Air Asia Essay

2382 WordsAug 4, 201210 Pages
Question 3 The PESTL Analysis and the Porter Model provide an overall analysis of the operating environment that Air Asia competes in. Also, the analysis of low cost carriers (LCC) industry reveals that it is so concentrated that intense competition is inevitable. However, amidst the challenges faced, there are still plenty of opportunities for Air Asia to explore and exploit. PESTL Analysis - Macro Environment a)Economics Asia’s rapid economic growth and sprouting middle class continues to fuel the growth of air travel in Asia. This growth in air travel was also due to the region having geographically dispersed countries with large population, a rapid increase in trade and tourism as well as the respective government investments in their airports, airlines and travel infrastructure. Although rapid growth and increased trade and businesses may intensify competition (entrance of other LCCs) and even lead to full-service airlines start cut costs to complete, it can present opportunities for airlines to enlarge their markets. Of late, projections by economists had placed Asia at the top of global economy growth charts in the coming years b)Political/ Legal Government policies are important drives for the success of Asia. In the late1990s, there was increase privatization and deregulation of the airline industry in Asia. It was noticeable that some Asian countries established open-skies agreements while others allowed the entry of private airlines. For instance, in 1997, a few LLC spouted quickly after Malaysia signed an “open-skies” agreement with the United States. Hence, it appears that although the travel market will be expanded, in reality Air Asia would also have to operate in a more challenging environment with intense competitions. As of 2006, governments’ intervention and regulation remained substantial. For instance, although Thai Air Asia managed to

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