Airline industry research – Term Paper

AsiaAir X; can the low cost model go long haul

The AsiaAir X is a success story in the air travel industry characterized by the use of radical measures to address critical challenges and the deviation from the norm in a sector. Since its inception, the idea appeared odd and nonconventional to the industry. At the core of AsiaAir X model is the concept of low cost. AsiaAir seeks to provide affordable air travel to ordinary people who previously found it hard or impossible to board planes. Low-cost flights are, however, a challenging service to offer due to the enormous maintenance cost involved in the business. AirAsia X model emphasizes on cheap air tickets. The model pays little attention to customer comfort; an aspect considered a luxury by the management of the company, it, however, emphasizes on efficiency among staff and cost rationalization. Unlike other airlines, AirAsia X believes that customers will be willing to travel at low cost in the absence of certain amenities offered in other airlines such as beverages and entertainment. It also sees the provision of such services as an opportunity to make more revenue if the customers were to request for them.  Initially, cost leadership was considered an impossible strategy in the airline industry. Airline companies competed on services offered to clients on board their aircraft. The low-cost models were developed to address the demand arising to middle-class income earners with moderate income which is rapidly growing. Unlike the traditional airlines which targeted wealthy individuals, the low-cost targets average income earners.

AirAsiaX has one of its greatest strengths as its brand name. Derived from its sister airline AirAsia, the company leverages on the legacy of its predecessor and utilizes most of its existing business ties to obtain a strategic advantage. A good example is in the case of purchase of new aircraft from Airbus were the company utilized and existing business link to negotiate a favorable price. The increasing demand for people traveling in the low-cost model is a strength to the enterprise. High demand means that the company’s revenue will continually increase and the business will be sustainable in the long run. AirAsia X marketing strategy is a great strength that allows it to announce its presence in new frontiers even before they have ventured into the market. The sponsorship programs on various sporting clubs in Europe and America is an indication of an effective promotion initiative that can be used to expand the business to new markets. A weakness in the company is the lack of online capacity to handle many customers leading to customer dissatisfaction.

Of the greatest threat to AirAsia X is the steep competition arising from companies entering the market segment notably from China and Japan. Competition would lead to the decline in revenue threatening the already slim margins obtained by the firm. The X model is particularly unique and therefore gives then a significant opportunity to venture into new markets such as in America and Africa.

Air travel is a dynamic industry that requires companies to make careful considerations before entering into a particular market. Engaging in long haul journeys, AirAsia X will benefit from increased revenue and a wider market. However, the company will have to incur more cost on maintenance and salaries for their employees. X can only succeed if the management sticks to the basic concepts in its model, that is maintaining a high efficient leave and minimize costs. The company must also increase its effort in seeking other revenue lines other than its common air ticks. X can derive Revenue from the sale of customized business tickets, and tailor the services offer to customers on board to suit their varied demands.