Air Asia: Whadis

This chapter explains the two major airline business model used today. The theories of air law and regulation leading to development of low cost airlines in North America, Europe and Asia are also discussed. The last section of the chapter consists of airlines industry development in Malaysia. Although this chapter is mainly descriptive, the material presented within it is necessary, to provide a background to the evolution of both low cost airlines and particularly their business model. The material in this chapter guides the flow of thought into Chapter Three.

Airline Business Model

Shafer, Smith and Linder (2005) observed that while it has become fashionable to discuss business models, there is no widely adopted definition of the term. Twelve definitions were said to have been nominated in established publication from 1998 to2002, coming from a wide variety of perspectives including e- business, strategy, technology, and information systems. A business model is a representation of a firm's underlying core logic and strategic choices for creating and capturing value within a value network. Osterwalder (2004) proposed the definition of a business model as a conceptual tool that contained a set of elements and their relationships and allowed expressing the business logic of a specific firm. Business model is not a strategy. Shafer et al (2005) supported Osterwalder's view in stating that business models are seen as a powerful way for management to analyze and communicate their strategic choices but it cannot be called a strategy. Rather, it reflected the strategic choices that have been made, mainly in regard to how the company created and captured value. Finklea and Hegel (2005) in their study highlighted that there are two major business models adopted by airlines across the world, whether it is a full service airline or low-cost airline. The majority of established, international airlines known as flag carriers operate according to a very specific business...