1.0 Introduction
Purpose
The purpose of this analysis is to conduct an environmental analysis in the context of
AirAsias international business operations, describing the major variables involved and the
impact of the specific threats and opportunities confronted by AirAsia besides that, this
analysis also helps to identify AirAsias competitive strategy and analyse how the strategy
is implemented to gain competitive advantage.
Background on AirAsia
AirAsia was set up by Dato Tony Fernandes in 2001. In December 2001, Fernandes and
his partners set up Tune Air Sdn Bhd (Tune Air), an airline holding company then bought
over AirAsia. Now, AirAsia has become one of the most successful airlines in the
Southeast Asian region and the pioneer of low cost and no frills travel in Malaysia. The
airline now flies to over 40 destinations in Malaysia, Thailand, Indonesia, Macau, China,
Philippines, Cambodia, Vietnam and Myanmar. AirAsia has formed 2 successful joint
ventures in Thailand through Thai AirAsia, and Indonesia through AWAIR. Starting from 2
aircraft till now AirAsia owns 28 and has carried more than 223 millions guest through its
low fares travel.
2.0 External Environment Analysis
2.1 Political
Flying outside Malaysia is difficult. Bilateral agreement is one of the obstacles in the way
of truly pan-Asia budget carriers. Landing charges at so-called “gateway airports” and
navigation charges are often prohibitively expensive, and in key destinations like Bangkok,
Beijing, Hong Kong and Singapore there are no cheaper, secondary airports. The budget
airline industry in south-east Asia has been underdeveloped because the aviation market is
tightly regulated by bilateral air rights agreements.
Threat of terrorism, people is afraid to fly after the September 11 terrorist attacks incident.
2.2 Economic
In spite of stiff competition from Malaysian Airline (MAS), AirAsias low-cost carriers
offering cheap tickets and few in-flight services are gaining attraction in the region. In
theory, Asia has most of the ingredients for making a budget airline work which has a huge
and dense population base, the emergence of underused regional airports, a growing
propensity among some upwardly mobile people to travel, and relatively high Internet
usage. Rising incomes and economic growth are empowering more Asians to board
aircraft. AirAsia, Malaysias budget airline, has sold a 26 per cent stake to three foreign
investors for US$26m as it prepares to meet increased competition in south-east Asia. .
With the economy slowing down, more people will want to enjoy its cheap tickets.
2.3 Social
Passengers are reluctant to board a no-frills airline for a long-haul flight. The longer the
route, the less price-sensitive the passenger becomes. They dont want to be crammed into a
