AirAsia X: From Low-Cost to Long-Haul Model

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Abstract

This paper explores the transition of the AirAsia X low-cost model from short haul to long haul operations by providing an insight into the strategies that underpin its success. At the outset, the essay explains the factors behind the victory the airline by providing an insight into the various elements that made its strategies applicable. The paper also provides a framework for utilizing the infrastructure of the AirAsia. Lastly, it seeks to explain how Darren Wright can use alternative market plans to promote the business within a year.

Introduction

AirAsia X is a flight company that was launched in 2007. Tony Fernandes finally implemented his dream of operating a low-cost long haul airline. The new business was an expansion of short and medium haul flights of the sister air carrier, AirAsia. Low-cost insiders who held that the plan was not viable challenged the idea in the end. However, Fernandes did not give up his expansion dream. Various key strategies were executed to realize the growth of the low-cost model. This paper critically examines the transition of the AirAsia X’s low-cost model from short haul to long haul operations by providing an insight into the strategies that underpin the success of the airline.

Factors behind the Success and Expansion of AirAsia X from Malaysia to other Destinations

Description of the Airline Industry Environment discussed in the Case Study

The case study reveals a business environment that was undoubtedly unfavorable for the global airline industry. It was a hard time following the effects of the September 11 World Trade Center terrorist attack in the United States. Air safety had become a global concern. As a result, many aviation companies dreaded aircraft hijackings. The prevalence of the severe acute respiratory syndrome (SARS) was also becoming global disaster. This situation scared pessimists from venturing into international airline businesses. Furthermore, the prevailing economic depression had tremendous effects on the industry. These conditions lowered the prices of the air tickets significantly. As a result, many airlines opted to charge relatively low prices to entice passengers (Chan, 2014).

Elements of AirAsia’s Business Model Revisited by X for its Success

The AirAsia X airline adopted the low-cost model of its sister company. It also embarked on various strategies that facilitated its transition to long haul operations. Firstly, the company targeted customers with growing disposable income rather than the wealthy class customers. The affordable tickets were inclusive of seats and airline taxes. However, they excluded onboard services. As a result, they attracted a considerable number of passengers in this class.

Secondly, the choice of aircraft and seat design were critical factors that propelled the expansion of the company. It had operated airbuses A330 and A340 before it introduced the most fuel-efficient A350 model. The company had about 20-percent more seating capacity as compared to other carriers that operate similar A330. According to Chan (2014), it adopted a 3-3-3 instead of the 2-4-2 pattern that was used by the other carriers. In 2010, the AirAsia X airline introduced a limited number of premium seats in a small section of the plane that stretched out flatly to ensure comfort (Chan, 2014).

Another unique strategy was the La Carte in-flight experience that brought about additional revenue for the airline. The management excluded onboard food and beverages services from the booking ticket. A reduced pre-booking option was adopted to boost the ticket sales. This option allowed passengers to buy the volume of food and beverages of their choice. This feature was uncommon with other carriers whose ticket included onboard services. AirAsia X also provided in-flight entertainment for a fee. This service was not offered in budget flights (Chan, 2014). Finally yet importantly, the company had a unique company culture that created a friendly working atmosphere regardless of position, gender, and/or age among others. The staff members were regarded as stars in the business.

How AirAsia X best leverage the Extensive Network of the Regional Sister Company AirAsia to select New and Profitable Destinations for AirAsia X?

The AirAsia X airline relied on its sister’s existing routes and resources for its success. In the 2008 global financial crisis, most its competitors such as Oasis suspended their operations because the airline business had become uneconomical for them. Due to its cheap model, the AirAsia X Company stayed in business. It received feeder flights from more than 78 destinations (Chan, 2014).

Due to its favorable local political relationships, the company was not opposed when it proposed to construct a low-cost carrier terminal. Although the terminal was usable by the competitors, it became the turning point of the air company because it avoided the expensive gate fees at the Kuala Lumpur International Airport (Daft & Albers, 2012). Moreover, the airline established a training academy for its staff including cabin crews, pilots, and engineers. The aim of the academy was to instill knowledge about strategic operations in its staff with a view of distinguishing itself from AirAsia.

In addition, the company used the existing sister company’s website for its online sales. Although the AirAsia airline adopted both traditional and non-traditional marketing strategies, AirAsia X took online marketing. It also used the print media to sensitize its business activities to the public. The plan was to reach scholars, internet users, and shoppers. This situation resulted in network expansion to other destinations around the world (Daft & Albers, 2012).

How can Darren Wright help shift his marketing team’s mentality away from a start-up mindset and simultaneously prepare for a global initial public offering within the next twelve months?

Daren Wright established a training academy to train the AirAsia X staff. The objective of this academy was to equip the staff with proper marketing strategies such as onboard sales techniques (Daft & Albers, 2012). It also sold a variety of products to its passengers during flights. The sales included services such as in-flight entertainment, which was only offered by the business class airlines. This strategy expanded the airline’s customer base. The passengers were allowed to purchase onboard services. This provision was not available in the business class airlines. However, the services provided to them were limited. Darren Wright focused on excluding such services from the ticket costs. The advantage of this strategy was that it attracted more passengers since the booking ticket fee was considerably low. Secondly, customers bought unlimited in-flight services of their choice (Daft & Albers, 2012)

Conclusion

The AirAsia X low-cost model propelled the airline to unimaginable success. This model surpassed the expectations of many other global airlines. The company survived the tough financial crisis when other operators opted to suspend operations. However, sound leadership and management have also played a crucial role in the success of the low-cost business model. While advisors at the AirAsia airline expressed their pessimism, Fernandes remained focused on his dream heights. Therefore, the low-cost model can go a long haul. However, the developing airline depended on the AirAsia’s infrastructure to realize its success.

Reference List

Chan, J. (2014). Understanding the meaning of low airfare and satisfaction among leisure air travelers using Malaysian low-cost airlines. Journal of Vacation Marketing, 20(3), 211-23.

Daft, J., & Albers, S. (2012). A profitability analysis of low-cost long-haul flight operations. Journal of Air Transport Management, 19(1), 49-54.

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