ASIAN JOURNAL OF MANAGEMENT CASES, 3(1), 2006 SAGE PUBLICATIONS NEW DELHI/THOUSAND OAKS/LONDON DOI: 10.1177/097282010500300104
AIRASIA: THE SKYS THE LIMIT
Rizal Ahmad Mark Neal
This case details the rise and expansion of AirAsia in South-east Asia. The company employed a business model for low-cost airlines that was originally developed by Southwest Airlines in the United States and subsequently employed with great success by European companies such as Ryanair and EasyJet. The case thus documents the successful application of a western business model in a previously unexploited Asian environment, and raises issues about knowledge transfer, and the sustainability of such a model in the face of increasing competition and market turbulence. In this way, this case raises issues of innovation, adaptation, strategy and sustainability within the Asian context. Keywords: Low-cost airlines, Budget airlines, Business model, Knowledge transfer, Innovation, Asian entrepreneurship
‘Now everyone can fly’—AirAsia had been drumming South-east Asians to take to the skies by making air travel affordable to the masses. In October 2004, AirAsia successfully attracted over USD 200 million in fresh capital through an Initial Public Offer (IPO) of its shares.1 In December 2004, it announced its decision to purchase up to eighty Airbus A320s (Defence-aerospace 2005). Arguably, AirAsia not only enabled many ordinary people to travel by air, but also stirred up competition and encouraged the formation of several low-cost airlines in South-east Asia (SEA). The financial market recognized its impressive financial performance, and Morgan Stanley Capital International Inc. (MSCI) included AirAsia Bhd’s2 shares, which were listed on the Kuala Lumpur Exchange, in its global index, the MSCI Standard Index Series (The Star Online 2005). By February 2005,
1 Based on the price of RM 1.25 