Air Asia Has So Far Essay

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Total Length: 670 words ( 2 double-spaced pages)

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Given that the profitability rate is already very low and that other costs have already been cut, the only practical response to rising fuel costs (assuming that they do not fall drastically very quickly) is to raise fares.

This will be problematic for the company, of course, since it has established as its major selling point the fact that it offers the lowest fares possible. However, having to raise fares is something that will no doubt happen at other companies as well since all companies will be affected. Thus it is entirely possible that the company will be able to raise fares and yet remain the lowest priced company in its market (Creaton, 2007, p. 48).

While rising fuel costs are the most significant costs that are beyond the control of the company, other external factors can have important impacts as well. Among potential issues in terms of overall costs to the company are: Airport landing and docking fees; security fees levied by different countries to cover perceived risks of terrorism; increased insurance costs; and increased labor costs (Bamber, Gittell, Kochan & von Nordenflytch, 2009, p. 71).

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Weather also has significant effects on airlines, especially in terms of on-time statistics. As the climate becomes increasingly unpredictable, compensating for violent weather will become increasingly expensive. None of these factors is under the control of AirAsia: All the company can do is to assess ways in which it can trim any other costs and make it clear to its customers that it is still doing the best job possible to reduce costs......

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