Opportunity and Threat of Airasia

>> OPPORTUNITIES Huge Market Potential - In a country of a billion people, the Indonesian aviation industry is puny. Indonesia have 12 million people who travel by air every year against 3 million passengers who fly everyday in the US, even though its population is one-fourth that of Indonesia. Even if we assumed that only one-fourth of that large middle-class could afford and would be willing to travel by air, it would call for at least a 5-6-fold increase in capacity. This points to a huge opportunity for AirAsia and the aviation industry in general. However, this large market is recognized by all and is the reason why new players are waiting to enter the Industry to exploit this potential. It is pertinent to note that the number of air travelers in Indonesia has grown during the last there of 2005-08 as compared to the same period last year, as per estimates of Amadeus Worldwide. Product differentiation – At present, AirAsia differentiates its no frills product by offering less features at substantially low fares. However, this strategy will become generic with the entry of low cost carriers waiting in the wings. At that stage, low cost competition will each need to try and “be different”. Limited product differentiation is an opportunity, but mustbe approached with extreme caution.This has happened in the West and by trying to differentiate; some low-cost airlines also losetheir bearing and begin adding frills like assigned seating, hot meals and in-flight entertainment to attract some of the more comfort-seeking customers. But that leaves themexposed to being undercut by a new competitor who focuses exclusively on price. Anything(like frills) that adds costs and reduces price competitiveness is a bad trade-off. >> THREAT *Skiller competition *– The Asia Region skies are witnessing a bloody battle for market shares. A much anticipated fare war has broken out across Asia Region skies. AirAsia is still a gowing airline company, but a medium-big player