AirAsia: Asia's Largest Low Cost Airline's Foray into India
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Case Code: BSTR432 Case Length: 14 Pages Period: 2012-2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.400 Organization: AirAsia Berhad Industry: Aviation Countries: India; Malaysia; Asia Themes: Diversification, Geographic Diversification, Entry Strategy, Joint Ventures |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
The history of AirAsia dated back to 1993 when it was founded by a government-owned conglomerate, Hicom, in Malaysia. It started operations on November 18, 1996. But the airline soon found itself steeped in debt and struggling to stay afloat. On December 2, 2001, Tune Air Sdn Bhd acquired the airline from Hicom for a token sum of RM 1 (Then equivalent to USD 0.26). The acquired airline was renamed as AirAsia Berhad and was listed on the Kuala Lampur Stock Exchange. At the time of acquisition, the airline had a debt of USD 11 million. However, under the new leadership, it became profitable within two years. In 2003, it launched its first international flight to Bangkok. In November 2004, it was listed on the Main Market of Bursa Malaysia Securities Berhad.
The airline adopted the Joint Venture (JV) model to expand its base in the South East Asian Region. It entered into JV deals in Indonesia, Japan, the Philippines, and Thailand. In the first few years of its operation, it became a pioneer in low cost aviation with its belief “Now Everyone Can Fly” (Refer to Exhibit I). The airline's low-cost business model required its operations to be lean and efficient. To achieve that the airline adopted several key operational strategies including a focus on safety, high aircraft utilization, low fare-no frills service, streamlined operations, lean distribution system, and point-to-point network.
In 2007, it launched AirAsia X, focused on the low-cost, long-haul segment and provided high-frequency and point-to-point networks to the long-haul business. Other affiliates of the AirAsia Group included Thai AirAsia, Indonesia AirAsia, Philippines AirAsia, and AirAsia Japan. By 2010, the airline covered 65 destinations in 18 countries. In January 2002, it had covered just six routes in Malaysia with two planes. It operated from ten hubs in three countries -- Kuala Lumpur, Kuching, Penang, and Kota Kinabalu in Malaysia; Bangkok and Phuket in Thailand; and Jakarta, Bali, Bandung, and Surabaya in Indonesia. It had a market capitalization of RM7.06 billion....
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