Airasia Pest Analysis

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Category: Business and Industry

Date Submitted: 09/25/2012 11:08 PM

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Background of the Company:

AirAsia BHD was initially established in 1993 in Malaysia by the government then sold to Tony Fernandes in 2001. It is an international low cost airline and the largest low-fare, no-frills airline and a pathfinder of low-cost travel in Asia. AirAsia group operates scheduled domestic and international flights to over 400 destinations spanning 25 countries (Wikipedia 2011).

2. Political Review:

The political situation is one of the most important elements of the environment that impacts business operations; in fact each and every company is influenced by regulatory and governmental agencies and must adjust their activities according to the rules or regulations set in the areas they operate in (Pride et al. 2007).

• 2.1 AirPort Tax increase:

Starting from the September the 15th 2011, the Malaysian airport and security taxes will be increased for the international travelers; this new government regulation might have high impacts on Air Asia BHD’s operations (The Start Online 2011).

The last increase in airport taxes had happened in 2002, the rates were raised from RM40 to RM 45 for international passengers and from RM5 to RM 6 for domestic flights. Since then, the government didn’t change much in the rate of departure, security and landing charges of Malaysian airports; however Malaysia Airports Holding BHD (MAHB) needs to increase taxes mainly due to the Malaysian government removing its subsidies for airline operations, this tax raise would also offset MAHB’s operation costs. The future increase will raise the rates from RM 51 to RM 65 for all airport operators and from RM 25 to RM 32 for international passengers of low cost carriers (LCCs) Air port tax for domestic flights, however will remain at RM 6 for LCCs’ users (The Star online. 2011).

While the 8.57 million passengers used low cost carriers from January to June 2011 (Siew Li 2011), this increase in landing, parking and security taxes may have an impact on the number...