AirAsia X: Can the Low Cost Model Go Long Haul?

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AirAsia X: Can the Low Cost Model Go Long Haul?

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Publication Date:
February 17, 2012

Industry:
Administrative & Support services

Industry:
Aerospace & Defense

Source:
Ivey Publishing

By 2007, AirAsia had become one of the most successful budget airlines in the world. Having conquered Southeast Asia, and entered China and India, AirAsia was poised to solidify its place as one of the foremost budget airlines and one of the most consistently profitable globally. But company founder Tony Fernandes had bigger plans. From the outset in 2001, Fernandes had intended to offer long haul service, competing against the largest and most established airlines in the world. However, his advisors had urged him to focus on regional, short to medium distance service. With many successes under his belt, Fernandes was once again ready to tackle long haul. Despite persistent claims from industry insiders that low cost long haul flights would never be profitable, Fernandes pushed forward with the expansion. Hiring 36-year-old Azran Osman-Rani as the CEO for the new long haul venture, nicknamed X, was a critical step in this process. X’s inaugural flight to Australia took place in November 2007. In early 2010, X received its eleventh aircraft and was flying to 15 destinations on three continents. However, over time the substantial differences between long haul and short haul operating requirements became more apparent. Consequently, the management decided to formally separate X from AirAsia. This separation, and the inherent challenges for X and its recently appointed head of Commercial Operations, Darren Wright included: (1) how best to leverage the extensive network of the regional sister company AirAsia in selecting new and profitable destinations for X, (2) how to increase revenues without raising ticket prices, (3) how best to globally position the airline’s brand in non-Asian markets, (4) how to shift his marketing team’s mentality away from a start-up mindset, and (5) how to prepare for a global initial public offering within the next 12 months.

Copyright © 2021 Harvard Business School Publishing. All rights reserved. Harvard Business Publishing is an affiliate of Harvard Business School.

AirAsia X: Can the Low Cost Model Go Long Haul?

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