HARVARD BUSINESS SCHOOLS CASE STUDY 1
AIRASIA: FLYING LOW-COST WITH HIGH HOPES
A. Synopsis
Private entrepreneur Tony Fernandes took over the debt-ridden AirAsia airlines from
the Malaysian government in December 2001, just months after the 11 September
2001 terrorist attacks. One month later, he relaunched the airline as South-East
Asia’s first low-cost carrier (“LCC”). By adopting the no-frills concept used by leading
LCCs in the West, AirAsia became an instant success. By 2007, not only was the
airline ranked as the best LCC in Asia, but it had also managed to increase
profitability and expand its routes. Under the tagline “Now Everyone Can Fly”, AirAsia
has been able to maintain the lowest cost structure among its competitors. Being
innovative all the way down to the corporate bone, the LCC has also pioneered
several services for its operation, such as Internet check-in, Xpress Boarding and ontime guarantees. It has also kicked off an ambitious plan that many other low-cost,
short- haul carriers view as risky: extending services to include long-haul routes
through its sister airline, AirAsia X.
On 6 May 2008, AirAsia’s major local competitor, Malaysia Airlines (“MAS”) initiated
an unexpected price war by launching its “Everyday Low Fare” campaign, offering
free fares for domestic and short-haul flights on routes that were largely dominated
by AirAsia. Amid surging global oil prices and intensifying competition in the AsiaPacific region, how can AirAsia increase its competitiveness?
B. Learning Objective
1. To give an overview of the airline industry, especially in Asia.
2. To examine the business-level strategy adopted by AirAsia (ie, integrated costleadership/differentiation strategy).
3. To determine the suitability of the strategy adopted by AirAsia by analysing the five competitive forces of the industry.
4. To identify the risks associated with the integrated strategy.
5. To explore ways to sustain competitiveness through AirAsia’s strategy by studying the primary and secondary activities, and cost structure of an airline company.
C. Questions
1. Briefly describe the trends in the global airline industry.
2. Comment on the business-level strategy adopted by AirAsia. How has AirAsia achieved cost leadership or differentiation?
3. Referring to Porter’s model of the five forces of competition, is the above strategy suitable for AirAsia to achieve a better position in the industry? What are the risks of using the strategy?
4. Identify the ways AirAsia can sustain its competitiveness through the businesslevel strategy it has adopted.
