Problems and Challenges Faced by Airasia

PROBLEMS AND CHALLENGES FACED BY AIRASIA

AirAsia is a low-cost airline based in Malaysia. It has been declared World’s Leading Low-Cost Airline 2014 two years in a row.  It has also attained the tittle of Asia’s Best and World’s Best Low Cost Airline by Skytrax for six consecutive years from 2009 until 2014. The approach used by AirAsia from prior year until now is to be easy to book, pay and fly and most of the seats are sold through online. This is in line with its motto ‘Now Everyone Can Fly’. AirAsia had expanding the business to neighboring countries such as Indonesia and Thailand years later. Despite all those success, AirAsia faced some challenges and problems where it place AirAsia in declining state.

1. Incident of Airbus 320-200 crashed

Irish Times reported that AirAsia encountered biggest challenges as jet goes missing in 2014 when an Airbus 320-200 with 162 people on board went missing during a flight from the Indonesian city of Surabaya to Singapore. Then it was disclosed that the airbus crashed into the Java Sea on December, 28. It killed all 162 passengers and crew. It was reported as the first major accident involving AirAsia plane. As a consequence of that incident, AirAsia dropped fares by 9% in the first quarter to bring back passengers. The Malaysian parent airline carried 3% more passengers in the first quarter than last year, while its capacity grew 10%, leading to a drop in its seat load factor, or the portion of aircrafts filled, to 75% in the first quarter of this year versus 81% in the same period of last year.

1. The declining value of domestic currency

Besides, the declining of the value in the currency has put AirAsia at loss. The company reported a gain of 321 million ringgit after it slod a 25% stake in AirAsia ExpediaTravel to its joint venture to its joint venture partner Expedia Inc. in February for $86.3 million. However, it also reported a 350 million ringgit foreign-exchange loss on its borrowing mainly because of the decline in value of the local currency. The company made a payment for its fuel and aircraft in U.S dollar which they claimed it was their biggest expenses.

1. The rivalry in the industry

Therewithal, the competition among airplane companies is very though. In 2013, AirAsia’s profitable market has been shaken up as rival low-cost carrier group Lion has launched Malindo Air. AirAsia’s Malaysian short-haul operation continues to report industry-leading operating profit margins of about 20% its yields have dropped in recent months and the carrier’s profitability could eventually be impacted. Now, each of Airplanes Company in the world is trying to conduct some strategies to compete with another competitor in their industry. They all have come out with different strategies to make their company better than their competitors.