SWOT Analysis for AirAsia

Strengths, Weaknesses, Opportunities and Threats Analysis for AirAsia

1.0 Strengths

Ø Air Asia has a very strong management team with strong links with governments and airline industry leaders. This is partly contributed by the diverse background of the executive management teams which consists of industry experts and ex-top government officials. For example, Shin Corp (formerly owned by the family of former Thai Prime Minister - Thaksin Shinawatra) holds a 50% stake in Thai AirAsia. This has helped AirAsia to open up and capture a sizeable market in Thailand. With their strong working relationship with Airbus, they managed to get big discount for aircraft purchase which is also more fuel efficient compared to Boeing 737 planes which is being used by many other airlines

Ø The management team is also very good in strategy formulation and execution. The strategy that they have formulated at the beginnings was a clever blend of proven strategies by other low cost airlines is US and Europe. They are Ryanair’s operational strategy (no frills, landing in secondary airport), Southwest’s people strategy (employee comes first) and Easyjet’s branding strategy (linking with other service providers like hotels, car rental).

Ø AirAsia’s brand name is well established in Asia Pacific. Besides the normal print media advertising & promotions, AirAsia’s top management also capitalised on promotions through news by being very “media friendly” and freely sharing the latest information on Air Asia as well as the airline industry. Their partnership with other service providers such as hotels and hostels, car rental firms, hospitals (medical tourism), Citibank (AirAsia Citibank card) has created a very unique image among travellers. Alliance with Galileo GDS (Global Distribution System) that enables travel agents from around the world to check flight details and make bookings have also contributed to their string brand name. Air Asia’s local presence in few countries such as Indonesia (Indonesia AirAsia) and Thailand (Thai AirAsia) have successfully “elevated” the brand to become a regional brand beyond just Malaysia. The links with Manchaster United (one of the world’s most famous football teams) and AT&T Williams Formula One team have further boosted their image to a greater extend beyond just the this region

Ø AirAsia is the low cost leader in Asia. With the help of AirAsia Academy, AirAsia has successfully created a “low-cost airline mentality” among their workforce. The workforce is very flexible and high committed and very critical in making AirAsia the lowest cost airline in Asia.

Ø The excellent utilization of IT have directly contributed to their promotional activities (email alerts and desktop widget which was jointly developed with Microsoft for new promotions), brand building exercise (with over 3 million hits per month and on the most widely surfed booking engines in the world) as well keep the cost low by enabling direct purchase of tickets by consumer thus saving on airline agent fees

2.0 Weaknesses

Ø Air Asia does not have its own maintenance, repair and overhaul (MRO) facility. It may be a good strategy when they first started with only Malaysia as the hub and few planes to maintain. But now, with few hubs (Malaysia, Thailand and Indonesia) and over 100 planes currently owned and about another 100 planes to be received in the next few years, AirAsia have to ensure proper and continuous maintenance of the planes which will also help to keep the overall costs low. It is a competitive disadvantage not to have its own MRO facility

Ø AirAsia receives a lot complaints from customers on their service. Examples of complaints are around flight delays, being charged for a lot of things and not able to change flight or get a refund if customers could not make it. Good customer service and management is critical especially when competition is getting intense.

3.0 Opportunities

Ø There are 2 major events that are taking place now or going to take place in less than 6 months from now. First, is the ever increasing oil price. Second, is the “ASEAN Open Skies” agreement that has been reached.

Ø The increasing oil price at the first glance may appear like a threat for AirAsia. But being a low cost leader, AirAsia an upper hand because its cost will be still the lowest among all the regional airlines. Thus, AirAsia has a great opportunity to capture some of the existing customers of full service and other low cost airline’s customers. However, there will be also some reduction in overall travel especially by casual or budget travellers.

Ø The “ASEAN Open Skies” allows unlimited flights among ASEAN’s regional air carriers beginning December 2008. This will definitely increase the competition among the regional airlines. However, with the “first mover” advantage as well as its strengths in management, strategy formulation, strategy execution, strong brand and “low-cost” culture among its workforce, this agreement can be seen as more of an opportunity.

Ø There is also some opportunity to partner with other low cost airlines as Virgin to tap into their existing strengths or competitive advantages such as brand name, landing rights and landing slots (time to land).

Ø The population of Asian middle class will be reaching almost 700 million by 2010. This creates a larger market and a huge opportunity for all low cost airlines in this region including AirAsia.

4.0 Threats

Ø Certain rates like airport departure, security charges and landing charges are beyond the control of airline operators and this is a threat to all airlines especially low cost airlines which tries to keep their cost as low as possible. For example, Changi airport in Singapore charges SGD21 for every person who departs from Singapore.

Ø AirAsia’s profit margin is about 30% and this has already attracted many competitors. Most of the full service airlines have or planning to create a low cost subsidiary to compete directly with AirAsia. For example, Singapore Airlines has created a low cost carrier Tiger Airways.

Ø Users’ perception that budget airlines may compromise safety to keep costs low.