AirAsia SWOT Analysis

The organization I am interested in is AirAsia, a Malaysian low-cost

airline that has been operating since 18th November 1996, and currently
offers flight to over 165 destinations in 22 countries (“AirAsia Annual
Report.”).

The economic strength of the organization is its prices strategy. Their

prices are 40-60% cheaper than full service carrier (FSC) (“Flight
Profile.”). It is a low-cost airline, so customers are willing to choose this
airline over another of a higher price. When demand is high, the
revenues will increase for the organization. AirAsia ranks top one as the
world’s cheapest budget airline and is famed for its pricing strategy.
AirAsia turnaround time is 25 minutes, so their utilization per aircraft is
12 hours per day, compared to 8 hours per day to full service carriers. It
has a high revenue of 6.85 million RM (~1 billion USD), and carried over
56 million passengers in 2016 (“AirAsia Annual Report.”). Another
strength is their distribution network. There are many affiliates of
AirAsia, with offices spread out in Thailand, the Philippines, Indonesia,
and India (“AirAsia Annual Report.”). By locating AirAsia offices in many
Asian countries, they can fly from different parts of the world instead of
Malaysia only, and thus expand the business to more stakeholders,
increasing their net revenue.

The economic weakness is its lack of investments in human and physical

resources, which causes the ethical weakness of frequent accidents.
According to Daily Mail, AirAsia airline ranks 2 or 3 stars out of 7 for
safety. There were several unfortunate accidents, including: 1) a plane
slided sideways on a runway in Borneo; 2) a plane crashed into the Java
Sea in 2014, killing all 162 on board; 3) entered the wrong longitude
into a navigation system, causing the plane to fly in the wrong direction
(“Passengers Describe Terror Aboard Indonesia AirAsia Flight.”).
Recently, there was a panic flight accident from Australia to Indonesia,
where a passenger described, “The panic was escalated because of the
behavior of staff who were screaming, looked tearful and shocked.
(“Passengers Describe Terror Aboard Indonesia AirAsia Flight.”)”
AirAsia has poorly-trained staff that does not know how to handle
irregular situations, and cannot provide safety ensurance to the
customers as other competitors with professional staff training do. In
terms of physical resources, they charge every service during their flight,
including luggage allowance, food, drinks, blankets, and seat
arrangement. If these services are included, the plane ticket to be more
expensive than full service carrier. For example, the average FSC cost is
$516, but after adding meals, luggage, and seat arrangement, the cost for
AirAsia is $588, going to the same destinations at the same period. This
will cause customers switching from AirAsia to a carrier that provides
safety and reflects the true price of their services.

There are a lot of socio-cultural opportunities for the organization that

accesses to different countries for a cheap price, especially when the
21st Century emphasizes on globalization and diversities. The lifestyle of
an individual has changed and there is a growing rate of middle class
family that can afford cheap ticket. Malaysia and Thailand have made
their way ranking 12 (32,588,000 tourists) and 14 (24,810,000 tourists)
respectively as popular countries among tourists in 2016, with Indonesia
at rank 33, the Philippines at rank 51 (“International Tourism, Number
of Arrivals.”). In the end of 2016, there are 3.2 billion middle class
individuals, with the majority as Asians. It is believed there will be an
increase of 160 million more in the next 5 years (Kharas, Homi.). Hence,
with its distribution network and cheap price, more globalized
individuals are willing to travel around the world, and more companies
are willing to travel to conduct transactions overseas within budget. In
order for global interactions to come true, it soars the demand for
airlines.

A political threat for AirAsia is the continued increase in fuel prices. It

has been reported there was a 30% drop in net profit for the first
quarter of 2017, mainly due to fuel prices. AirAsia is a low-cost airline, so
they have to manage their finance well to make profit while providing
their service. Fuel prices are at $57/barrel, but it has a tendency to
increase according to the graph (“Crude Oil.”). If AirAsia has to utilize all
of its plane for 12 hours, then the amount of fuel would be over 14
million litres per year, contributing to the negative environmental factor
of using up the natural resources (“Flight Profile.”). If the government
were to continue to increase fuel price, it can destabilize the business
model, causing this airline to either increase their prices, or go bankrupt.
Another economic threat is the increasing entrants of low cost airlines.
Since there are also many more low cost carriers joining the market,
such as Emirates, Jetstar, and Peach, competition occurs and those with
the lowest price attracts the customers. Having the increase in fuel
prices and the need to drop prices to compete might cause AirAsia to
lose profit, considering other companies might surpass AirAsia due to its
lack of safety.

Overall I believe the strengths of the organization are effective in

expanding the business and market share as its low cost is its main
selling point and it has a clear understanding in what the customers
want: to get from one destination to another within budget. Although the
changing demographics and lifestyle may improve AirAsia’s existing
profit, safety is a major weakness that can affect the airline business and
reputation. AirAsia must strive to improve its technology and resources
to make safety their number one priority instead of low prices.
Works Cited

“AirAsia Annual Report.” AirAsia,

2016, http://www.airasia.com/cdn/docs/common-docs/investor-
relations/airasia-annual-report-2016.pdf.

“Crude Oil.” Nasdaq, 7 Nov.

2017, http://www.nasdaq.com/markets/crude-oil.aspx.

“Crude Oil.” Nasdaq, 7 Nov.

2017, http://www.nasdaq.com/markets/crude-oil.aspx.

“Flight Profile.” AirAsia, www.airasia.com/my/en/about-us/ir-flight-

profile.page.

“International Tourism, Number of Arrivals.” World

Bank, data.worldbank.org/indicator/ST.INT.ARVL.

Kharas, Homi. “The Unprecedented Expansion of the Global Middle

Class.” Brookings, Brookings, 5 May
2017, http://www.brookings.edu/research/the-unprecedented-
expansion-of-the-global-middle-class-2/.

“Passengers Describe Terror Aboard Indonesia AirAsia Flight.” CNBC,

CNBC, 16 Oct. 2017, http://www.cnbc.com/2017/10/16/passengers-
describe-terror-aboard-indonesia-airasia-flight.html.
“What Is Low Cost?” AirAsia, www.airasia.com/my/en/about-us/ir-
what-is-lcc.page.

“World’s Most Dangerous Airlines Named: AirAsia Included on List but

Malaysia Airlines Scores above Average for Safety.” Daily Mail Online,
Associated Newspapers, 22 Jan.
2016, http://www.dailymail.co.uk/travel/travel_news/article-
2908531/Ranking-world-s-dangerous-airlines-includes-troubled-
AirAsia-Malaysia-Airlines-scores-highly-safety.html.