Airasia Case Study

Register to read the introduction… AirAsia purchased insurance policies to mitigate pure risk although it is done and operated a bit differently as it adopts an integrated approach risk management that goes beyond the traditional parameters of what is insurable. For instance, when AirAsia purchases insurance any policies to insure against pure risk, it also makes a conscious effort to acquire them at a much lower rate lower than other LCCs. In addition, to mitigate price risk, AirAsia hedged fuel prices at US$42 a barrel for the first half of 2005, which was substantially lower than the price per barrel of US$70 in the late 2005.AirAsia has little exposure to credit risk as it does not lend money to any external parties. Better still, customers who wish to purchase their air tickets need to make payment almost immediately upon booking. Hence, this eliminates credit risk totally. So far, Air Asia’s holistic approach to risk management effectively is viewed favorably by its stakeholders most of the time, especially the …show more content…
Between 2001 and 2004, AirAsia enjoyed a compound average growth of 45% for sales and 407% for net income as well as cash flow positive from the time it began its operations. All these inevitably increase the value of investments significantly. This probably explains why AirAsia has always enjoyed strong support from banks and venture capitalists when the CEO took the company public in November 2004.AirAsia satisfies its customers by offering low fares without having to compromise to quality and service. This helps to attract new customers as well as retain existing ones. In order to ensure that all specific needs are met, the company’s key staffs travel regularly to mingle with the host communities so that they understand them better. This has facilitated Air Asia’s aggressive expansion and resounding success in the regional markets – which include Thailand and Indonesian over a short span of time. For instance, Air Asia’s joint venture with Shin Corporation to launch its new LLC achieved immediate success. In just 3 days of operations, it sold more than 20,000 seats on domestic routes. This speaks well of Air Asia’s ability to meet (or even exceed) the expectations of its customers. Besides that, AirAsia also strives to build strong relationship with its suppliers. For instance, although the company operates 737 aircraft that were built by Boeing, it also acquired the new A320 aircraft from Airbus. In this way the company establishes good relationship with the two and only civil airliner suppliers and hopefully through these good mutual dealings, the power of these suppliers can be further reduced. The company also strives to maintain good relationship with other suppliers that provide aircraft maintenance and airport services. This probably also explain why AirAsia is able to get lower rates from them. As a staff of the AirAsia team, he/she gets to enjoy highly competitive and attractive remuneration packages. These include productivity and