2.

0 AIRASIA EXTERNAL ENVIRONMENT

2.1 AIR ASIA PESTLE ANALYSIS
PESTLE Analysis of Air Asia analyses the brand on its business tactics. Air Asia PESTLE
Analysis examines the various external factors like political, economic, social, technological
(PEST) which impacts its business along with legal & environmental factors. The PESTLE
Analysis highlights the different extrinsic scenarios which impact the business of the brand.

POLITICAL FACTORS:

Various political factors affect the operations of Air Asia since the company operates across
different countries, on different continents. As a result, apart from general regulations of the
aviation sector, the company also needs to follow the local restrictions of the aviation boards that
operate in the region. The dynamic nature of the task leads to increased expenditure of research,
that needs to be undertaken to stay relevant in the segment as well as abide by the different
regulations. The landing charges across countries vary, which changes the operating cost of
airlines across the world. This is similar in a particular region but is subject to any changes in the
political situation. The political stability in certain regions and the diplomatic relations between
different countries, ease the operations of the airlines. Terrorism is a major influencer of airline
operations.

ECONOMIC FACTORS:
The economic condition of a particular region describes whether people can afford flights. With
the flight being considered a luxury mode of transport, a rise in income, with the flight prices
getting cheaper will lead to a high demand for flights. When discounts are applied during the
festive season, and people prefer taking airways to travel distances and save time. With Air Asia
offering cheap tickets and fewer in-flight services, the airlines have managed to produce a low-
cost carrier chain for the betterment of all its stakeholders. Another major factor that affects the
operation of the airlines, is the fact associated with the cost of fuel. With the trade war between
the US and the UAE countries, there have been major fluctuations in the price of the oil. These
changes in price are responsible for causing an increase in the operating cost of the airlines. 

SOCIAL FACTORS:

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The airlines' emphasis on ‘Safety first’ for all its customers and with this tagline, has created an
image of a safe airline for various consumers across the Asia Pacific region. With the rise in the
number of travelers to different countries, especially from the Asia Pacific region, the airlines
have managed to grow by over 20% year over year in comparison to the other airlines. Air Asia
has managed to understand the need of Asian customers and has provided them with a low-cost
option with good quality of service being provided. The airlines have managed to create value
for the amount their customers pay. To support its customer via quality service, Air Asia has
managed to include staff that speaks multiple languages, especially the Asian languages to serve
its consumers better. Air Asia, with its target to serve people better, has conversed with various
local leaders, before opening new routes and social enterprise initiatives.

TECHNOLOGICAL FACTORS:

Air Asia tries to stay updated with the recent technologies and digital media. The airlines have a
strong presence on social media such as Instagram and keep posting the recent updates and
discounts that are to be offered by the airlines over the various routes. The company promotes
online booking, hotel bookings, car hire, etc. AirAsia runs an online program GO holiday, where
guests can book holiday packages online in real-time. The company keeps changing its aircraft to
stay updated and relevant in the segment. With recent and most updated technologies, the
company has managed to improve fuel efficiency, while providing its consumers with a more
luxurious and easier ride. AirAsia has also been working on chargeable in-air Wi-Fi. This will
facilitate the consumers by providing them with free Wi-Fi for a fixed amount.

LEGAL FACTORS:

Since Air Asia operates across various regions, it needs to comply with the different regulations
that prevail across these regions. Though the market in the Asia Pacific region has become more
liberalized, the regulations for the aviation sector have not. Increase in competition, rise in the
cost of fuel, and increased inflation in some countries have all affected the operations of the
airlines, and yet to stay in business the airlines need to abide by the different regulations. Since
the airline operates across different regions, it also needs to take care of the different laws related
to employment in these regions are followed. 

ENVIRONMENTAL FACTORS:

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Air Asia has been working towards making a mark in the field of sustainability. The airlines
have tried to reduce the weight of their carriers, to facilitate lower use of fuel and increase
efficiency. A recent achievement was when the company managed to reduce its carbon emission
by 609 tons in 2017 as compared to emissions in 2016. The per passenger emission of CO2 has
reduced to 69.68 grams per person in 2017 as compared to 76.75 grams in 2016. The company
has recently started measuring its carbon emissions from electricity usage by various aspects of
its operations.

The airlines to save paper has undertaken the initiative of recycling its travel360 magazines and
utilizing the money generated from the process towards the Red Heart Fund. It has also
undertaken the initiative of recycling the cabin waste that is generated per flight, and this is
processed by certified vendors, and the proceeds are utilized by the Red Heart Fund for its social
causes. The airlines are trying to do its bit by helping to save the environment, this should be
considered an inspiration and should be taken up by all major aviation companies.

2.2 EXTERNAL FACTOR EVALUATION (EFE) MATRIX

The EFE matrix of Air Asia shows that ‘High demand so new destinations can be achieved’ are
the most important factors in Air Asia as the aviation company. In external factor of rating was
indicate the effectiveness of the current strategies of the company. The superior responses that
given a rating of 4 are ‘High demand so new destinations can be achieved’ and ‘New markets
can be targeted Ex: China and India. The rating 3 indicates those responses are ‘Intense rivalry
from competitors’, ‘Fuel price’, Increase in MRO cost’ and ‘Government airline’. The rating 2
indicates that ‘Create more business class cabins for higher revenue’ shows that in the rating 2.
The poor responses of Air Asia are rating 1 such as ‘New products (charter planes) at low cost’
and ‘Economic conditions.

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 2.3 COMPETITIVE PROFILE MATRIX (CPM)

No Air Asia Singapore Airlines Air China

.
Critical Success Weigh Rating Score Rating Score Rating Score
Factors t

1 Financial position 0.03 3 0.09 3 0.09 3 0.09

2 Advertising 0.15 4 0.6 2 0.3 2 0.3

3 Global expansion 0.05 1 0.05 1 0.05 2 0.1

4 Services 0.04 2 0.8 2 0.8 2 0.08

5 Customer service 0.13 1 0.13 1 0.13 2 0.26

6 Organization 0.04 2 0.08 2 0.08 2 0.08

structure
7 Employee 0.03 1 0.03 1 0.03 3 0.09
dedication
8 Management 0.06 2 0.12 2 0.12 4 0.24
experience
9 Customer loyalty 0.08 3 0.08 1 0.08 2 0.16

10 E-Commerce 0.02 2 0.04 1 0.02 3 0.06

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11 Price 0.27 3 0.81 3 0.81 4 1.08
competitiveness
12 4 0.8 3 0.6
Market shares 0.20 4 0.8

TOTAL 1.00 3.63 3.31 3.14

Based on this matrix, the Competitive Profile Matrix of Air Asia is shows Air Asia has the best
financial position. Malaysia has overall the best of price competitiveness from this observation.
CPM is a tool that compares the firm and its rivals and reveals their relative strengths and
weaknesses. As an example, an analysis that can be used identifies the key competitors of the
firm and compares them using the critical success factors of the industry.

Rating Indicator:
4 = Major strength
3 = Minor strength
2 = Minor weakness
1= Major weakness
Weighted score indicator:
Ranges from 0.00 (not important) to 1.00 (all important)
Based on the table above, it shows Singapore Airlines is lower than Air Asia but higher than Air
China Airlines with a total weightage score with 3.31 followed by Air China Airlines with a
lowest weightage score among three companies with a value of 3.14compared to Air Asia which
is 3.63. This shows that Air Asia receives the highest total score is relatively stronger than its
competitors, Air China, and Singapore Airlines.

For the Critical Success Factors (CSF) are the main areas that decides the success of a business
on the market. For an organization to thrive in the business, there will be ahigh competition at
the potential level of performance and success. All these factors influence wide range across
sectors or even strategic categories. Both internal and external review considerations should be
considered in the CSF.