Neri 1 Michael Neri Professor Denise Luethge Comparative International Management 11/19/2011 AirAsia Case

1.

How might demand for low-fare service differ in the Asia-Pacific region

from North America and Europe?

Demand differs between these two regions when you look at the purchasing factors for each. Axess Asia reveals that in Southeast Asia it is noted that low fares are often the deciding factors for budget-conscious travelers, which was primarily driven by the Asian financial crisis in 1997. Also, the Asia-Pacific region continues to have a low average income that would allow the anticipation of low fare demands to continue to increase. Another degree that differentiates between the Asia-Pacific region and the North America and Europe region is the recent removal by many national governments in Asia of the bilateral air services agreements. These agreements have yielded great demands in flight by boosting trade and tourism throughout the regions. However, in the North American and European regions, only recently have we seen a higher demand for servicing with a low-cost Carrier. Overall, American and European customers still look for many of the personal factors such as convenience, luxury, appearance, and comfort as reasons for justifying demand

Neri 2 levels. This change in preference can be closely linked to not being an overall perception by the region but merely a link to the recent economic hard times that they are currently fighting. As this period of a recession begins to cycle away, many experts are making the strong argument that this current demand for lowfare providers will greatly diminish.

2.

Compare AirAsias generic strategy (cost leadership, differentiation, focus)

with the strategies of other incumbent carriers and with Southwest and Ryanair. How is it similar to and different from the strategies of those carriers?

From a similarity standpoint, AirAsia, easyJet, Ryanair, and Southwest all share the operations concept of being a low-cost Carrier. Common elements of being an LCC include reduced in-flight service, point-to-point travel, high aircraft utilization, single fleets, and ticketless passenger reservation systems. AirAsia has most notably added to their differentiation through the exploration of joint ventures and innovative branding. Join ventures with Indonesia and Thailand allowed AirAsia to a potential 235 million passengers in Indonesia alone! This level of differentiation has been imperative to gaining market share and forecasting long-term success.

3.

How should AirAsia respond to the challenges posed by (a) new low-fare

carriers entering the Asian marketplace and (b) low-fare strategies pursued by

Neri 3 incumbent carriers? How would you characterize the competitive dynamics in this market?

In response to the challenges imposed by both of the cases, AirAsia needs to continue to execute at what they do best, optimizing as being a low-cost Carrier. Maximizing on the building relationships with their joint ventures, while maintaining the flexibility of resisting stagnancy will be counted as a huge opportunity for AirAsia to capitalize on in comparison to the other carriers. If AirAsia is able to stick to their fundamentals, and not risk too much on creating a new niche in troubling times, they will continue to hold their market share by creating a brand image, an image that stands for results, efficiency, and safety. What we have seen historically as well as on a regular basis, a companies greatest asset isnt necessarily the price they are providing but the image of their product or service that you are receiving as a customer. Brand image in the case of AirAsia may from this point on be their greatest asset in providing a solution to the challenges of new low-fare carrier as well as other low-fare strategies by other carriers.