AirAsia - Southeast Asia's Most Successful Low-cost Airline
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Case Code : BSTR157
Case Length : 17 Pages
Period : 2001 - 2005
Organization : Air Asia Airlines
Pub Date : 2005
Teaching Note : Available
Countries : Malaysia
Industry : Aviation
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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The airline industry was not a good place to be in at that time, reeling as it
was from the combined effects of the September 11 terrorist attacks, Severe
Acute Respiratory Syndrome (SARS), and economic downturn.
However, within three years of operation, AirAsia changed the dynamics of the
Asian airline industry. It not only managed to compete with major carriers like
Malaysian Airlines (MAS) and Singapore International Airlines (SIA), but it also
became the benchmark for several other low-cost airlines in that market. So
great was AirAsia's impact that analysts said the airline, with its minimal
fares, was living up to its tag line which said 'Now Everyone can Fly'.
Fernandes started his career as a music industry executive, working at Virgin
Records and Time Warner Music.
It was his
childhood dream to run an airline, but he did not consider the idea
seriously until he saw easyJet, a London-based low cost airline, on
television. Fernandes was impressed with what he saw of easyJet and
decided that he wanted to explore its operations further. He spent two
days at easyJet's headquarters in Luton airport, talking to staff and
passengers and learning how the airline was run.
Fernandes had always believed that a low cost airline would be
successful in the Southeast Asian region, and his experience at easyJet
convinced him of the potential of his idea.
He resigned from his job at Time Warner Music and returned home to Malaysia . Fernandes had no prior experience in running an airline, nor did he have enough money to start one. He raised money by mortgaging his house and using up his savings. He also roped in three of his associates - Datuk Pahamin A. Rajab, Abdul Aziz Abu Bakar and Kamarudin Meranun - who believed in his vision for a low cost operator in Malaysia.
Getting an airline license was not easy in Malaysia. The partners set up a
meeting with the Malaysian Prime Minister, Dr. Mahathir Mohamed (Mahathir), and
presented to him the major features of their business model...