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Air Asia

Essay by   •  November 19, 2010  •  5,490 Words (22 Pages)  •  1,754 Views

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Thai Air Asia Limited

Section 1: Company Background

In the past, domestic air routes were limited to only few players; such as Thai Airways, Bangkok Airways, Air Andaman, and Phuket Air. Prime Minister Thaksin Shinawat announced the opening of Thai air routes in 2002 and this has induced a lot of airlines to enter the market, especially low cost airlines, which have already been widely and well accepted in scores of countries. In Southeast Asia, at that time, Air Asia Malaysia was considered as one of the most well known budget airlines and operating in many Asian countries. After long-going negotiating process with local companies, on November 12, 2003, Air Asia Malaysia agreed to enter the partnership with Shin Corporation Public Ltd., in forming Thai Air Asia Limited. Using the catchy and effective slogan of "Now everyone can fly", Thai Air Asia has completely changed the new ground of airline industry. People no longer look at flying as an expensive choice of transportation, rather one of the economically justified ways of traveling to domestic and international destinations.

Air Asia has considerate advantages over other airlines in many ways. Firstly, its experience of being in this industry for long time contributes to the already established service standard, operational expertise, infrastructure readiness, as well as bargaining power with suppliers. According to the survey done by www.lowcostairline.org, the travelers ranked Air Asia as number 8 of their most favorite low cost airlines. Secondly, Shin Corp, local partner, is very powerful business entity as it has highly diversified portfolio and many strategic business units in media industry. This gives Air Asia the competitive edge in terms of creating awareness of the brand and budget airline industry as a whole. There was a big buzz when Air Asia offered incredibly low airfare in the first 3 months. Moreover, because both giants, Air Asia Malaysia and Shin Corp, have great financial resource that it can make outsized investments in the short time span. This does not benefit in the investment aspect solely, but it could allow Air Asia to engage in price war if it is necessary. Lastly, in terms of destination offers, its aircraft

go to 11 destinations, domestic and international, and it has the most frequent flights among all the budget airlines in Thailand. All of these put the company in the greatly strong position in entering Thai budget airline market.

The budget airline industry immediately became striking after the open of Thai air route. Moreover, there are other factors advocating this industry attractiveness. The growing number of people traveling for school, working and leisure purposes makes this such a lucrative market. This means Air Asia does not have to mainly steal the customers from full service airlines; instead, it can create its own customer base by encouraging people to fly than going on buses or trains. The key issue in competing in this market is not only attractive advertising and offering acceptable services; smart pricing strategy is also very vital in penetrating and building customer base.

1.1 4Ps Analysis

To give the general knowledge about the brand, the report will start off with 4Ps analysis:

Product

* Travel and Transportation:

The product is the service of transporting and traveling from one place to another.

* Food and Beverage:

Full service airlines, which are considered as indirect competitors, also offer food and beverage to the customers. With the cost constraint, Air Asia needs to keep the cost as low as possible, so it is able to offer the low airfare to the customers. Because of limited service in terms of food, budget airlines are often referred as "no frill airlines". However if the customers wish to have meal delivered on the airplane they can order so and there will be addition charge for it. Although the company does not offer some of the services that the full service airlines do, it clearly states that it would not lower the level of service in the areas of flight punctuality, safety, and hospitality.

* Destination:

One of the product aspects is the route offered. Air Asia has the largest number of routes compared to other budget airlines (Refer to Appendix 1), and this is one of company competitive advantages.

* Aircrafts:

All the flights fly with Boeing 737-300. The company owns total of 4 airplanes. Each of them contains 148 seats, which all are economy classes (no business/ premium classes).

* Flight Frequency:

Because of more destination and capacity of Thai Air Asia, the company is able to offer more frequent flights to each destination than the competitors (Refer to Appendix 2)

* Seat Reservation:

It is the open seats or other words--non-assigned seats. The customers are able to pick the seats toward their preferences when they get on the airplane. This policy help reduce company's cost.

Price

* Low Airfare policy:

Compared to full service airlines, Air Asia has definitely a lot cheaper airfare. Similarly, if Air Asia is compared to other budget airlines in Thailand; namely One-Two-Go, Nok Air, and Tiger Air, the company is considered as cost leader in low cost airline industry. It employs penetration-pricing strategy, which will be further elaborated in the later section of the report.

* Pricing Mechanism:

The company uses the "price only" method, which is applied by solely Air Asia and Tiger Air. Demand and Supply determines the price of a particular flight (Refer to Appendix 3). This can imply that, for the same flight, the early booking will give the lower price than the close flying booking. The tracking price is illustrated in Appendix 4.

* Quantity Discount:

It offers the discount, if the customers book for more than ten people.

Place

* Methods of booking and paying for the ticket:

There are 4 methods

o On-line at www.airasia.com

o Nation wide call center

o AirAsia's walk-in airport stations or sales offices

o AirAsia's

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