Example of E-Commerce Success - AIRASIA

AirAsia, as the second Malaysian National Airline, provides a totally different type of service in line with the nation's aspirations to benefit all citizens and worldwide travellers. AirAsia provide the electronic ticket or e-ticket service which is used to represent the purchase of a seat on a passenger airline, usually through a website. Once a reservation is made, an e-ticket exists only as a digital record in the airline computer. Customers usually print out a copy of their receipt which contains the record locator or reservation number and the e-ticket number. Such service takes the form of a no frills - low airfares flight offering, 40%-60% lower than what is currently offered in this part of Asia. Their vision is "Now Everyone Can Fly" and their mission is to provide 'Affordable Airfares' without any compromise to Flight Safety Standards.

AirAsia was initially launched in 1996 as a full-service regional airline offering slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001, AirAsia fail to either sufficiently stimulate the market or attract enough passengers from Malaysia Airlines to establish its own niche market. The turnaround point of AisAsia is in 2001, while it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled some of the lending low-cost airline experts to restructure AirAsia’s business model. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-frills operation with three B737 aircraft as a low-fare, low-cost domestic airline.



The Factors that cause AirAsia Success:


1. Low cost per average seat kilometer
AirAsia focused on ensuring a competitive cost structure as its main business strategy. It has been able to achieve a cost per average seat kilometer (ASK) of 2.5 cents, half that of Malaysia Airlines and Ryanair and a third that of EasyJet. AirAsia can lease the B737-300s aircraft at a very competitive market rates due to the harsh global market conditions for the second-hand aircrafts because of the September 11th event in 2001.

2. Low distribution cost
AirAsia focus on Internet bookings and ticketless travel allowed it to lower the distribution cost.

3. Attractive ticket price
With the average fare being 40-60 % lower than its full-service competitor, AirAsia has been able to achieve strong market stimulation in the domestic Malaysian air market (Thomas 2003). For instance, the fare for the trip from Kuala Lumpur to Penang on AirAsia starts from 39 ringgit. Comparing to trip by bus charge 40 ringgit and 80 ringgit by car. The effect of attractive low fare is more travelers switching from bus to air, similar case as Ryanair in Europe.

4. Good Management Team
AirAsia value proposition is more sophisticated than Ryanair placing equal emphasis on brand reputation and customer service/people management, by a senior advisor to AisAsia’s top management team. AirAsia pursue a Ryanair operational strategy, Southwest people strategy and an Easyjet branding strategy.


By:
Wong Zheng Hwa 0701815