Thai Air Asia Limited
Section 1: Company Background
In the past, domestic air routes were limited to only few players; such as Thai Airways,
Bangkok Airways, Air Andaman, and Phuket Air. Prime Minister Thaksin Shinawat
announced the opening of Thai air routes in 2002 and this has induced a lot of airlines to
enter the market, especially low cost airlines, which have already been widely and well
accepted in scores of countries. In Southeast Asia, at that time, Air Asia Malaysia was
considered as one of the most well known budget airlines and operating in many Asian
countries. After long-going negotiating process with local companies, on November 12,
2003, Air Asia Malaysia agreed to enter the partnership with Shin Corporation Public Ltd.,
in forming Thai Air Asia Limited. Using the catchy and effective slogan of “Now everyone
can fly”, Thai Air Asia has completely changed the new ground of airline industry. People
no longer look at flying as an expensive choice of transportation, rather one of the
economically justified ways of traveling to domestic and international destinations.
Air Asia has considerate advantages over other airlines in many ways. Firstly, its
experience of being in this industry for long time contributes to the already established
service standard, operational expertise, infrastructure readiness, as well as bargaining
power with suppliers. According to the survey done by www.lowcostairline.org, the
travelers ranked Air Asia as number 8 of their most favorite low cost airlines. Secondly,
Shin Corp, local partner, is very powerful business entity as it has highly diversified
portfolio and many strategic business units in media industry. This gives Air Asia the
competitive edge in terms of creating awareness of the brand and budget airline industry as
a whole. There was a big buzz when Air Asia offered incredibly low airfare in the first 3
months. Moreover, because both giants, Air Asia Malaysia and Shin Corp, have great
financial resource that it can make outsized investments in the short time span. This does
not benefit in the investment aspect solely, but it could allow Air Asia to engage in price
war if it is necessary. Lastly, in terms of destination offers, its aircraft
go to 11 destinations, domestic and international, and it has the most frequent flights
among all the budget airlines in Thailand. All of these put the company in the greatly
strong position in entering Thai budget airline market.
The budget airline industry immediately became striking after the open of Thai air route.
Moreover, there are other factors advocating this industry attractiveness. The growing
number of people traveling for school, working and leisure purposes makes this such a
lucrative market. This means Air Asia does not have to mainly steal the customers from
full service airlines; instead, it can create its own customer base by encouraging people to
fly than going on buses or trains. The key issue in competing in this market is not only
attractive advertising and offering acceptable services; smart pricing strategy is also very
vital in penetrating and building customer base.
1.1 4Ps Analysis
To give the general knowledge about the brand, the report will start off with 4Ps analysis:
Product
Travel and Transportation:
The product is the service of transporting and traveling from one place to another.
Food and Beverage:
Full service airlines, which are considered as indirect competitors, also offer food and
beverage to the customers. With the cost constraint, Air Asia needs to keep the cost as low
as possible, so it is able to offer the low airfare to the customers. Because of limited
service in terms of food, budget airlines are often referred as “no frill airlines”. However if
the customers wish to have meal delivered on the airplane they can order so and there will
be addition charge for it. Although the company does not offer some of the services that
the full service airlines do, it clearly states that it would not lower the level of service in
the areas of flight punctuality, safety, and hospitality.
Destination:
One of the product aspects is the route offered. Air Asia has the largest number of routes
compared to other budget airlines (Refer to Appendix 1), and this is one of company
competitive advantages.
Aircrafts:
All the flights fly with Boeing 737-300. The company owns total of 4 airplanes. Each of
them contains 148 seats, which all are economy classes (no business/ premium classes).
Flight Frequency:
Because of more destination and capacity of Thai Air Asia, the company is able to offer
more frequent flights to each destination than the competitors (Refer to Appendix 2)
Seat Reservation:
It is the open seats or other wordsnon-assigned seats. The customers are able to pick the
seats toward their preferences when they get on the airplane. This policy help reduce
companys cost.
Price
Low Airfare policy:
Compared to full service airlines, Air Asia has definitely a lot cheaper airfare. Similarly, if
Air Asia is compared to other budget airlines in Thailand; namely One-Two-Go, Nok Air,
and Tiger Air, the company is considered as cost leader in low cost airline industry. It
employs penetration-pricing strategy, which will be further elaborated in the later section
of the report.
Pricing Mechanism:
The company uses the “price only” method, which is applied by solely Air Asia and Tiger
Air. Demand and Supply determines the price of a particular flight (Refer to Appendix 3).
This can imply that, for the same flight, the early booking will give the lower price than
the close flying booking. The tracking price is illustrated in Appendix 4.
Quantity Discount:
It offers the discount, if the customers book for more than ten people.
Place
Methods of booking and paying for the ticket:
There are 4 methods
o On-line at www.airasia.com
o Nation wide call center
o AirAsias walk-in airport stations or sales offices
o AirAsias preferred travel agents
Because of various trade channels, customers can conveniently book and make payments
for the tickets.
Promotion
Initial promotion:
To create brand awareness and encourage the trial, Air Asia launched the promotion of
99Baht airfare to Chiang Mai, Phuket, Hat Yai, and Khon Kean for 20,000 seats.
New destination promotion:
It often gives the striking low airfare to the new destination to increase trial rate.
Section 2: Customer Identification
Since Thai Air Asia has been officially operated in February, there have been more than
700,000 people using the service. The company projected that this figure could reach one
million within this year. This fact has highly proved that there is high market potential for
low-cost airline in Thai market. The market is ready and a number of people potentially
patronizing this newborn service are sufficient to support industrys growth and
profitability. In Thai market, the target customers of low-fare airline are mainly divided
into three groups as the followings.
2.1 First-time flyer
The majorities of this group live in upcountry. Before the low-fare airline was introduced
and available in the market, this group of customers could not afford conventional airlines.
Their basic mean of transportation to other provinces is bus or train. In fact, airplane seems
to be out of their consideration set of transportation mode. However, with the offering of
low-cost airlines, travel by plane from one province to another is no longer impossible for
them due to its affordable price. The major characteristic of this target customer is group
travel. In other words, they often travel together as a group, comprising of approximately,
15-20 people, which can be family members or friends.
2.2 Budget flyer
The budget flyer generally travels by plane to upcountry due to their works
requirements, for example, professor whose job is teaching at several universities around
Thailand, and salespeople who are assigned sales territories outside Bangkok. Thus, the
low-fare airline will provide significant benefit to this group of customers by enabling
them to visit their families and friends more frequently yet, with substantial fewer amounts
of Baht spent.
2.3 Frequent flyer
The frequent flyer always chooses to travel by plane. Comparing to the other two groups
mentioned above, they account for the least proportion of total customer. Nonetheless, they
are the least price-sensitive segment. They seek for convenient value from airline service.
Consequently, their purchasing criteria depends on flight schedule whichever matches with
their agenda. These unique purchasing behavior and value of frequent flyer allow the
opportunity for low-cost airline to satisfy the needs of this target customer by its frequent
flight schedules and prompt purchasing process. The ability to purchase plane ticket via
internet or call center will enhance the convenient value offering. Customers no longer
have to wait for ticket delivery. Rather, holding solely identification card and confirmation
code is adequate to get them ready for boarding.
Section 3: Competitive Analysis
Competition of Air Asia can be aggregately defined into two levels, macro and micro. At
macro level, the competition includes those of conventional airlines who offer similar
destinations to Air Asia such as Thai Airway. As for micro level, the competition lies in the
low-cost airline industry, comprising of four key players: Thai Air Asia, Nok Air,
One-Two-Go by Orient Thai and Tiger Airways. Essentially, the other three budget airlines
pursue same market segment and offer similar values as Air Asia, and hence are considered
as Air Asias direct competitor. Thai Airway, on the other hand, offers wider range of
services with higher price. Therefore, despite similar destinations provided, Thai Airway
