Pest Analysis on Airasia

1.0 Introduction

Purpose

The purpose of this analysis is to conduct an environmental analysis in the context of AirAsia's 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 AirAsia's 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), AirAsia's 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, Malaysia's 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 don't want to be crammed into a plane for six or eight hours. Especially, when there are limited or no in-flight services. AirAsia wanted to become a company that worked on the basis of the average man in the street being able to afford our air fares, and people who would not have considered flying, or would not fly as often as they as do now. Outbreak of the Severe Acute Respiratory Syndrome (SARS) has scare people to fly. AirAsia commit to "Safety First"; comply with all regulatory agencies, set and maintain consistently high standards; ensure the security of staff and guests.

2.4 Technology

AirAsia provides online service that combines air ticketing with hotel bookings, car hire and travel insurance. To help keep costs in check, Air Asia has pushed internet booking services. Particularly in parts of the region that are poorly served by road and rail infrastructure, people will prefer to travel by airplane. In August 2003, AirAsia became the first airline in the world to introduce SMS booking where guests can now book their seats, check flight schedules and obtain latest updates