AirAsia Berhad: SWOT analysis

Strengths
Low cost operations

AirAsia Berhad is the first airline company that offered a low cost flight in Asian market. By operating the low cost principle, AirAsia Berhad aim to maximize their sales and minimize their operating cost. Based on their slogan “Now Everyone Can Fly” have fulfilled the wants for those passengers who choose to fly with low cost airlines especially students, those family with lower income and low income earners. Therefore, it can increase the demand of travelling.

Extensive of E-Commerce

AirAsia Berhad has the benefit for selling off their seats through internet network and telephone booking. AirAsia uses Navitair’s Open Skies computer reservation system (CRS) which is a web-based sales and inventory system linked to AirAsia’s call centre and allow the customers to print out the boarding pass. This shows that they are efficient and effective towards their company. Since AirAsia has limiting the agents’ commission, so about 85 per cent of AirAsia flight ticket is sold through online booking .Therefore, they can reduced the cost by promoting their organization hence it can be reduced the intermediary cost.

Flexible Air Schedules

AirAsia Berhad increases the frequency of their flight every year to fulfill the needs of passengers. The organization will give an incentive to those pilots who take for short flight which they can reduce the duration of flights. Therefore, it is suitable for business passengers who travel often.

Strong Management

Every staffs in AirAsia Berhad are the contributors. Everyone is focused on their work and concern about their organization. To have a strong management, they must have an extensive set of skills by planning, making decisions, solving problems, selecting and developing the right people, communicating and motivating their employees.

Economy of scale

The advantage of the cost will increased the output of a product. It has an inverse relationship between the quantity produced and per unit fixed costs. AirAsia Berhad can employ more pilots and cabin crews into their organization. It is because that they use limited types of aircraft for their organization. Therefore, they can reduce the cost of training.

Weaknesses
As a largest low cost-carrier in Asia region, AirAsia berhad has performed well and succeed for winning various awards such as World’s Best Low-Cost Carrier by Skytrax, but the company still encounter some weaknesses as listed below.

Limited services resources

Due to their low cost business model they implement, AirAsia Berhad cannot provide additional service to the customers as they require. It is limited where AirAsia Berhad does not include frill service such as complimentary drinks, snacks, pillow and entertainment. Passengers may charge an additional fee for inflight services when meet the needs of it.

Punctuality

Passengers have to face some trouble by travelling on time to a destination. Passengers will loss the confidence towards AirAsia Berhad which can be affected the name of the organization. Some of the passengers will think that being delay is a disrespect of perspective. Delays occurred because AirAsia Berhad has scheduling more flight and increasing the number of aircraft, along with the capacity scarcity of airport, this may cause the congestion of air traffic in the airport. Therefore, it can lead their business to drop.

Lack of maintenance, repair and overhaul (MRO) facility
AirAsia Berhad has owned 123 aircrafts until today and about another 100 aircrafts to be received in this few years. Due to the increasing number of aircraft and routes, they also undergo high risk of malfunction of their aircraft. Their malfunction aircrafts cannot utilize since they have shortage of MRO facility to fast repair it. It will directly lessen their revenue. So, the synergy to have its own MRO facility for continuous maintenance is closely related to reduction of operating cost.

Opportunities

Promote Malaysian tourism
AirAsia Berhad will have the opportunity to promote Malaysian tourism because they have increased their routes and destinations all over the countries. AirAsia Berhad has created a skybridges of culture with many countries, since year 2012 they have flying to 81 destinations in 18 countries. The place of interest and culture in Malaysia would be spread out to all passengers who travel with AirAsia Berhad. Therefore, this will increase the revenue of the organization.

Passengers First Choice Of Travelling Abroad
AirAsia Berhad will be chosen as the first choice of travelling during the economic slowdown. Some people like to travel no matter how is the economy goes on, since AirAsia Berhad offers an affordable airfares for everyone regardless of different income categories of people. Therefore, it able to fulfill everyone’s needs and achieve their dream of making flying possible for everyone.

Political connections
AirAsia Berhad is joining venture with Shin Corp, where Shin Corp is owned by the family of Prime Minister in Thailand. Shin Corp has the financial strength to support AirAsia Berhad to grow their organization. This is the reason why AirAsia Berhad grows up faster and easier in the airline market with the powerful politically.

Threats
Competitors
Nowadays, AirAsia Berhad is a leader in the world’s low cost carrier in airline industry but it is still a growing company. Many of the full service airlines are planning to create a low cost operation to compete directly to AirAsia Berhad. For example, most Malaysian knew that Firefly is a subsidiary of Malaysia Airline which has the ability to compete with AirAsia for their benefits as these two airlines also considered as low cost airlines.

Fluctuating Price of Fuel
When the price of fuel is too high, this may causes AirAsia Berhad have the problem about the cost of fuel which will have a major dampening effect on earnings. Due to the high volatility in fuel price, the airline is adopting static hedged approach at current price level would involve taking excessive risks. The company may have a huge problem on this change. Read also introduction for online reservation system

Change in Weather
Due to the bad weather, the flight might be delayed or the worst is cancel. If the flight is cancel, this may affect passengers not really enjoy their flight journey. Therefore, AirAsia Berhad needs to put more effort to comfort the emotion of passengers. This will affect the operating of human resources in a company. Besides, AirAsia Berhad may receive less income because of the bad weather. Delayed of a flight may influence the airline need to reorganize the company flights.