ICA_Case 1_AirAsia HKU833

Q1: Briefly describe the trends in the global airline industry.

Research shows that the global airline industry is responsible for carrying more than 3 billion
passengers per year across the world and delivers almost one third of traded goods by value. It
is a huge sector employing more than 9 million workers. This industry can be seen with high
competition and high threat of new entrants as well. Hence, today the challenge in front of
Airlines is not just to respond to the current operating environment but also it is essential to
anticipate the future events and position of the company in the industry. For this, looking
towards past history and expected future path, we have identified 5 key trends which have been
and still are shaping the global airline industry. The figure below shows the 5 identified trends

are:

1. Customer Centricity

The newest trend in Global Airline Industry is to increase customer centricity and leverage the
pain points of the customer to rebuild experiences and utilise customer data to increase
personalisation. As in the case of Air Asia, they were successful in acting ahead of their
competitors to alleviate customer pain points. For eg: Low cost fares, No frills, Mobile
Booking, Online Seat Reservations, In-Flight meals on demand, long haul flights and rapid
route expansions to the majority of the domestic lines. They also provided extra incentives like
“on-time guarantee”, i.e, e-gift vouchers for passengers subjected to flight delay.

2. Upgradation and Adoption of New Technologies

Airline Industries are applying technologies to reduce fuel costs and evolve from classic Low-
cost carriers (LCCs) into integrated service providers. Pioneered new Customer-Centric and
efficient technologies like inflight connectivity and Artificial Intelligence in aviation to satisfy
the customer’s needs. New direct channels have grown, leading ticket Booking to go beyond
the traditional travel distributors into social media and other digital channels, creating broader

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partnerships. Joint Ventures of Airline companies and the adoption of low volume airports have
broadened domestic consumer’s destination selection.

3. Focus on Sustainable Business Operations

One of the major trends across the global airlines industry is to aim towards environmental
sustainability and generate a meaningful change through its operations. In addition, it has a
significant impact on partnerships as investors prefer companies with sustainable operations
and those making an effort to reduce carbon emissions. If we consider the case of Air Asia, the
company has addressed global concern about carbon emissions through its website on how it
is making its operations more environment friendly by introducing a fully ticketless system
that helps to reduce paper waste. Moreover, Air Asia was able to incorporate fuel efficiency
with the help of its pilots who reduced fuel consumption by nearly 20% and by upgrading to
new and more fuel-efficient Airbus A320-200 aircrafts.

4. Growth in Strategic Alliances & Partnerships

The Airline Industry today is experiencing extreme competition and there is always the threat
of new entrants for the companies. With this, strategic alliance and partnership helps the
companies in strengthening their position and expanding their network coverage in the
respective countries while minimizing risks and investments. Strategic Alliances and
partnership have airlines for improving their profitability and market share, benefiting from
schedule convenience, connectivity and flow improvement. It can be extensively seen with the
case of AirAsia where they went into Joint venture and started their services of Thai AirAsia,
went into new affiliation for introducing Indonesia AirAsia, and also explored possible
partnerships with other LCCs in Asia Pacific Region trying to reach out to more locations
across the world. This process has also helped route rationalization in case of any conflict
between two or more airlines who are operating on the same or similar route.

5. Emerging Markets

The airline industry and especially the LLCs must start targeting emerging business centres in
developing countries. Till now air traffic in developing countries were mostly confined to its
tier-1 cities but with developing countries becoming manufacturing hubs tier-2 cities with
business prospects must be kept an eye on as demand for LLCs along with aware customers
would be on the rise.

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