However, they tend to value quality service, and are willing to pay for excellent service. On the other hand, Asians are less likely to concentrate on quality of service, and are willing to compromise quality service for a low price. Furthermore, people in the U.S. and Europe can use other forms of transport for short trips such as speed rail, bus etc. However, there are hardly any world class rails in Asia, and air travel remains the only option for many travelers. Some people in Asia might use bus, but the advent of budget airlines has made it cheaper for travelers to fly instead. Given today's economic climate, low-fare service would be a hit in any part of the world and the Gulf region is no exception. Although, the Gulf region has a good per capita income, lower and middle class travelers would nevertheless welcome low-fare service and it would definitely affect the large carriers in the Gulf Region.
Q2: Air Asia is a budget airline which was on the verge of bankruptcy, but sprang up in 2001 to become the world's cheapest airline. Air Asia is a budget airline and succeeded in getting the lowest cost per kilometer of any airline. It was largely in part because of the declining demand for air travel and fleet purchases in the aftermath of 9/11. Thus, time was a key player in ensuring that Air Asia got the lowest cost structure possible. Furthermore, Air Asia also differentiated itself from other carriers by initiating ticketless travel. Under this new method, travelers had to book tickets online and there was no hassle to for travelers to go through agents. This made travel easy for the passengers and helped further in the reduction of distribution costs.
However, Air Asia was similar to other carriers because all carriers of its type focused on low cost travel and targeted small business travelers. Moreover, Air Asia just like other carriers also offered only three types of fares. This was to stimulate demand for these carriers and attract travelers from major airlines like Malaysian Airlines.
Q3: By reading the case study, I feel that Air Asia was wrong in its decision of Internet booking. Although this has been a viable option for many travelers, it has also meant that the airline is losing potential passengers who do not have access to the Internet. Air Asia is targeting relatives and small travelers and many might not have access to Internet. Furthermore, I also feel that expanding too much in a short period of time might have its disadvantages. Purchasing a lot of fleet might be a cause of concern given today's shifting business climate. It would be difficult to make monthly payments if uncertain conditions force demand to plunge.
First, Air Asia came into the market at the right time. Just after the terrorist attacks of September 11, the aviation industry took an uncertain turn and there was a drop in demand. This caused the market for fleets to go down and leasing costs were reasonable, causing Air Asia to penetrate the market. Also, Air Asia expanded beyond national borders and grabbed the opportunity to serve neighboring countries. Moreover, Air A