Air Asia Berhad Report 2022

Running head: AIR ASIA BERHAD
Air Asia Berhad
Name of the Student
Name of the University
Author note

AIR ASIA BERHAD
1
Introduction
Air-Asia Berhad is the largest low-cost airline of Malaysia, headquartered in Kuala
Lumpur. The company has been operating successfully since its launch in 1996. The Air Asia
company is biggest in Malaysia in terms of number of destinations and fleet size. It operates
domestic and 165 international destinations across 25 countries (Air Asia, 2019). This report
presents the analyses on external environment factors and the competitive environment for Air
Asia Berhad to understand the competitive position and scopes of improvement of the services so
that it can retain the existing as well as gain new market shares. Macro-environment analysis of
the organization is most important to manage and understand external environment of the
organization. Here, PESTEL analysis will examine all the external factors such as political,
economic, technology, social culture, environment and legal, for decision making of the Air-Asia
Berhad (Cassey, 2014). It is also necessary to explore the competitive environment of the
organization, using Five Forces model, which is essential to understand to sustain in a
competitive industry and improve potential profit. The Five Force model analyses threat of new
entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers and
rivalry among existing competitors in the industry.
Macro-environment analysis: PESTEL
The PESTEL analysis is the best tool to analyze the external market of the airline
industry. It analyzes short term and long term market growth or decline efficiently (Delbari,
2016). The six different factors that affect external environment of any industry are political,
economic, social, technological, environmental and legal factors. It serves as the tool to
understand potential threats and opportunities of the market. The findings are presented below.

AIR ASIA BERHAD
2
Political
Political analysis includes the regulations and acts needed by an aviation organization to
run the business. Political problems can create unfavorable condition to grow for the
organization. Insecurities like terrorist attacks and accidents have a negative impact on the
organization (Flouris & Oswald, 2016). However, several policies by the government to protect
passengers attracted more customers and thus, the stability of the organization in a competitive
aviation industry is restored. Some merger and acquisition policies encouraged the organization
to grow stronger Air-Asia Berhad got an approval from the government for commencing
business in India in 2013. The organization is allowed to take 49% stake of sister airline in India
(Ho, 2014). It helped to expand the business and increased profit of the organization.
Economic
The impact of economic factors on aviation industry is huge. The aviation industry
suffered heavy losses because of recession and unstable political situation in many countries of
the world. Increasing demand of laborers made it difficult for the industry to cope up with.
However, the recession left behind some positive effects in the aviation industry (Itani,
O’Connell & Mason, 2015). The cost of airline reduced and standard of service raised to stay in
competitive market. It benefitted the low cost airlines such as Air-Asia Berhad. The demand for
airline is elastic with respect to high income. Therefore, as the income grows with better world
economy, the demand for airline will also grow. The oil prices drive a record high as the political
scenario of Iraq improved. Thus, it might add multimillion to the cost of Air-Asia Berhad (Tan &
Yap, 2015). The cost of crude oil surcharge create a risk for the airline industries, as the world
economy slow down the number of people travelling for businesses and holidays reduced.

AIR ASIA BERHAD
3
Social culture
Though the cultural and social influences on economy and business vary depending on
the country, the cultural and demographic aspect of the country should be included for analyzing
the market condition and should be considered as it is most important for any industry (Zahari &
Romli, 2018). These factors create a major impact on airline industry as needs, preference and
lifestyle of the customer is changing rapidly. To provide better service and quality the existing
aviation organization need to develop new strategies in order to maintain its customers. The
increasing demand of low cost airlines and higher number of travelers forced the higher cost
airlines to reduce the flight charge. The commuters preferred to take airline service from the
renowned brand to ensure better service and security. Thus, to maintain the market share smaller
brands are trying to create powerful brand image to cope up with existing lifestyle and demand.
Malaysian largest low cost airline Air-Asia Berhad has a large market share as its brand name
and lower cost attracts a lot of commuters.
Technological
The impact of technology on aviation industry is significant. The industry require to
invest lump sum amount in research and development to foster cutting edge technology. As the
technological environment is dynamic and ever changing the organization need a continuous
effort to keep up the pace (Delbari, 2016). Advance science and technology revamp the security
and emergency measures. The technological advancement has helped the industry in many ways.
Now-a-days booking tickets online from the website or smartphone application of the particular
airline is most convenient. The passenger can have any kind of information or updates related to
their booking instantly (Arshed & Pancholi, 2016). Use of advance technology facilitates the
customers of Air-Asia Berhad and the organization gains competitive advantage. Alliance