An evaluation of the low cost airline strategy : a descriptive study of Airasia in Macau

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An evaluation of the low cost airline strategy : a descriptive study of Airasia in Macau


Author: Lau, Kung-ho Adam
Title: An evaluation of the low cost airline strategy : a descriptive study of Airasia in Macau
Degree: M.Sc.
Year: 2005
Subject: Hong Kong Polytechnic University -- Dissertations
Airlines -- Management -- Case studies
Aeronautics, Commercial -- Management -- Case studies
Department: Graduate School of Business
Pages: xii, 220 leaves : ill. (some col.) ; 30 cm.
InnoPac Record:
Abstract: The low cost airlines or low cost carriers (LCCs) over the past decades have revolutionized the airline industry in the West. They are characterized by their simplicity in terms of point-to-point short haul network, quick turnaround, high aircrafts utilization and seat density, no frills cabin, direct channel of distribution, streamlined organizational structure and operation. The net outcome of which is the low fare offered to air travellers through which LCC is still able to make a profit. The LCCs business strategy in recent year has started to storm the Asia Pacific where there is a very fragmented environment for airline business. Airasia, a LCC modelling the operational efficiency of the European counterparts, has been proved successful in the Southeast Asia. Its arm-stretch to the Southern China posts another challenge for the LCC business strategy. This paper aims to examine the application of LCC business model by Airasia in Macau SAR, a second destination in China serviced by LCCs after Valuair of Singapore in Hong Kong. It is found that Airasia have brought about traffic stimulation on routes where it introduced services. The preliminarily sign of "Southwest effect" is evident. Fare drops and demand for air travel is increased to certain extent at the expense of competitor. Travelers are offered low price and location option, in their planning of travel aboard to and out of Southern China. The higher internet usage by international travelers supports its distribution strategy. However, the collective purchasing behavior of general Asian constrains the flexibility of LCC pricing in slack season. The uneven acceptance on "pay-frills" and the perception of value by the people in Southern China exposes the potential deficiency of LCC product attributes, or the intrinsic expectation of premium class product traditionally with full service carriers. This is also found that the average time achieved in turnaround in Macau airport is discounting the operational efficiency of LCC strategy. The cause is attributed externally more than internally to Airasia. The airport issue is not surprisingly a fundamental debate in Asia where not all airport infrastructures and ground processes could meet the specific requirements of LCCs operation.

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