Past Year Question Oct 2009 Part D

QUESTION 1

Identify five (5) of competitive advantages used by AirAsia.

(5 marks)

• AirAsia launching new routes from its hub in
• Kuala Lumpur International Airport at breakneck speed.
• Air Asia undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $0.27).
• AirAsia operates scheduled domestic and international flights and is Asia's largest low fare,no frills airline.
• AirAsia pioneered low cost travelling in Asia which is then followed by Tiger
• Airways, Jetstar Asia, Nok Air, Lion Air and Cebu Pacific.
• AirAsia also the first airline in the region to implement fully ticketless travel and unassigned seats.

QUESTION 2

Which of the Porter's generic strategies were applied by AirAsia in the case study and

explain with examples.

(6 marks)

 Differentation

The products or services have particular difference. Certain or only few people purchase the product instead thinking of the price.

example:

Instead of giving low cost travelling, AirAsia is the first airline in theregion to implement fully ticketless travel and unassigned seats. AirAsia also operates with the world's lowest unit cost of US$0.023/ASK(available seat per kilometer) and a passenger break-even load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day.

QUESTION 3

Based on Porter's Five Force Model, analyze Air Asia’s buyer power and supplier power.

(9 marks)

Buyer power

 AirAsia assessed by analyzing the ability of buyers to directly impact the price they are willing to pay for an item.

example: AirAsia giving low cost travelling to their customers and also operates with the world's lowest unit cost of US$0.023(ASK) . Usually airline industry has high buyer power because of customer have many choices.

Supplier power

 AirAsia assessed by the suppliers' ability to directly impact the price they are charging for suppliers.

Example: AirAsia is currently the main customer of the Airbus A320. The company has place an order of 175 units of the same plane to service its route. AirAsia also enhance its route network by connecting all the existing cities in the region and expending further.

Usually airline industry has high supplier power has as there are limited plane and engine manufacturers to choose from.