AirAsia X: Can the Low Cost Model Go Long Haul?

Subject: Economics
Type: Synthesis Essay
Pages: 2
Word count: 597
Topics: Macroeconomics, Microeconomics, Political Science

The Global airline industry is very competitive. Before the introduction of low-cost tickets, the airline industry was characterized by short airline operations with high ticket prices and complex operational costs (Morell, 2008). Intercontinental flights are long to an extent that they operate in different time zones and cultural aspects going by the differences found in the existing continents. Airline companies that exist are exposed to different financial risks, substantial complexities, legal issues and differences in the landing rights of various nations in different continents. The nature of certifications of airlines in various countries contributes immensely to the challenge of setting up a new intercontinental airline. With regards to the employees of these airlines, elderly CEO are recruited to manage these companies. These CEOs believe in traditional values of management as opposed to young enthusiastic CEOs who come with efficient ways of managing large companies (Zhang, Hanaoka, Inamura, & Ishikura, 2008).

In the past, the airplane industry was characterized by larger types of airplanes due to the long hauls that were used in the operations of larger airlines. This was due to the intercontinental factor of operation since these companies wanted to make more profits than could be imagined. Additionally, the operational costs in this industry remain high due to a number of factors such as failing to incorporate departments in such a way that they would operate as single unit department and have departmental roles in existence (Morell, 2008). These companies operate single unit company departments, thus raising the costs of operation for such companies. In the modern airline industry, companies tend to integrate the customer service, training departments into a single unit department. 

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A number of factors led to the success of AirAsia in the airline industry. First and most important was the issue of the hiring of a young CEO who brought on board modern ways of operations and administration into the new airline company, and an unconventional company name that attracted clients from different regions (Morell, 2008).  The naming strategy that incorporated ‘X’ in its company name linked the firm’s name to the success of AirAsia Group and a franchise to the company. Another key factor that attributed to the success of the airline was the introduction of Air plus airplanes with type A330 Airbus being the first of its kind to be used by the company. AirAsia purchased a large fleet of Airbus type of aircrafts so that it would avail a more favorable financing plan as compared to its rival competitors in the airline industry (Morell, 2008). 

On the other hand, after the inauguration of AirAsia, the company adopted a very effective idea. Rather than focusing on providing the wealthy class to provide them with flight services, the organization directed their focus on passengers that were not interested in intercontinental flights. Unlike other airline companies that focus more on intercontinental flights, AirAsia aimed at a larger pool of average class passengers (Morell, 2008). Other than focusing on the larger pool of average passengers, the company also published fares for seats and departures taxes. This initiative attracted more passengers because their ticket pricing methods were more understandable as compared to other rival companies since these passengers could calculate rates for themselves. Lastly, the issue of passenger safety was critical. AirAsia invested on passenger safety, especially at a time when passenger safety was high on agenda for many governments (Zhang, Hanaoka, Inamura, & Ishikura, 2008). Going by the history on the rise in number of plane crash, more funds were injected towards safety of passengers from point of booking to the point of landing.

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  1. Morrell, P. (2008). Can long-haul low-cost airlines be successful? Research in Transportation Economics24(1), 61-67.
  2. Zhang, A., Hanaoka, S., Inamura, H., & Ishikura, T. (2008). Low-cost carriers in Asia: Deregulation, regional liberalization and secondary airports. Research in Transportation Economics24(1), 36-50.
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