What is the macro and industry environment in the Southeast Asian region for the entrance of new budget airlines? What opportunities and challenges are associated with that environment?
The environment for new entrants into the budget or low cost carriers market in the Southeast Asian region has become very competitive in the last few years despite the fact that the low cost carrier industry is still young. One of the most appealing aspects for operating a low cast carrier in Southeast Asia is the size of the market. Moreover, the untapped potential for growth in many countries within the region is great. As stated in the case study, some government regulations have been adjusted, lifted ...view middle of the document...
This will present some challenges but in the big picture this should help both companies to keep costs low. AirAsia will need to set up key performance indicators to measure the success of the alliance.
How might demand for low-fare services differ in the Asia – Pacific region from North America and Europe?
Due to the low income and socioeconomic level of the majority of the population in Southeast Asia that would normally not use a full-service carrier and the infrastructure that is in place that allows other options for transportation, there is still a very large opportunity for low cost carriers. “The low-cost model is currently more prevalent in the South Asia market place than the North Asia one, according to the Centre for Asia-Pacific Aviation. In northeast Asia low-cost carriers only account for 7% of capacity, while in Southeast Asia they account for one third, and in South Asia it’s close to a half.” (Easen, 2012)
The low cost carriers will have difficultly in bringing in customers from other transportation areas such as high speed rail. This is due to the fact that the cost of other forms of transportation might be lower than an airline ticket and it might not be as convenient to take an airline. Additionally, getting the message to the masses might be difficult due to population size and geographical hurdles. That is to say the majority of the target market may not purchase tickets on AirAsia directly. Finally, since this is a relatively new option for travellers in Southeast Asia, the market share would not be as developed and mature as those in Europe or even North America.
Compare AirAsia’s generic strategy (cost leadership, differentiation focus) with the strategy of other incumbent carriers and with Southwest and Ryanair. How is it similar to and different from the strategies of those carriers?
The differences between Southwest and Ryanair versus AirAsia is that Southwest and Ryanair, one airline from the United States and Ryanair from Europe, is that they are one of many low cost carriers in their markets. Southwest is seen as the trail blazer within the low fare industry but is also viewed as a mature entrant. Conversely, AirAsia is one of a few in a relatively young market segment but has a growing demand and expanding market.
Regarding similarities, AirAsia has followed the Southwest business model. “AirAsia charges fares that are on average significantly lower than those offered by FSAs. This fare strategy, adopted from the original Southwest Airline business model, identifies the following key business strengths:” (Zhang, 2008). (Please refer to Appendix B for the list of business strengths).
This will allow AirAsia to take advantage of both worlds. First, they can create and have a major impact in it’s market. Secondly, this will allow AirAsia to use what Southwest and Ryanair used to make them successful.
Did Fernandes weigh the range of political, economic and operational uncertainties and risks when he...