Strengths, Weaknesses, Opportunities and Threats Analysis for AirAsia

1.0 Strengths

Ø Air Asia has a very strong management team with strong links with governments and airline industry leaders.
This is partly contributed by the diverse background of the executive management teams which consists of
industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of
former Thai Prime Minister - Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. This has helped
AirAsia to open up and capture a sizeable market in Thailand. With their strong working relationship with
Airbus, they managed to get big discount for aircraft purchase which is also more fuel efficient compared to
Boeing 737 planes which is being used by many other airlines

Ø The management team is also very good in strategy formulation and execution. The strategy that they have
formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and
Europe. They are Ryanair’s operational strategy (no frills, landing in secondary airport), Southwest’s people
strategy (employee comes first) and Easyjet’s branding strategy (linking with other service providers like
hotels, car rental).

Ø AirAsia’s brand name is well established in Asia Pacific. Besides the normal print media advertising &
promotions, AirAsia’s top management also capitalised on promotions through news by being very “media
friendly” and freely sharing the latest information on Air Asia as well as the airline industry. Their
partnership with other service providers such as hotels and hostels, car rental firms, hospitals (medical
tourism), Citibank (AirAsia Citibank card) 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 have also contributed to their string brand name. Air Asia’s local presence in few
countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) have successfully “elevated”
the brand to become a regional brand beyond just Malaysia. The links with Manchaster United (one of the
world’s most famous football teams) and AT&T Williams Formula One team have further boosted their
image to a greater extend beyond just the this region

Ø AirAsia is the low cost leader in Asia. With the help of AirAsia Academy, AirAsia has successfully created a
“low-cost airline mentality” among their workforce. The workforce is very flexible and high committed
and very critical in making AirAsia the lowest cost airline in Asia.

Ø The excellent utilization of IT have directly contributed to their promotional activities (email alerts and

2.0 Weaknesses

Ø Air Asia does not have its own maintenance, repair and overhaul (MRO) facility. It may be a good strategy
when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hubs
 (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be
received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes
which will also help to keep the overall costs low. It is a competitive disadvantage not to have its own MRO
facility

Ø AirAsia receives a lot complaints from customers on their service. Examples of complaints are around flight
delays, being charged for a lot of things and not able to change flight or get a refund if customers could not
make it. Good customer service and management is critical especially when competition is getting intense.

3.0 Opportunities

Ø There are 2 major events that are taking place now or going to take place in less than 6 months from now. First,
is the ever increasing oil price. Second, is the “ASEAN Open Skies” agreement that has been reached.

Ø The increasing oil price at the first glance may appear like a threat for AirAsia. But being a low cost leader,
AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia
has a great opportunity to capture some of the existing customers of full service and other low cost airline’s
customers. However, there will be also some reduction in overall travel especially by casual or budget
travellers.

Ø The “ASEAN Open Skies” allows unlimited flights among ASEAN’s regional air carriers beginning December
2008. This will definitely increase the competition among the regional airlines. However, with the “first
mover” advantage as well as its strengths in management, strategy formulation, strategy execution, strong
brand and “low-cost” culture among its workforce, this agreement can be seen as more of an opportunity.

Ø There is also some opportunity to partner with other low cost airlines as Virgin to tap into their existing
strengths or competitive advantages such as brand name, landing rights and landing slots (time to land).

Ø The population of Asian middle class will be reaching almost 700 million by 2010. This creates a larger
market and a huge opportunity for all low cost airlines in this region including AirAsia.

4.0 Threats

Ø Certain rates like airport departure, security charges and landing charges are beyond the control of
airline operators and this is a threat to all airlines especially low cost airlines which tries to keep their cost
as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs
from Singapore.

Ø AirAsia’s profit margin is about 30% and this has already attracted many competitors. Most of the full service
airlines have or planning to create a low cost subsidiary to compete directly with AirAsia. For example,
Singapore Airlines has created a low cost carrier Tiger Airways.

Ø Users’ perception that budget airlines may compromise safety to keep costs low.
Fast 50 2008: Air Asia
BY: JEFF CHUFebruary 19, 2008

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AirAsia | courtesy of AirAsia

What can you buy with a quarter? Maybe a few drops of gas or a Jolly Rancher -- unless
you're a former music exec named Tony Fernandes. Seven years ago, Fernandes paid 25
cents for a near-defunct carrier with two creaky planes and $12 million in debt. Today,
AirAsia is one of the world's fastest-growing, most profitable carriers, making its name --
and money -- by defying industry convention and democratizing air travel.
AirAsia is innovative down to its corporate bones. Most passengers think of it as one
carrier, but it's actually a co-branded collection of several, a unique structure Fernandes
devised to allow AirAsia to set up hubs in three countries (Malaysia, Thailand, and
Indonesia). It built its brand in part by being surprisingly cheeky; when AirAsia began
flying from Singapore to Bangkok in 2004, Fernandes ran full-page newspaper ads
taunting Singapore Airlines' famed Singapore Girl flight attendants: "There's a new girl
in town: twice the fun, half the price."
But mostly it's been known for its frugality. AirAsia's operating costs are the lowest of
any airline in the world, and so are its fares. One-way specials for as little as $3 have
opened the skies to new travelers. Says Yap Choo Ying, who runs a market stall in
eastern Malaysia and now regularly jets to Kuala Lumpur to see her grandkids: "It's like
our bus."
Now that bus is going farther than ever. In November, AirAsia did what no low-cost,
short-haul carrier has dared to do -- not Ryanair, not Southwest, not easyJet: it went
long-haul, adding flights to Australia. Industry analysts have repeatedly questioned the
viability of that venture, but AirAsia says that business will break even before the end of
'08. This year, it will also expand in China and India, two markets experiencing booming
growth in air travel -- and massive numbers of people who have yet to take to the skies.