MANAGING COST IN A COMPETITVE ENVIRONMENT
The global financial crisis that started in mid-2008 affected many industries, including the aviation industry. Fewer business and leisure travelers were flying due to the economic recession. Corporations and government agencies issued orders, as part of an austerity drive, for less travel or, when absolutely necessary for their enior employees, for economy-class travel. This became an opportunitfor LCCs such as Airasia to grow their market share. Indeed, the number of passengers choosing Airasia grew byover 21 percent in the first quarter of 2009, and by 2010 the company was able to turn over a core operating profit margin of 23.2 percent.
The cornerstone of airasia's success is its contant drive to lower costs. Indeed, airasia has the world's lowest unit costs of 2.3US costs. Indeed, ASK (available seat kilometer). Airasia makes profit by keeping costs low while maintaining a high rate of aircraft utilization, quick turnarounds, low distribution costs using online booking, and ncillary income such such as its "supersize" charge for excess baggage. To keep costs down and ensure aquick aircraft turnaround of 25minuter, its cabin crew is expected to multitask by serving customers and helping clean.
Following airasia's success, many other LCCs, such as indiabased air deccan, philippines' cebu pacific and singaorebased tiger airways followed uit. According to the center for asia pacific aviation, LCCs inthe asia-pacific region accounted to 1.1 percent in 2001.
The growth of LCCs has been seen as a threat to full-servive carriers. Some of these carriers have decided that if they cannot beat the low-cost carriers, they will join them. Singapore airlines an qatas launched their market share. These LCCs. With the support of their resource-rich parent companies, were able to invest more and therefore sustain initial osses.