, Thailand – Bangkok, Korea-Seoul, Japan- Tokyo and Nagasaki, Taiwan and the other. Meanwhile, it has subsidiaries in Indonesia, Thai, Philippines, Japan and it has a fleet size of nearly 300 aircrafts.WeaknessesAir Asia does not have its own maintenance, repair and overhaul (MRO) facility. Although it is a good strategy with the hub and few planes only need to maintain when Air Asia getting their first journey which only in Malaysia.
However, with those few hubs that only situated in Malaysia, Thailand and Indonesia with over 100 planes that owned by Air Asia currently and another 100 planes which intended to be received in future next few years, Air Asia have to take proper actions of confirmation such as continuous of maintenance of planes with maintaining the overall costs low. This is a competitive disadvantage that Air Asia do not have its own belonging of MRO facility which cause many difficulties.Meanwhile, AirAsia receives lot complaints from customers on their service. Examples of complaints are around flight delays, being charged for a lot of things and not able to change flight or get a refund if customers could not make it. It is crucial for Air Asia to have a good customer service and management when the market competition is more and more intense. Besides, this is also due to do not have too many routes as compared to market leader. Which mean Air Asia can’t provide many fly schedule compared to the MAS for example. And Air Asia has a very stiff competition in its sector.
Pestel 2.1.1. Political Budget airlines grows rapidly in the Southeast Asia region after the the liberalisation of the industry. Countries including Thailand, Malaysia, Cambodia, Philippines and Singapore underwent deregulation of the budget airline industry.
Moreover, reciprocal access agreement were implement among Southeast Asia countries with the United States to embrace the liberalization of the industry. This implies the open skies services agreement encourage more air traffic to enter and exit the region domestically and internationally. Finally, governments in these countries allow more new private budget airlines were introduced to the industry to increase competition.2.1.3. Social The large population base of the Southeast Asia region creates a large market for aviation travel. Among those, Indonesia that with 235 million potential passengers fuels the growth of budget airline industry.
However, there is an perception of Asian passengers values quality more than price. Hence, despite the low price strategy, certain inflight quality standards will have to met the expectations of Asian passengers. 2.1.4. Technological Infrastructures such as international and domestic airports, public transports to the terminal are quite sophisticated in the region. Malaysia for example, every states at least has a domestic airport, while bigger cities might have a combination of international and domestic terminals.
Internet coverage are usually adequate for the purpose of purchasing online ticket, which lower the operating cost in budget airline.2.1.
5. Legal Competition regulation implemented in several countries such as Malaysia, major merger or acquisitions were mostly prohibited by the local government to ensure the industry’s competition. Foreign direct investments were also limited to joint ventures or alliances by several countries in the region.
Moreover, regulatory systems in some of these countries are quite weak, which might affect the business planning in this region. 2.1.6. Environmental Environment is really a big advantage for the airline industry, particularly to budget airlines. This is due the lack of high speed cross countries railways or highways, which make land travelling among countries difficult.
Moreover, most the countries are separated by sea which pave ways to the budget airlines in the region as either travelling in business or pleasure have to take a flight to another country. Additionally, tourism industries are a major industry in the Southeast Asia countries. The spilled over of the growth tourism industry also increases the demand for budget airline, as more passengers demand for more low cost and fast travel options while travelling in the region. Finally, the countries were located near to each other, within 3 hours flight, few countries can be reached from Malaysia to Singapore, Indonesia, Philippines, Brunei and Thailand. Which budget airline can achieve a cost benefit from their fuel consumption.PestelLegalMalaysian government does not have a clearly written policy for commercial air transport.
Therefore in the past years, more emphasis was placed on domestic flights and with AirAsia’s approval to operate cheap flights locally and internationally, the company has managed to strike a balance in its flights.Demographic environmentPopulation growth affects sales of AirAsia. Increasing population in the country increases sales of the airline bearing in mind that many clients prefer affordable services.
Demand for products and services have also increased. However, the company should take advantage of this to expand its operations.AirAsia SWOT analysisStrengths, Weaknesses, Opportunities and Threats Analysis are one of the important things in a company. This SWOT analysis is for identifying the internal (strength and weakness) and external (opportunities and threats) factor for AirAsia Company to achieve their goals and objectives to be low cost carrier company in airline industry. To be successful in the company management, a company needs to consider the company ability and how to integrating it with the as well as main factor in the internal and external factor. The main factor in the internal and external factor can be identified with SWOT analysis. On this section, I will identify one by one the strength, weakness, opportunities and threats in AirAsia Company.
The purpose of this analysis are for identify the internal and external factor that AirAsia need to consider to be low cost carrier in airplane industry. These are the strength, weakness, opportunities, and threat in AirAsia.StrengthsAir Asia has a very strong management team with strong links withgovernments and airline industry leaders.This is partly contributed by the diverse background of the executive management teams that consists of industry experts and ex-top government officials. According to Johnston (1996), without the protection of national airlines brought about by deregulation, building alliances as strategy became necessary for many airlines to stay competitive and gain access to a global market too huge for any existing airline to dominate HYPERLINK “https://itsaboutmymot.
wordpress.com/2009/08/31/the-airasia-company-strategic-management-%E2%80%9C-how-airasia-can-be-a-leader-in-the-lowest-cost-carrier-in-the-airplane-industry%E2%80%9D/” l “_ftn14” 14. The strong links with the government and airline industry leaders is one of the strength of AirAsia Company.For example, Shin Corp (formerly owned by the family of former Thai Prime Minister – Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and capture a sizeable market in Thailand. And also, with their strong working relationship with Airbus, they managed to get big discount for aircraft purchase which is also more fuel efficient compared to Boeing 737 planes which is being used by many other airlinesThe management team is also very good in strategy formulation and execution.` The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe.
They are Ryanair’s operational strategy (no frills, landing in secondary airport), Southwest’s people strategy (employee comes first) and Easyjet’s branding strategy (linking with other service providers like hotels, car rental).AirAsia’s brand name is well established in Asia Pacific.Besides the normal print media advertising ; promotions, AirAsia’s top management also capitalized on promotions through news by being very “media friendly” and freely sharing the latest information on Air Asia as well as the airline industry. Their partnership with other service providers such as hotels and hostels, car rental firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) has created a very unique image among travellers.
Alliance with Galileo GDS (Global Distribution System) that enables travel agents from around the world to check flight details and makes bookings have also contributed to their string brand name.Air Asia’s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) has successfully “elevated” the brand to become a regional brand beyond just Malaysia. The links with Manchester United (one of the world’s most famous football teams) and AT&T Williams Formula One team have further boosted their image to a greater extend beyond just the this regionAirAsia is the low cost leader in Asia.
With the help of AirAsia Academy, AirAsia has successfully created a “low-cost airline mentality” among their workforce. The workforce is very flexible and high committed and very critical in making AirAsia the lowest cost airline in Asia.The excellent utilization of ITThe excellent utilization of IT have directly contributed to their promotional activities (email alerts and desktop widget which was jointly developed with Microsoft for new promotions), brand building exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well keep the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent feesWeaknessesAir Asia does not have its own maintenance, repair and overhaul (MRO) facility.It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low. It is a competitive disadvantage not to have its own MRO facilityAirAsia receives a lot complaint from customers on their service.
Examples of complaints are around flight delays, being charged for a lot of things and not able to change flight or get a refund if customers could not make it. Good customer service and management is critical especially when competition is getting intense.OpportunitiesThere are 2 major events that are taking place now or going to take place in less than 6 months from now.First, is the ever-increasing oil price. Second, is the “ASEAN Open Skies” agreement that has been reached.
The increasing oil price at the first glance may appear like a threat for AirAsia. But being a low cost leader, AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline’s customers.
However, there will be also some reduction in overall travel especially by casual or budget travelers.Second, is the “ASEAN Open Skies” allows unlimited flights among ASEAN’s regional air carriers beginning December 2008. This will definitely increase the competition among the regional airlines. However, with the “first mover” advantage as well as its strengths in management, strategy formulation, strategy execution, strong brand and “low-cost” culture among its workforce, this agreement can be seen as more of an opportunity.There is also some opportunity to partner with other low cost airlines.
As Virgin to tap into they exist strengths or competitive advantages such as brand name, landing rights and landing slots (time to land).The population of Asian middle class will be reaching almost 700 million by 2010.This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia.
ThreatsCertain rates like airport departure, security charges and landing charges are beyond the control of airline operatorsThis is a threat to all airlines especially low cost airlines that tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore.AirAsia’s profit margin is about 30% and this has already attracted many competitors.Most of the full service airlines have or planning to create a low cost subsidiary to compete directly with AirAsia.
For example, Singapore Airlines has created a low cost carrier Tiger Airways.Users’ perception that budget airlines may compromise safety to keep costs low.In conclusion, the SWOT analysis that AirAsia have is on of the major component to make AirAsia more strength in their business and can make they are able to compete with the same low cost carrier airline industry.After I’m discussed about the SWOT analysis, I would like to discuss about the AirAsia strategy to solve the current issues: How AirAsia can be a leader in the lowest cost carrier in the airplane industry.