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AirAsia X Can the Low Cost Model Go Long Haul?

AirAsiaX: Can the Low Cost Model Go Long Haul?

AirAsiaX: Can the Low Cost Model Go Long Haul?

Inventionshave changed the way individuals live and move around the worldtoday. The barriers of transportation that have been in place for anextended period are now being overcome by the new and cheap modes oftransport including the air travel (Chin, 2014). Airline competitionhas continued to intensify, and companies such as AirAsia are forcedto come up with new ways of winning clients. This paper will focus ondiscussing different aspects of AirAsia X.

TheGeneral Environment in the Global Airline Industry

Theterm general environment refers to the political, legal, social, andeconomic environment that can affect the functioning of business. Thelegal environment in the global airline industry is complicated, andthe procedures of acquiring new certifications to start a new airlineare even more complex (Mutum et al., 2013). For example, in the casestudy, Fernandes had strategized for several months with theintention of establishing a low cost, long haul flights but he laterrealized that due to complicated legal issues, the long haul airlinehad to be legally separated from the local AirAsia entity (Forrey etal., 2012). Therefore, the legal environment in the global airlineindustry is not favorable. For example, the processes of acquiringthe necessary approvals, landing right, and licenses are tedious.Besides, the social environment influences the airline industrybecause every carrier is supposed to do a careful analysis of theprofiles of the customers it is targeting. In this case, there aredifferent types of clients who include the high-end customers likethe business individuals who travel frequently and the middle-classcustomers. The business executives are often choosy, and they likeflying with aircraft whose tickets cater for meals as well asbeverages. On the other hand, the middle-class clients are willing totravel as long as the fare is right. Therefore, it is necessary foran airline to evaluate the type of customers that it will target fora fast expansion. Furthermore, there are political connections in theglobal aviation industry (Lee &amp Carter, 2012). Some airlines gainfavors especially from the government to do things those othercompanies are not allowed. For example, AirAsia was getting a lot ofgovernment support until it reached a point of being given permissionto construct its low-cost carrier terminal that had a capacity ofhandling over ten million passengers annually.

SuccessFactors of AirAsia

Thefirst factor that led to the success of AirAsia is the way it wasusing the low-cost differentiation strategy (Forrey et al., 2012).AirAsia used the strategy as a way of gaining entrance into the newmarkets. Customers were attracted to the company because the ticketswere incredibly cheap to the extent of being irresistible to fly.This approach made the company to win so many clients whom theymanaged well by being loyal to them. Another factor that hascontributed towards the success of the company is training anddevelopment (Forrey et al., 2012). AirAsia used training anddevelopment as a way of differentiating itself from other airlines.To do so, the company established a training academy where it trainedits pilots, cabin crews, and the engineers. During the training,these employees acquired an AirAsia mindset that made them offer thebest services they could. Although there were workers that came toAirAsia with some experience from other companies, most workers weretrained by AirAsia. Moreover, the success of AirAsia can be linked tothe way that the firm was selling its tickets through differentoutlets. The main outlet outlets for tickets were online, by phone,sales counters at the airport, ticket kiosk machines, as well as theticket offices. These outlets ensured that the tickets were availablequickly and reliably. Also, the company used both the traditional andnon-traditional marketing strategies such the social media and presslike the daily newspaper as a way of ensuring that the company isknown by as many people as possible (Forrey et al., 2012).

Elementsof AirAsia Revisited in the Introduction of AirAsia X and Change ofEnvironment

Themain elements that had to be revisited are the cost leadership anddifferentiation strategies that were going to be used when launchingthe AirAsia X so that they could win the customers (Forrey et al.,2012). AirAsia was set to be the company that was going to lead inticket prices therefore, through reviewing the cost leadershipstrategy, it was better positioned to act as a low-carrier. This wascritical to the airline since it helped to offer a competitiveenvironment against other carriers. Indeed, through cost leadership,the airline was in a position to operate under reduced operatingcosts, giving it an upper hand in surviving through economichardships. During the time, while other carriers were failing, thecompany emerged as successful. Furthermore, through revisiting on thedifferentiation strategy, it was capable of capturing clients thatrequired having unique services. This made the carrier to increasethe number of clients that needed the unique services.

HowX can Leverage the Extensive Network of AirAsia in Selecting New andProfitable Destinations

Xcan borrow some capital from the sister company to purchase otherfleets of aircraft that will be used to fly people to newdestinations. Apart from borrowing resources from the sister company,X can also leverage the extensive network through utilizing suppliersand mechanics of the sister entity. This would be a great advantageto the X because it would assist in cutting down costs, which can beincorporated into the company’s profits. It is with these profitsthat the carrier can venture into new destinations. Besides, thecompany can use the infrastructure that is already established by thesister company to train its new employees and instill them with anAirAsia X mindset so that they can deliver quality services to thenew destinations.

HowDarren can help to Shift the Marketing Team’s Mentality

First,he can shift the mentality of the team by convincing them about thestrong performance of the company, despite it being a start-up.For instance, while other airlines were failing, AirAsia X was verysuccessful (Forrey et al., 2012). Through Darren convincing themarketing team this way, they would gain confidence with the start-upand sell the airline on the basis of success without any worries,which can win the international investors towards buying shares ofthe company for a public offering.Also,in an attempt to shift the mentality of the marketing team, Darrenneeds tofocus on carrying out a market feedback from clients,which would help in giving the marketing team a positive view of thecompany in the global field. This would make anappeal to the marketing team that the company is set to succeed,which would make them market the organization even with a moreemphasis on its successes. Furthermore, since learning by examplescan offer motivation and help in realizing the much-needed change,Darren shouldgive examples of start-ups that have begun and succeeded within avery short time such as the JetBlue.With the positive examples, the marketing team can be in a positionto gain confidence in the company and shift their mentality.

Conclusion

Fromthe analysis of the AirAsia X case, it can be argued that the companyhas the capacity of going overhaul based on the low-cost strategy.The low-cost model has proved successful in different occasions whenthe airline was successful despite other entities facing challenging.However, the company needs to integrate the low-cost model with a bitof differentiation.

References

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Chin,P. L. (2014). TheAirAsia story 2: From two planes and RM40 million debt: how AirAsiamade flying possible for everyone and is now Asia`s largest LCCgroup.New York: Routledge.

Forrey,B., Doh, J. &amp Lawton, T. (2012). AirAsiaX: Can the Low Cost Model Go Long Haul?Ontario: Richard Ivey School of Business Foundation.

Lee,K., &amp Carter, S. (2012). Globalmarketing management: Changes, new challenges, and strategies.Oxford: Oxford University Press.

Mutum,D., Roy, S. K., &amp Kipnis, E. (2013). Marketingcases from emerging markets.New York: Prentice Hall.

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