Low-Cost Strategy Factors in Airline Industry: The AirAsia Case

Abstract:

Demand for air transportation has boomed extensively in Southeast (SE) Asia during the past decade as a result of economic development and the lack of land routes between destinations. The purpose of this study is to focus on the cost-leadership competitive strategy applied by low-cost carriers (LCCs) in SE Asia airlines and explore the elements that affect the competing capability of these airlines in the region. Furthermore, the study attempts to illustrate the key success factors that have resulted in the superiority of AirAsia (AA) airline among other LCCs airlines in the competitive market of SE Asia. The research shows that the regulatory environment in the regions air transportation business is an important barrier for the development of local LCCs airlines. Hence, AA attempts to cope with these barriers have been illustrated in this research.

• Periodical: Advanced Materials Research (Volume 845)
• Pages: 652-657
• DOI: https://doi.org/10.4028/www.scientific.net/AMR.845.652
• Online since: December 2013
• Authors: Alireza Rangraz Jeddi, Nafiseh Ghorbani Renani, Alireza Khademi, Vahid Shokri, Mohd Yusof Noordin*
• Keywords: Air Transportation, AirAsia (AA), Competitive Strategy, Cost-Leadership Strategy, Low-Cost Carriers (LCCs) Airlines

References

[1] J. I. Castillo-Manzano, L. López-Valpuesta, and F. González-Laxe, The effects of the LCC boom on the urban tourism fabric: The viewpoint of tourism managers, Tourism Management, vol. 32, no. 5, p.1085–1095, Oct. (2011).

DOI: 10.1016/j.tourman.2010.09.008

[2] B. Miller and J. -P. Clarke, The hidden value of air transportation infrastructure, Technological Forecasting and Social Change, vol. 74, no. 1, p.18–35, Jan. (2007).

DOI: 10.1016/j.techfore.2004.03.011

[3] A. Zhang, S. Hanaoka, H. Inamura, and T. Ishikura, Low-cost carriers in Asia: Deregulation, regional liberalization and secondary airports, Research in Transportation Economics, vol. 24, no. 1, p.36–50, Jan. (2008).

DOI: 10.1016/j.retrec.2009.01.001

[4] H. Murakami, Time effect of low-cost carrier entry and social welfare in US large air markets, Transportation Research Part E: Logistics and Transportation Review, vol. 47, no. 3, p.306–314, May (2011).

DOI: 10.1016/j.tre.2010.11.003

[5] J. Y. Chung and T. Whang, The impact of low cost carriers on Korean Island tourism, Journal of Transport Geography, vol. 19, no. 6, p.1335–1340, Nov. (2011).

DOI: 10.1016/j.jtrangeo.2011.07.004

[6] J. B. Barney and W. S. Hesterly, Strategic Management and Competitive Advantage: Concepts and Cases. Pearson Education, Limited, (2012).

[7] J. F. O'Connell and G. Williams, Passengers' perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines, Journal of Air Transport Management, vol. 11, no. 4, p.259–272, Jul. (2005).

DOI: 10.1016/j.jairtraman.2005.01.007

[8] R. Merkert and P. S. Morrell, Mergers and acquisitions in aviation – Management and economic perspectives on the size of airlines, Transportation Research Part E: Logistics and Transportation Review, vol. 48, no. 4, p.853–862, Jul. (2012).

DOI: 10.1016/j.tre.2012.02.002

[9] D. J. Nicol, The influence of aircraft size on airline operating costs, Omega, vol. 6, no. 1, p.15–24, (1978).

DOI: 10.1016/0305-0483(78)90034-8

[10] P. Morrell, Can long-haul low-cost airlines be successful?, Research in Transportation Economics, vol. 24, no. 1, p.61–67, Jan. (2008).

DOI: 10.1016/j.retrec.2009.01.003

[11] W. M. Swan and N. Adler, Aircraft trip cost parameters: A function of stage length and seat capacity, Transportation Research Part E: Logistics and Transportation Review, vol. 42, no. 2, p.105–115, Mar. (2006).

DOI: 10.1016/j.tre.2005.09.004

[12] G. Walker, Modern Competitive Strategy with Online Access Card. McGraw-Hill Higher Education, (2006).

[13] Anon, Snarling all the way to the bank, Economist, (2007).

[14] S. P. Robbins and M. Coulter, Management. Pearson Prentice Hall, (2008).

[15] K. Burton, A Study of Motivation: How to Get Your Employees Moving, Indiana University, (2012).

[16] M. Shari, A Discount Carrier Spreads Its Wings, Bloomberg Businessweek Magazine, (2003).

[17] J. D. Pemberton, G. H. Stonehouse, and C. E. Barber, Competing with CRS-generated information in the airline industry, The Journal of Strategic Information Systems, vol. 10, no. 1, p.59–76, Mar. (2001).

DOI: 10.1016/s0963-8687(01)00042-7

[18] D. Buhalis, eAirlines: strategic and tactical use of ICTs in the airline industry, Information & Management, vol. 41, no. 7, p.805–825, Sep. (2004).

DOI: 10.1016/j.im.2003.08.015

[19] D. G. Copeland and J. L. McKenney, Airline Reservations Systems: Lessons from History, MIS Quarterly, vol. 12, no. 3, p.353, Sep. (1988).

DOI: 10.2307/249202

[20] PlaneSpotters. net, http: /www. planespotters. net/Airline/AirAsia.

[21] T. C. Lawton and S. Solomko, When being the lowest cost is not enough: Building a successful low-fare airline business model in Asia, Journal of Air Transport Management, vol. 11, no. 6, p.355–362, Nov. (2005).

DOI: 10.1016/j.jairtraman.2005.03.001

[22] AirAsia Berhad Annual Report 2012, (2012).

[23] A. Z. Ibsen, The politics of airplane production: The emergence of two technological frames in the competition between Boeing and Airbus, Technology in Society, vol. 31, no. 4, p.342–349, Nov. (2009).

DOI: 10.1016/j.techsoc.2009.10.006

[24] D. A. Irwin and N. Pavcnik, Airbus versus Boeing revisited: international competition in the aircraft market, Journal of International Economics, vol. 64, no. 2, p.223–245, Dec. (2004).

DOI: 10.1016/j.jinteco.2003.08.006

[25] L. B. C. Campos, On the competition between Airbus and Boeing, Air & Space Europe, vol. 3, no. 1–2, p.11–14, Jan. (2001).

DOI: 10.1016/s1290-0958(01)90004-8

[26] C. Wong Pui Man, Enabling Technology in Airline Industry, AirAsia, (2009).