AHMAD HARIRI BIN AZHARI (2018285058)

CASE STUDY 2: AirAsia Innovative Solutions

AirAsia is the leading low-cost carrier in Asia with over 165 routes covering
destinations in Asia, Australia, and Europe. Since its inception 10 years ago, the airline has
flown over 140 million guests and grown its fleet from just two aircraft to 108.
Complementing this is AirAsia X, the airline’s low-fare long-haul affiliated carrier that
currently flies to destinations in China, Europe, Australia, Taiwan, Iran, Korea, Japan and
New Zealand. AirAsia was named the World’s Best Low Cost Airline in the annual World
Airline Survey by Skytrax for five consecutive years since 2009.
Although AirAsia X has revolutionized air travel in many ways, the airline is not about
to rest on its laurels. Being in the competitive air travel industry, AirAsia X is always on the
lookout for innovative trends to ensure customer satisfaction and maintain its global
leadership position in low-cost aviation.
In line with this, AirAsia X joined forces with Optiontown, the pioneer in dynamic
travel options, to launch the Upgrade Travel Option (UTo) service in 2011. The UTo provides
AirAsia X’s guests the opportunity to upgrade to AirAsia X’s Premium Flatbed seats. Options
are dynamically priced and limited by flight to ensure a reasonable probability of successful
upgrades. In 2012, AirAsia X again collaborated with Optiontown to introduce the Empty
Seat Option (ESo), which provides its guests travelling in Economy the option of getting all
three seats in a row for a nominal fee. These innovations are meant to boost customer
satisfaction and enhance their flying experience.
With the UTo, guests are able to enjoy continuous low fares as they have the option
to purchase only what they require. Underlining this is the feedback from passengers which
has been resoundingly positive as this service provides a clear comfort value for
passengers. On top of that, the UTo has helped to significantly increase AirAsia X’s premium
class load factor by over 22% and upgrade yield by over 60%. As for the ESo, it was
expected to further increase the airline’s ancillary revenue stream by up to US$1 million in
2012.

Source: Farah Waheeda, Jalaludin et. al. (2014). Information Systems: An Introduction.
Oxford Fajar Sdn Bhd, Selangor. Pg:40.
QUESTION 1

State AirAsia Strategic implementation from Michael Porter’s Generic Strategies. How
AirAsia implement the strategic. (10 marks)

Michael Porter’s Generic Strategies when entering a new market is three which is
broad cost leadership, broad differentiation, and focus strategy. Air Asia X as a company
that represent low cost and long-haul flight for their customer implement the strategy to
make sure that they have the competitive advantage among their competitors. Air Asia X
have the competitive advantage by introducing the Upgrade Travel Option (UTO) and Empty
Seat Option (ESO) with the join forces of Uptiontown which making them step ahead from
other company.

Air Asia X implement the focus strategy, which is provide a low-cost flight in the
market meaning that they focus on cost leadership. By doing this, this company can make
sure that they reach a large market segment but the difference that Air Asia offer which
make them better from other competitor is that they utilize the aircraft with single class cabin
but with premium and economy class seating. For example, the customer can choose to fly
with the premium or economy class and also with the Empty Seat Option (ESO) the
customer can fly on economy class with three seats in a row for a low cost which clearly will
increase the customer comfort experience when they fly with Air Asia X to their destination.
Good thing about this Empty Seat Option (ESO) is that the target market segment is wide
because of the low cost.

For the differentiation, Air Asia X implement it with the premium class and also
introduce the Upgrade Travel Option (UTO) which is upgrade to premium flatbed and enjoy
the luxurious comforts and privileges for a fraction of the regular economy class price up to
75%. The main reason for this focus is to get a profit from the niche market which is high
cost. To make sure that they can attract customer to choose the premium class, they use the
Upgrade Travel Option (UTO) to take the customer from economy class by offering a
premium class services and priority that they provide for the premium class but with more
affordable price if they book through the Optiontown. This also help increase the premium
class load factor.
QUESTION 2

By implementing competitive strategy, discuss the advantages of the strategy from this case
study. (10 marks)
There are many advantages that a company from the case study can get through
implementing the competitive strategy. For Air Asia X, the company can enhance their value
among the customers. This because of the focus strategy they can fulfill the customers
need. For example, Air Asia X succeed to target their wide market segment which consist of
the low-cost focus with Empty Seat Option (ESO) for economy class and also the niche
market focus by providing the premium class with the Upgrade Travel Option (UTO).

The next advantage of the competitive strategy from the case study is Air Asia X do
not have to worry about the threat of substitutes. This because they are the first one to offer
a new competitive advantage such as Upgrade Travel Option (UTO) and Empty Seat Option
(ESO). The customer is going to choose Air Asia X and is not going to looking for other
options because other competitors do not have the advantage that Air Asia X offer.
However, it is temporary because competitors will duplicating the strategy and Air Asia X
have to create a new advantage.

Furthermore, the advantages are sustainable competitive advantage. From the

competitive strategy, Air Asia X can create a sustainable competitive advantage because it
is not commonplace or easily obtained and inimitable which is it cannot be easily imitated.
From the case study, Air Asia X brings in Optiontown as their executer for the Upgrade
Travel Option (UTO) which will be hard for other competitors to find the same apps to be
their line for them to copy.

Lastly, the advantages are increase in profit. This is because by creating the new
competitive advantage you will become the first. The customer has no other choices to look
for hence they will go to their only options. For example, Air Asia X get the increase in profit
for the premium class by 22% because of the Upgrade Travel Option (UTO) and also from
the case study the Air Asia X expected that they expected increase of $1 million profit for
that year because of the Empty Seat Option (ESO). This shows that a good competitive
strategy can lead to many advantages.