Professional Documents
Culture Documents
0 INTRODUCTION
Based on this assignment, detailed information of award winning low cost carrier (LCC) in
Asia Pacific region- AirAsia are discussed. This assignment analyzes the current business
environment in local and international market, competitive advantage and SWOT analysis of
AirAsia.
AirAsias first and main base is the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur
International Airport, while its secondary hubs are located at Kota Kinabalu International
Airport, Senai International Airport, Penang International Airport, Kuching International
Airport and Langkawi International Airport. Being the home of AirAsia, the LCCT is the
budget terminal in KLIA, opened on 23 March 2006.
AirAsia is a prestigious low cost airline based in Malaysia and headquartered near Kuala
Lumpur, Malaysia. AirAsia primarily serves Southeast Asia and the surrounding regions. The
airline is no stranger to Malaysians as it is known to be Asias largest low fare, no frills, hassle
free airline that has been vastly expanding since 2001. The airline claims No Admin Fee
surcharge on its customers but has some fees on certain services which are free on other
airlines. AirAsia slogan is Now Everyone Can Fly that sparked a revolution in air travel
industry with more people opting AirAsia as their preferred choice of airline to their designated
travel destination. Tony Fernandes exposed a five-year plan to further enhance AirAsia's
presence in Asia at the end of 2006. AirAsia Company planned to connect all of its existing
destination over the region and expanding further into Indonesia, India, Vietnam and Southern
China. Rapid advancement of AirAsia has earned them a reputable image in the air travel
business whereby AirAsia now flies to over 120 domestic and international destinations
spanning 24 countries. AirAsia covers 108 routes and operates over 400 flights daily. AirAsia
has flown over 55 million guests across the region and continuously create more extensive
route networks. The AirAsia subsidiaries consists of Thai AirAsia, Indonesia AirAsia, AirAsia
India, AirAsia Japan, Philippines AirAsia. AirAsia associate companies includes AirAsia X,
Thai AirAsia X, Indonesia AirAsia X, Tune Hotel and Tune Money.
In August 2011, AirAsia agreed to form an alliance with Malaysia Airlines (MAS) by means
of a share swap but it was struck down by the Malaysian government in effect voiding the
agreement of both airlines. Besides that, the 2012 World Airline Awards at Farnborough
Airshow ranked AirAsia as the worlds best low-cost airline. It has also been named as worlds
best low cost carrier (LCC) for 8 years in a row including the latest award in 2016. AirAsia is
also the sponsor of Malaysias national football team, Singapore national football team and
Queens Park Rangers. AirAsia is also a former sponsor of Manchester United football
association and Asia Red Tour.
AirAsia Company signed an agreement with financial services firm Tune Money to launch its
own frequent-flyer program (BIG). BIG is the first global loyalty program where customer will
earn BIG Points with every transaction and enjoy perks as an AirAsia BIG Loyalty Member.
Besides, AirAsia Airline is also known as the first airline in Malaysia to offer WiFi services on
board which is only equipped in 4 aircraft.
AirAsia aims to create value through their vision and mission statement:
2.1 VISION
To be the largest low cost airline in Asia and serving the 3 billion people who are currently
under served with poor connectivity and high fares.
2.2 MISSION
-To be the best company to work for whereby employees are treated as part of a big family
-Create a globally recognized ASEAN brand
-To attain the lowest cost so that everyone can fly with AirAsia
-Maintain the highest quality product, embracing technology to reduce cost and enhance
service level.
3.0 ENTRY MODE TO INTERNATIONAL MARKET
Meanwhile, AirAsia X is a sister company of AirAsia, founded in 2007. It is the medium and
long-haul, low-cost affiliate carrier of the AirAsia Group and currently flies to destinations in
the Asia Pacific region, including Sapporo, Tokyo, Osaka, Seoul, Busan, Taipei, Xian, Beijing,
Hangzhou, Chengdu, Shanghai, New Delhi and Kathmandu), Australia (Sydney, Melbourne,
Perth, and Gold Coast), New Zealand (Auckland) and the Middle East (Jeddah).
The joint venture between Expedia and AirAsia enable to offer travellers world-
class travel products at an unparalleled value and in the same time the services
that provided is upgrading the customer level of satisfaction. This collaboration
allowed customers to enjoy every journey without worries. Therefore, AirAsia
and Expedia are launching a revolution in online travel for Asia.
Moreover, PHAR joined forces with AirAsia to build South East Asia's
largest publisher trading desk. PHAR combines the reach of traditional media
with the accuracy of data-based digital execution to target travellers on the
move. PHAR utilize programmatic advertising via their own DSP to achieve a
truly connected journey. AirAsia has been unveiled as the official airline of
Taylor Swifts RED Tour throughout South East Asia with collaboration
PHAR. To celebrate, AirAsia has painted one of its 180-seat Airbus A320
aircraft in a special Taylor Swift livery
(https://www.youtube.com/watch?v=Vb8JItjlX4w&feature=youtu.be).
4.0 How do the international market/ culture, management styles and business system
affect the company performance? Do they need to adjust/alter their product or services
to fit with the host country market needs? How does the company face the competition?
4.1 How do the international market/ culture, management styles and business system
affect the company performance?
AirAsia is set to expand and take over the international market. As we are aware, no-frills
operation was launched by AirAsia from Kuala Lumpurs main airport (KLIA) in the early
2002. The airline is poised to overtake Malaysia Airlines (MAS) as the biggest carrier (in terms
of weekly seats) at the countrys busiest airport just after 13 years. Last week, AirAsia launched
its latest route from the airport to Visakhapatnam, India, its 62nd destination in total, and
seventh in India.
In KLIA, AirAsia flights now account for just over one-third of all seat capacity. Not at all,
other airlines which are part of the AirAsia Group of airlines account for another 11.4% of seat
capacity at the airport, giving the group control over around 45% of all seats at KLIA.
In KLIA, AirAsias seat capacity at KLIA has increased almost fourfold from just under three
million departing seats per annum to almost 11.5 million between year 2005 and 2015. The
capacity has grown at a slower rate in recent years after annual growth of more than 20% up
until 2009. After that, AirAsia even experienced a tiny decline in 2014. Capacity growth is
currently planned at around 5% for this year.
The number of destinations served from KLIA is from 27 to 52 that is virtually doubled
between 2005 and 2009. At the end of this year, it will have increased of the rate of adding new
destinations by just a dozen more to 64 since then the rate of adding new destinations has
slowed. There will at least twice-daily flights of these 35 will be served. Besides that, AirAsia
plans to add two further new destinations this summer which is Manila in the Philippines and
Mal in the Maldives after the adding of Visakhapatnam. Relatively few routes have been
abandoned over the last decade, but these do include Bangkok Suvarnabhumi (replaced by
flights to Bangkok Don Mueang), Colombo (now operated by AirAsia X), Dhaka in
Bangladesh, Haikou in China, Kuantan and Manado in Indonesia and Thiruvananthapuram in
India.
Local carriers created when AirAsia is involved in joint ventures for Indonesia and
Thailand. The country that leading international markets is Indonesia and Thailand. Then, the
international markets followed by Singapore, India and China. There is the total of 14 countries
from KLIA to outside of Malaysia in the operation of international flights, the only new
addition in 2015 being the Maldives. Service to Mal is scheduled to begin in July.
From the schedule data for this August in 2015, AirAsia provides the service of 64
destinations non-stop from KLIA while Malaysia Airlines provides the service of 59
destinations. Both of the airlines serve 32 destinations. But the flight flown by AirAsia only
half of the total routes, and there is 74% of AirAsias seat and flights at KLIA from these 32
routes. For Malaysia Airlines the corresponding figures are 70% of flights and 61% of seats.
AirAsias next two new routes from KLIA, to Mal in the Maldives and Manila in the
Philippines, are both currently served by Malaysia Airlines.
For AirAsia, there is two important celebration of milestones in a journey that has seen
it firmly established as the largest low-cost airline brand across Asia and one of the most
recognized brands in the world. AirAsia has been On November 18, 2016 it will be 20 years
since the carrier first inaugurated operations in Malaysia on November 18, 2016 while it has
been 15 years since former Time Warner executive Tony Fernandes secured control of the
business and transformed it into a low-cost carrier later on December 2, 2016 that is just a
couple of weeks from November 18, 2016..
He says that, "It really was a little bit of stick your finger in the air and hope for the
best. But we were good marketing people from the music business we just went out there
and felt the market and said if you halve the fare, there's a huge enormous untapped market,"
The leading of Fernandes was a regional revolution. From India, Indonesia, Malaysia,
Philippines and Thailand, AirAsia Group is profiting from the evolution having grown from a
small Malaysian airline to a group that encompasses operations. Together they operate a
combined fleet of around 170 Airbus A320s firmly establishing AirAsia as largest airline
customer for the Airbus single aisle product line through joint ventures with local business
partners. So AirAsia is now ready to develop its penetration across North Asia since the
Southeast Asian markets are already matured.
The second chief executive officer that followed by Fernandes to AirAsia Expedia,
Kathleen Tan successfully turned around the loss-making joint venture within eight months,
delivering a net profit of S$20 million in her second year. She accelerated growth and establish
AirAsia Expedia as a major player in North Asia especially in key markets such as Japan,
Korea, Hong Kong and Taiwan.
Kathleen Tan takes a new role as president of North Asia and replicates her success at
AirAsia Expedia. In China, Hong Kong, Macau, Japan, Korea and Taiwan, she builds the
airlines market. Fernandes explain that Kathleen Tan lives and breathes North Asia. She was
the first to spot the massive potential of China when no budget airlines operated to it. She made
sure we were the first low-cost carrier to fly to China and built a strong network there.China
currently contributes nearly 40% of AirAsias revenue. Anyway, there is still a lot of
opportunities to develop further across North Asia. North Asia is an important long-haul market
and it will take on greater significance once AirAsia Japan launches.
4.1.2 Management Styles
Every leader has a unique style of leadership to manage and lead their subordinates in
the workplace.Superiors must decide on the future course of action as per the existing culture
and conditions at the workplace. The nature of employees and their mindsets also affect the
management style of working.
AirAsia is a huge company with many employees. Employees are front liners that are
essential for a companys growth. At AirAsia, the bond between subordinates and other
stakeholders is considered to be the strongest. Levels of hierarchy is nonexistent that means no
ranking discrimination happens. The staff and crew understand their roles and responsibilities
and understand the basic strategy of the company that is low cost maintenance resulting in high
productivity. AirAsias employees are self-motivated and take an initiative for the betterment
of the company. In management, motivation defined as a power to force someone to work in
certain way so that it able to reach certain desired goal. As what people always said, motivated
people always work harder as compare with those unmotivated people. AirAsia gives rewards
and incentives to its employees to maintain the level of motivation in them. The company
favors the employees by giving them incentives, in return AirAsia demands for staff loyalty
and credibility.
From AirAsia point of view, they believe that their entire staff act as contributor for the
company, therefore, they always been treated as a big family and equally. This is an example
of empowering employees. The company encourages its staff to have an open communication
in order form a better understanding between each other. AirAsia inculcates an environment of
zeal and enthusiasm and expects its employees to work in the same way. They organize various
different social events such as a monthly staff forum and create some fun programs to help
them release their working stress as well as to social and interact with each other. These kinds
of events contribute in maintaining healthy and friendly working environment. Secondly,
AirAsia believes in honest and transparent relations with customers, staff and even with its
partners. AirAsia encourages an environment that is free of racial, ethnic and cultural
discrimination. AirAsia strives hard to maintain the quality of its services and operation
nationally and internationally.
AirAsia employees are able to perform in multiple roles in flat organizational structure
because the airline has implemented a flexible work rules (Zhu, 2010). Flexibility motivates
employees to work harder because they are contented with all the flexible rules given and thus,
they can gain more experiences in that industry. Even though AirAsia always try to minimize
their expenses cost, but they are very determined on employee work ethic. Therefore,
AirAsiaprovides their employees the best training and ensure that they are happy in their
working place. (Foo, 2012) This can be called as redesigning jobs. As a result, AirAsia gets to
establish a numbers of quality and excellence employees because the employees are satisfied
with their jobs that are always fresh to them. This type of management style makes AirAsia
being more productive and efficient.
4.1.3 Business System
Since 2001, AirAsia has been expanding rapidly by being the largest low fare airlines
in which everyone can travel with affordable price and AirAsia has also awarded for the world
best low cost airline in year 2010 (Miller, P., 2010). Let's put it in this way with a simple slogan,
"Now Everyone Can Fly", AirAsia has successfully carried out and position themselves in
customer's mind as the airline that provides low-cost flying trip hence AirAsia managed to
capture large customer base.
'Go Holidays' offered by AirAsia at the low-cost flying trip, whereby they also offer
hostel, hotels, car rental and holiday packages at discounted rates. Booking or reservation of
airplane tickets can be done at www.airasia.com. Besides, AirAsia provide services such as
Low Cost Carrier Terminal (LCCT) and AirAsia's bus travel to KLIA at the lower cost.
According to The Star report under the business section, AirAsia is now announced that several
airports in Malaysia and regional countries will offered a self check-in service and for more
convenience, customers can also use web-based check-in service (The Star, 2010).
There are few types of Information System were in use in AirAsia, such as Computer
Reservation System (CRS), Customer Relationship Management (CRM), Enterprise Resource
Planning (ERP) System, and Advanced Planning and Scheduling (APS) system.
Computer Reservation System (CRS) is a computer system used in travel industry that
allowed storing, retrieving data and conducting transactions. This system used by AirAsia
allows users to access and check seating availability, flight schedules, airline fare, booking
reservations and generating tickets.With the adoption of IT system, AirAsia is able to run their
businessefficiently and effectively. With the introduction of CSR, customers no longer need to
queue up or go through agency to purchase their flight tickets. With that itself, online
reservation on AirAsia website for flight as well as hotel rooms can be done in a click of button
that saves time as well as enhance customer satisfaction.
Customer Relationship Management (CRM) is a set of applications that enables
companies to capture market insights in order to serve customers better. This systematic
application helps AirAsia to analyze customer databases in order to maintain and update
electronic customer profile. Moreover, CRM also helps to update online answers at AirAsia's
web page - frequently asked questions (FAQs) about their services, such as booking, online
payment and etc. CRM assists AirAsia in organizing customer communications if AirAsia
faces difficulties, such as struggles to maintain multiple mailing lists for different groups of
customers. Using CRM also helps AirAsia to develop their customer's relationships. CRM
systems provide reliable sources to deal with AirAsia's customers in sales, marketing, and
service to optimize revenue, customer satisfaction, and customer retention (Laudon and
Laudon, 2010). The benefit of using CRM is because this system provides a better service to
customers. For example, on the first page of AirAsia Website states member log in button
which proves that AirAsia always set customers as their first priority in every aspect. The
benefits of becoming AirAsia members are information provided to customers will always
one's step ahead from others (ie. promotional booking offers, news updates, and so on). All
customers' particular data are fully secured and will be guaranteed for personalization from
AirAsia.
Enterprise Resource Planning (ERP) System is the information systems to integrate the
data from different functional areas of a business, such areas as planning, manufacturing, order
entry, inventory management and many more (Oz, 2008). This system also helps in planning
and allow companies to operate more efficiency because it avoid duplication of information
and avoid rework (Oz, 2008). AirAsia uses ERP system to capture daily operation's
transactions, manages supply chain, and reduces daily operational costs as well as to increase
operational performance (Microsoft Press Pass, 2005).The major benefits of ERP are
improvement on the coordination of AirAsia's process into one streamlined process where all
information can be accessed across departments through a single enterprise wide information
network (Anthony, 2005). Additional benefit from implementing ERP systems are reduced
operating cost, such as lower the cost of production, marketing, inventory control, and help
desk support. Facilitating day-to-day management activities is also one of the benefits from
ERP systems. It encourages the establishment of backbone data warehouses (Anthony,
2005).The implementations of ERP systems allows employees to access real time information
and this helps with research, decision making, and managerial control (benefitsoferp, 2010).
Advanced Planning and Scheduling (APS) system is a manufacturing management
process system. APS system enables visibility across the whole supply chain since it uses
information from ERP for planning and scheduling operations and can be used to tracks costs
based on the activities in the production of manufactured goods. To improve AirAsia's strategic
and operational performance, classifies and clusters orders from customer, and checks
resources availability, AirAsia uses APS system to analyze the flexibility and intelligence
required. The supply chain management system helps AirAsia to have better connectivity
across the supply chain by ensuring each party like suppliers and customersto works together
in integration in terms of cross-functional scheduling and planning.
4.2 Do they need to adjust/alter their product or services to fit with the host country
market needs?
AirAsia do not need to adjust their services to fit with the host country market needs as
customers can get the same information through every channel of AirAsia. All the channels
worldwide share the same knowledge base. This may reduce the risk of wrong information and
decrease the operating cost.
AirAsia is one of the companies that provides consistent and fast customer service
across mobile channels, web and Facebook 24 hoursa day. AirAsia invested in new areas such
as mobile app and Facebook for customer service, over two million enquiries per month are
being managed. For example, customers enquire through AirAsia mobile app which gives users
an enhanced experience. AirAsia mobile app also generated 2 million downloads and achieved
as No1 downloaded apps in Apple Store at Malaysia, Indonesia and Thailand.
In addition, AirAsia needs to adjust their product to fit with the host country needs and
culture. For example, AirAsia adjusted the menu according to different flight routes. AirAsia
AK flight Malaysia offers traditional food like murukku, nasi dagang with chicken curry and
rice with beef in black sauce. Besides, Thai AirAsia FD flight offers traditional foods and
western foods which is hyderabadi biryant, spaghetti and baked French toast.
6.1 STRENGTH
Low cost leader in Asia
AirAsia Berhad is the first airline company that offers a low cost flight in the Asian market.
Regarding to the low cost principle, AirAsia Berhad plans to maximize sales and minimize
operating cost. Based on their slogan Now Everyone Can Fly, AirAsia provides low cost
flight for those budget passengers especially students, those family with lower income and low
income earners who wish to travel at a low cost pricing. Therefore, it increases the demand of
travelling. Besides that, AirAsia have a strong working relationship with Air bus which helps
them to purchase aircraft at a discounted rate and this air craft is fuel efficient compared to
Boeing 737 planes that many airlines company are currently using.
Management team has strong connections with the government and the airline industry
leaders.
This is because executive management member team of AirAsia are from different kinds of
industry professionals and ex-top government officials. For an example, Shin Corp in the past
which owned by the family of former Thai Prime minister-ThaksinShinawatra holds around
fifty percent of shares in the Thai AirAsia. Due to this reason, it has help to create and explore
a sizeable market in Thailand.
AirAsia management team has good strategy formulation and execution skills. The strategies
formulated at AirAsia are a clever blend of proven strategies used by other organizations.
Examples of strategies implemented are: Ryanairs operational strategy which is no frills and
landing in secondary airport. Southwests people strategy which is employee comes first.
Easyjets brand strategy which is linking with service providers like car rental and hotels etc.
They forged cooperation with other service providers such as hotels and hostels, car rental
firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) which 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 make bookings. It
contributed to their brand name. AirAsias in Indonesia (Indonesia AirAsia) and Thailand (Thai
AirAsia) have successfully become a regional brand beyond just Malaysia. AirAsiais endorsed
byManchaster United football team and AT&T Williams Formula One team to advertise and
improve the image to a greater extend.
Marketing Tools
AirAsiaruns promotions and advertisements very often to attract customers. AirAsia utilizes
marketers to promote through social media, newspaper, magazines which can influence choice
of purchase. Moreover, AirAsia is a well-established LCC operating out of South East Asia
and 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
6.2 WEAKNESS
Limited service resources
Due to their low cost business model, AirAsiaBerhad cannot provide various servicesrequired
by customers. It is limited wherebyAirAsiaBerhad does not include frill services such as
complimentary drinks, snacks, pillow and entertainment. Passengers may be charged an
additional fee for inflight services if they need extra services.
Customer service
AirAsia receives a lot of complaints from customers on flight delay problem which causes
customers to be unsatisfied and in the long run they will lose confidence towards
AirAsiaBerhad.
6.3 OPPORTUNITY
Promote Malaysian tourism
Recently, there are lots of foreign workers from neighbouring countries such as Indonesia,
Myanmar, Philippines, and Vietnam working in Malaysia. They are the potential customers for
AirAsiaBerhad because they opt for cheap and budget airlines.
Political connections
AirAsiaBerhadjoint venture with Shin Corp, where Shin Corp is owned by the family of Prime
Minister in Thailand. Shin Corp has the financial strength to support AirAsiaBerhad to grow
their organization at a global scale. This is the reason why AirAsiaBerhadexpanded quickly in
the airline market backed up with strong political connection.
6.4 THREATS
Rising fuel cost and labor costs
Hike in fuel price may cause AirAsiaBerhadto encounter problem about the fuel costing which
will have a major effect on earnings. Besides, it increases cost of production,
consequentlyAirAsia will either increase priceof the flight or reduce the fly route. Meanwhile,
AirAsias employees demand an increment in salary and the increase cost of the training and
staff welfare causesAirAsia expenses to increase.
Competitors
Currently,AirAsiaBerhad is the leader in the worlds low cost carrier in airline industry but it
is still growing. Many of the full service airlines are planning to create a low cost operation to
compete withAirAsiaBerhad by offering similar offers and attributes. For example, Singapore
Airlines has created a low cost carrier Tiger Airways.
7.0 BRAND POSITIONING
Positioning is the process of putting the image of a company or a brand into the mind of the
target customer. In order to position the brand strongly in consumers mind, organizations
needs to redefine and differentiate themselves from their competitors. Most of the airline
industry offers comfort seats for passengers, quality service but in AirAsia's case, on top of all
that it offers cheap flight fares. The success of the brand positioning depends on the
effectiveness of advertising in nailing the perceptions into the minds of prospects. CEO Tony
Fernandes turned the company around and quickly positioned AirAsia as the first low-cost
carrier in Asia by introducing cheap flight fares and economy class for the whole flights with
the tagline Now Everyone Can Fly. AirAsia initiated advertisements through social media
such as flights as low as RM1 and consequently introduced their popular AirAsia Zero Fare
Promotion. Since Malaysian Airlines was already the first in the airline category, AirAsia
cheekily associated themselves with its rival with this catchy advertisement in 2006.
At AirAsia, no one gets treated like a second-class citizen. For a few Ringgit, you'll get a
comfy leather seat and a fun and friendly crew who treats you the way you like to be treated.
It's so easy to book and you can even choose to sit anywhere you like! It's no wonder more than
20 million guests have embraced the AirAsia experience.
This advertisement alone simultaneously portrays AirAsias fun and friendly brand image and
positioned itself as a no frills, low-cost airline and with 20 million guests, it is the wanted airline
of choice. It also poked fun at Malaysia Airlines' first class seating and relatively pricier fares.
Brand salience talks about brand awareness. Customers associates AirAsia as the preferred
choice of travelling airline with affordability. With AirAsias slogan- Now Everyone Can Fly,
travelling is no longer a hindrance for people and it can be a reality by flying with AirAsia to
preferred choice of destination.
Brand performance is about the tangible and intangible brand associations of customers
towards a brand. AirAsia designs the service products which works on customers touch points.
All intangibles are diligently put to service. The airline synchronize the tangibles and
intangibles at different level to meet the customers requirements. Customers relate AirAsia as
a budget airline offering quality and reliable service at an affordable price. Brand imagery is
the intangible aspect as how the brand portrays itself. Through consistent advertisements and
promotional efforts, AirAsia markets itself as a low cost carrier offering the lowest fare and no
frills in comparison with other airlines.
Brand judgement is defined as evaluation about the brand. Customers judge AirAsia through
service and quality aspect whereby AirAsia is able to deliver satisfied quality service to
customers. Brand feelings of customers towards AirAsia is strong and favourable as AirAsia
portrays a fun, friendly, trustworthy airline and live up to their mission.
Brand resonance is relationship between customers and the brand. With the AirAsia BIG
programme, members can earn BIG POINT from every transaction and redeem it for free
flights with AirAsia. This strategy will forge an intense relationship between the company and
customers and develop long term loyalty towards the brand.
8.0 Conclusion
9.0 References
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