The Ascendance of Airasia: Building a Successful Budget Airline in Asia

1. What is the macro and industry environment in the Southeast Asian region for the entrance of new budget airlines? What opportunities and challenges are associated with the environment?

In recent years, as additional carriers enter the market, competition for the Southeast Asian budget traveler has grown considerably. These carriers are drawn to the market by the large number of would-be travelers. The easing of government regulations have made it easier for these companies to operate. Fuel prices are a major concern for these companies. To combat this challenge, AirAsia and other airlines are establishing alliances to share the additional cost of operating their airlines.

2. How might demand for low-fare service differ in the Asia-Pacific region from North America and Europe?

Low income levels in many Asian countries are the driving force for low-fare airlines in Asia. Also, the accessibility of alternative modes of transportation coupled with the increased awareness of the United States and European tendencies giving preference to low-fare providers are also contributing factors in the creation of low-fare services.

High speed rail is the preferred method of transportation in Asia and is in direct competition with the airlines. Airfare in Europe and the United States does not have this type of competition. Also, the low-fare airlines in Asia cater to a much smaller market than do the European and the United States, for this reason, it is unlikely that low-fare airlines in Asia will directly compete with more expensive and larger providers.

3. Compare AirAsia’s generic strategy (cost leadership, differentiation, focus) with the strategies of other incumbent carriers and with South west and Ryanair. How is it similar to and different from the strategies of those carriers?

AirAsia is attempting to model themselves with Southwest’s people-oriented strategies and Ryanair’s efficient operational strategies. The emphasis of Southwest and Ryanair’s...