5. Firm’s Strategy
5.1 Background of competitors and their products
To begin with, airline industry can be classified into the two main groups which are full- service airlines and low cost airlines. Low cost airlines are focused on bringing passengers directly from their origin to the final destination, no special services being provided. Airlines in this competitor group are regional airlines with destinations limited to East Asia. Numerous competitors in this group including Jet Star, Tiger Air, Firefly, and Maswings.
On the other hand, full-service airlines are defined as large firms that have been in the industry for an extended period of time, with many of these airlines enjoying a monopoly on certain national routes. Full-service airline will use a hub and spoke routing system which helps passengers to transfer to other aircraft for long-haul flights and short –haul flights. (Burghouwt and Veldhuis, 2006, p. 107). Example of full services airlines are Thai Airways, Qatar Airways, and Malaysia Airlines.
5.2 AirAsia differentiate its products from others
Next, providing a better quality service at low price is the way AirAsia differentiate its product from others. AirAsia is the airline known as a good technology infrastructure which offers very low cost of operations from its use of technology to automate customer processing. Additional services that customer requested such as food and entertainment are charge 80% cheaper than others competitor. Moreover, AirAsia also provide innovative and personalized service such as self-check-in which may help passenger to enjoy new experience.
5.3 Strategy used to gain profit and beat its competitors
Furthermore, AirAsia has been awarded World’s Best Low-Cost Airline by Skytrax from year 2008 to 2018. Air Asia is using everyday low price strategy and trying to compete in Blue Ocean. Example that can be refer is AirAsia able to provide low airfares to increase huge amount of passenger loads by reducing the expensive cost of in-flight services, minimizing labour, facilities and overhead costs (Zhu, A 2010). To link with the above statement, their business vision is “always to continue to be the lowest cost short-haul airline in every market we serve, delivering strong organic growth through offering the lowest airfares at a profit”.
In the financial year 2017, AirAsia company increase their revenue by 42% from RM6846 million in 2016 to RM 9710 million in year 2017. This was contributed by a 10% year-on-year increase in capacity and 11% increase in number of guests carried to 39.1 million. AirAsia Berhad also achieved a full year operating profit of RM 2.16 billion, higher than RM 2.07 billion in 2016.This means that, AirAsia has successfully practice the law of demand which means provide low costs airfares helps to increase quantity demanded of passengers to buy tickets from their company.
Figure 1: Revenue
Figure 2: Operating profit
Besides, AirAsia have 58.3% market share in year 2017compare to 47% in year 2016 for domestic routes in Malaysia. In comparison, domestic market shares for Malaysia Airlines decline from 42% in 2016 to 34% in year 2017. While Malindo Air increased its domestic market share from 12 % to 15%.
Figure 3: Market Share
5.4 How competitors react
In order to position MAS itself, they tend use two types of frequent flyer program to attract customer which are Grads for Students (Grads) and Enrich. (Grads) which is a frequent flyer program with benefits designed for students whereas Enrich is specifically designed for frequent travellers especially businessman will enable them to gain privileges of obtaining discount or free flights when travelling around the world. Budget airline Malindo Air has expanded its flight destination to Lahore, Pakistan, a location not covered by AirAsiahttps://www.ukessays.com/essays/marketing/malaysian-airline-vs-airasia-marketing-essay.phphttps://www.malaysiakini.com/news/326496http://www.theedgemarkets.com/article/competition-easing-malaysian-skies-airasia-dominateshttps://ir.airasia.com/ar.htmlhttps://www.airasia.com/cdn/docs/common-docs/investor-relations/airasia-annual-report-2016.pdf