socio technical impact of Internet on Air Asia

CONTENTS

Abstract ——————————————————————————————————3

Introduction————————————————————————————————-4

Challenges Air Asia faces in using Internet Technology ———————————–7

Customer Segmentation————————————————————————–7

Decline of Culture and Meaning—————————————————————-7

Difficulty in aligning the culture—————————————————————–9

Email and workplace politics——————————————————————–9

Cost and Expenditure on the Internet Technology—————————————11

Market Growth and Internet Technology by Air Asia————————————13

General Macro-environment——————————————————————-14

Drivers for the Adoption of Internet Technology———————————————-14

Impact on Market Share——————————————————————————-16

Major Risks in the Face of Internet Technology———————————————–16

Market Risk—————————————————————————————-17

Fuel Price Risk———————————————————————————–17

Foreign Currency Risk————————————————————————–18

Capital Risk Management———————————————————————-19

Competition Risk———————————————————————————19

High Operating Costs and Declining Revenue Yields—————————————22 Consumer Behaviour———————————————————————————–23 Conclusion————————————————————————————————-25 Bibliography———————————————————————————————–27

 

Abstract

This case study aims to critically examine the socio-technical impact of the internet on Air Asia Airline Company. Air Asia is an airline company that provides services in the air transportation industry. It traces its establishment in 1993 when it was established by DRB-Hicom, a government-owned conglomerate. Ownership of the company also forms a significant part of its history in the airline industry since the ownership has changed over the period from one. It is headquartered in Malaysia with its main base at Kuala Lumpur International Airport. The company has a feat of being the leader in low cost air services in the airline industry. The competitive mood of the airline industry cannot go unmentioned in the analysis since competition affects strategic decisions of any company. The airline industry is faced with high degree of competition and therefore it helps a given company to gain an advantage over other competitors and guarantee itself of the customer loyalty.

The major endeavour will entail determining if the use of internet technology has a positive or negative impact on the airline company and assessing the challenges the company faces in the use of this technology and what drives the company to invest in internet technology as an incentive.

Introduction

In its vibrant and competitive environment, Air Asia has been able to get immense benefit by using a low-cost advantage in its business strategy. By combining the low-cost approach with technology advancement in most of its operations especially in the sales and marketing operations, and the attempt to recognize the various languages used by the diverse world customers, AirAsia has victoriously built its business into an extensively known best performance air service provider in Southeast Asia airlines industry.

The changes in technology have had a lot of impacts on societal operations in the current world. AirAsia has expanded tremendously since change of ownership in 2001. The advancement in technology has both positive and negative repercussions that need to be clearly understood before implementing any technology. Internet technology has been employed in all aspects of life in many societies as it contributes largely to part of daily life in society.

The Internet has largely contributed to effective communication and this has been brought about by the presence of peculiar gadgets that can serves as a phone, a camera and a calendar. Youth have been affected so much by the internet as they use the internet extensively as compared to other population. The proliferation of advanced technology such as wireless access to the internet and other advanced cell phones has changed the way people relate in the society, way of learning and how people retrieve information (Bugeja, 2007)

It is with deep concern that it is important to understand that internet has huge negative repercussions for business despite having positive impacts as compared to the advantages that face-to-face communication carries. Some scholars have criticized the use of internet as means of communication as they postulate that communication by use of the internet and other technologies have adverse effects on society. McChesney (2004), argued that communication and community in virtual spaces has a lot of disadvantages in that people will be existing in virtual communities which contrast with real ones which is expected by society. This poses a very critical shortcoming in the sense that people will be loosing very essential communication skills. Even tough internet enhance democracy and civic participation, it also has the consequences of diverting the attention of the people from real life situations. Internet causes people to disengage in real life matters

According to research done by CNN, use of computer screens as opposed to face-face communication causes the users to be very addictive hence eliminating authentic interpersonal relationships amongst the members in the society. It was found that around ten per cent of the internet users have been adversely affected in that manner (Bugeja, 2007)

In order to evaluate the impact of internet technology on the Air Asia airline company the following continuum will also help in the assessment. The impact is thus critically assessed on the basis of the context, the content of the information provided by the company, community, communication through internet technology, customization, connection, and commerce. Subsequently, the challenges the company faces in the use of the internet technology are also analyzed.

1. Context

The company makes use of internet technology for marketing and sales of its products to the wide targeted clientele. Its registered domain is name is airasia.com and this looks easier to find since it can even be easily guessed. The website for the company is dominated by two main colours: red and white. These two colours represent the colours used by Air Asia and the site generally depicts user-friendliness as it is simple and can be understood easily.

2. Content

Besides English, there are various other languages provided although most of them are Asian and this probably sprouts from the fact that the airline company’s main target market is Asia and it operates in Asia. The site provides complete information and updates the content of the site frequently. Buying and booking of the air ticket from the site is easy to be done and the process also includes checking of the flight schedules.

3. Community

In the modern competitive business environment, most business organizations provide an opportunity for customers and stakeholders to share information through company-sponsored forums which also give the companies an opportunity to know and establish existing loopholes in the customer service among other important areas of concern to the business. Air Asia does not provide a direct opportunity for people to engage in a community feature like a forum though it gives a link through Facebook and Twitter. Through this kind of set up, people are given a chance to share their views and comments on the services provided by the company.

4. Communication

The company’s website has all the necessary information which includes the sales office, the call centre, the insurance claims procedure, and the contact information. Booking procedure is also given and another feature is the option of receiving alerts on different issues, the company uses the homepage to offer promotional information where it promotes its low-cost tickets through special price advertisement. There is also an option to sign up for the company’s newsletter (airasia.com 2010).

5. Customization

With respect to customization, the site has provided the customer the option of using the most appropriate language the customer or visitor is comfortable with among the various options of language given on the site. It is also customized to achieve user-friendliness through the simple interface that does not have many complications that would thwart effective communication.

6. Connection

In the booking of flight, the company gives the customer a chance to book hotel too. There are other companies that Ai Asia cooperates with including banks and insurance companies beside the numerous hotels it mentions (airasia.com 2010).

7. Commerce

The main part of the internet technology for the airline company is the online booking where the customers that wish to book flights online make payments through the HSBC bank.

Challenges Air Asia faces in using Internet Technology

 Customer Segmentation

As it expands, Air Asia is also faced with a challenge in filling up capacity as consumer spending changes from time to time depending on many factors. This fact intermarried with the increased competition from the Malaysia Airlines makes the challenge even greater. For instance, Malaysian Airlines offered zero fares in the recent past on surplus seats.

The decline of Culture and Meaning

The Internet has been used extensively by the company especially in its sales and marketing efforts and culture has been defined through the recognition of various languages as used by various customers across the world. Jones (2002) pointed out that the internet is essential in building a culture of quicker information flow. However, the author further observes that culture and meaning are both a challenge and an achievement to the airline industry and businesses at large. The challenge is that cultural perspectives may not be comprehensively represented by the internet apart from just the language used and probably if an extension is made to pictures on the page. A number of scholars have criticized this idea saying that the internet has never promoted effective and efficient definition and promotion of culture. This is due to the fact that businesses have the primary objective of selling but rarely have a culture-based strategy that could be taken as bringing the value of culture. This leads to poor financial performance and drop in general growth rate as most of the resources put into the technology becomes unproductive because it is not being used to generate revenue (Hirst, 1996). The advancement in technology and the current use of internet in Air Asia and the general airline sector should be beneficial to the airline companies though there has been sharp contrast in the sense there are adverse social implications that accompany the need to integrate all the cultural needs of different customers and this does not concur with the expectation of the society..

Michael Bugeja (2005) was a prominent critic of use of internet in the society as means of communication. He pointed out that there is a social gap arising due to misperception of reality by internet users. Misconception of others has been order of the day to internet users. People are living a very different kind of life which is attributed directly to the influence of the internet. He said that communities are living virtual lives where people no longer recognize the norms and values of society. This is because internet distorts perception of the moral and social values in the society. Face to face communication assist in guiding the young generation and proper dissemination of social values can be achieved. He also asserted that use of computer screens as a means of communication have pronounced effect on the young persons who are still anxious of exploring things. It affects the intellectual and social development of the young population. Level of socialization has been affected negatively by the technology. Mode of interactions between the business and the customer has not been spared by the proliferation of technology in all industries and sectors (Rosenstiel, 2000).

Liffick (19995) points out that use of internet in organizations generally shifts relationships by creating a change in the intercommunications protocols and thus brings a change in the aspects of customer service approach.

Difficulty in aligning the culture

Alignment of global culture may be very challenging to the concept of globalization and the application of the internet technology makes this more complex for Air Asia. This can be seen from the way different societies react for example through a common quote “westernization,” “alienation” among others (Panayotou 2000). The major problem faced by many firms as they globalize is the difficulty in maintaining the original corporate culture. Maintenance of the cultural identity in the global markets is quite difficult. Firms which are globalizing through joint ventures and partnership led firms are forced to adopt the culture of the native and cultures of the diverse people where their clients operate (Finnermore, 2000). In the same manner, political views are as diverse as the cultural views are. Aligning the cultural views to reach a balance may not be easy and that is partially why most organizations are said to lose their identity when they create a desire to integrate cultural views of different individuals like customers or staff members..

Email and workplace politics

Email has been adopted in most organizations in the current economy as means of communication over the internet. It was first considered to promote democracy in organizations in our society. It is being used to limit the status imbalance and to air the views of the voiceless. According to studies and research carried out, it comes out clearly that the differences in status ahs never been eliminated even with the advancement in technology. Some scholars argued that use of email as way of communicating has rendered disruptive organizational politics what is termed as virtual politicking (Romm & Nava, 1999). Email has been used by dishonest employees to bring a lot of commotions in the organization. Their acts have a conflict with the intentions of the management committee when executing the technology. This is deliberate behaviours by the employees. Communications and other technology-extended interactive modes have lead to differentiation as opposed to homogenization which is the driving aspect of society (Rosenstiel, 2000)

For a community to progress very well, the physical community is mandatory to a moral society. There should be peaceful coexistence between different parties that make a society (Bugeja, 2007). These include schools, homes, towns and neighbourhood. Face-face communication is very essential to enhance formation of good relationships and this is possible if people work together, discuss issues together and try to iron out problems as one. The use of computer screens at home has paralyzed formation of good relationships in the society due to the fact there is no social structure in the community if technology is adopted in various activities i.e. extensive use of internet leads to constant changes that are difficult to adopt. Bugeja (2005). He further argued that face to face enable people in the society to interact which in turn dictates level of good relationship in the society. Use of electronic devices such as cell phones and computers hinder good interaction between members in the society which has far reaching influence on the morality and social wellbeing of people. It leads to emotional disconnection between different members in the society. People are placed in a position which they have no ability to handle real life issues in the real space as they are conversing in a virtual world (Thompson, 2000).

Presence of the internet has been very disadvantageous to society and public at large. Technology has given rise to disoriented mass communication and journalism due to more emphasis on profits rather delivering relevant information to society. The Internet has motivated most journalists to writer sensational stories which are full of opinion avoiding times less glamorous facts which are of substantial importance (Rosenstiel, 2000)

Cost and Expenditure on Internet Technology

While the internet and e-commerce have greatly revolutionized the business environment, the business expenditures on the e-business have also been seeing an increase. The other side of the matter, however, is that the business organizations have to apply economic criteria in their justification of spending on IT-related decisions. Time value of money is a very important aspect of any investment decision made and hence the firms not only consider the impact of internet to their business but they also look at the implications of the decisions they make to invest in the IT-related ventures. As business faced the turn of the century, spending in the information technology increased by about nine per cent while the following year saw a further increase in the spending by eleven per cent in 2000 (Pisello and Strassmann 2003). Pisello and Strassmann (2003) elaborate further pointing out that those businesses which under- spend on internet-related ventures are no better performers while those that invest more on the IT-related ventures perform better. In addition, spending on internet-related investments calls for even more spending as there is more expenditure required to ensure that the venture is well maintained and well managed for efficiency and effectiveness.

Because an investment venture may be beneficial to a business or organization in one of the two ways; cost-saving or additional revenue, the paper will attempt to critically analyze ROI in relation to e-business while considering of the two aspects (Pisello 2003).

 

The graph below shows how US businesses’ expenditure on IT –related ventures rose steadily from mid nineties to 2001. The tremendous increase in the spending between 1999 and 2001 is significant.

US Business IT spending from 1995 to 2001

 

As it can be seen from the graph, investment in the internet, IT and e-business intensified particularly towards the close of the century, and it can further be seen that it is within the same period that Air Asia adopted the digitization of its operations. However, the underpinning economic conditions do not allow for funding without considering whether the investment would have a good return on investment or if it would have a detrimental effect on growth, expansion and survival of the business entity. The economy continues to be volatile and the capital that can be invested in any new venture continues to be scarce as well. This is notwithstanding the fact despite all these, spending in e-business by business organizations now clocks trillion of dollars. Businesses have to justify these investment decisions.

There are a number of things that business, while justifying its investment decision, must put into account. First of all, the prevailing uncertainty in business environment must be slotted in. risk is also involved in any decision and hence the businesses attempt to weigh their capabilities to handle the risk that comes with any business investment they make. After that they have to carry out a sensitivity analysis.

Though Return on investment is widely used by businesses as a standard justification for their investment in the internet ventures, the assumptions they make are widely varied.

Market Growth and Internet Technology by Air Asia

Air Asia was established in 1993 though it started operating in 1996 as an airline company offering the airline services. The passenger volumes increased toward the end of the 1990s despite the market turbulence that had rocked the airline industry and Air Asia in particular which saw high turnover in the top management of the company. The internal environment of the company also changed substantially when the company a strategic decision to adopt an expansion culture and become the best airline service provider in the airlines industry.

In 20004 Air Asia took a market orientation which involved segmenting the market in terms of the income bracket and lifestyle. This was a tactic move to attract a wider base of the market in the Asian marketplace. The main stakeholders in the firm consist of the staff members who are responsible for the tactical decision making in the company and carrying out the company’s strategic objectives. The airline’s customers also form a very important part of the environment in which the company operates since the very customers determine how the airline makes its decisions; both strategic and tactical. For instance, when Air Asia introduced the price-based market segmentation, it basically meant to capture the customers across the income board. This is therefore a good use and application of the information a company has concerning the target market. Knowledge of the target market goes hand in hand with the Air Asia’s long-term mission of stakeholder satisfaction.

General Macro-environment

This macro-environment describes all the factors that have an influence in the airline company and which the company has no direct control of whatsoever. Although the government regulation and political factor discussed above also fall under the macro-environment for the Air Asia, other factors are the wider social factors and the economic factors. The airline industry is very much affected by the changes that take place within the environment and at proximity level; these changes have had an impact on Air Asia as an airline service provider. In addition, several rapid and dramatic changes have taken place in the airline market environment in the past decades. The changes are either brought about by the industry-wide paradigm shift of the contemporary marketplace or the competitive pressures of the market at large. Air Asia boasts as the industry’s largest and most successful low fair airline in Europe. One of its major target markets is the leisure travel consumers and visiting friends and relatives. The desire for most business to go global makes use of internet technology more welcome for Air Asia as it enables distant administration of services to customers that are far.

Drivers for the Adoption of Internet Technology

Air Asia has faced diverse challenges most of which face the whole airline industry on the global perspective. One major challenge that has faced the Air Asia in the recent past is the uncertainty that accompanies the company’s extra capacity building in creation of new passenger flight routes. The success of the new routes it created through that program would not be predicted with precise certainty. For this reason, the company has to incur extra costs to finance extra marketing and in application of such promotional activities as discounting of fares during the launch of the new routes. Through internet marketing and promotional efforts are unleashed at once and reach wider range at the same time.

Rising fuel prices are also a contributing factor to the vulnerability of the airline company as the ability to plan for such expenditures with precision becomes as good as impossible. From 2005, there was a general rise in fuel prices and if this is coupled with a low-fare policy which Air Asia used then the possibility of passing the costs to the passengers by increasing fares is limited.

In the aftermath of the 2001 terrorist attack and other terrorist attacks on airliners, the airline industry faces the uncertainty in terms of the security of the stakeholders and operators in the industry. There have been frequent predictions of possible terrorism attacks on the UK and this inflicts an added risk to the airline industry, the holiday centres hence either an extra cost in the industry or reduced booking by customers who use services like the holiday centres. Volatility of the world events have a direct bearing to the fuel costs yet these events are unpredictable hence making fuel price fluctuations inflict additional risk to the airline industry. For instance, in 2006 about 35% of the operating costs of Air Asia represented the fuel costs.

Concerns over environmental issues, specifically the issue of greenhouse gases that originate from carbon emissions have had great attention in both the political sphere and public at large. When the focus is directed particularly at the impact of aviation in carbon emissions, the airline industry the industry is affected due to the fact that there are uncertainties that surround the possibility of change in the regulation that govern some areas in the airline industry. For instance if the emissions caused by the aviation as predicted by Oxford University, then the possible result is an increase in the fuel prices arising from increased taxation of the commodity. One strategy that the company has put in place to deal with such an occurrence is the deployment of aircrafts that are efficient in terms of fuel consumption and limited pollution.

Impact on Market Share

Air Asia boasts as the favourite airline service provider when it comes to offering low-cost carrier eservices in Asia. For this reason, it provides services for 51% of the passengers in the Malaysian airline market. The competition on the international airline industry is however more extensive with the closest competitor in terms of low-cost service being Malaysian Airlines. Apart from Malaysian Airlines, there are also other airline service providers and the fact that each takes a particular percentage of the passengers available makes the competitive forces in the market quite complicated since directing a competitive strategy at one company is not possible. Thus, it is important to note that costs play a major role in the airline industry since pricing acts as attraction pointy for customers. In order for Air Asia to provide low cost flight services, it must be able to manage its costs effectively. The use of internet technology helps in managing costs especially those related to queuing and administrative procedures.

Major Risks in the Face of Internet Technology

Due to complexities intrinsic in the global business environment and the competitive environment in the airline industry, most airline service providers like Air Asia are exposed to various risks. The major risks faced by most organizations in the airline industry may include the market risk which incorporate the fuel price rise, interest rate risk and the foreign currency risk. These risks are associated with the nature of the market.  These risks are critically discussed. The impact of each risk is illustrated and its origin.

Some of the above mentioned risks are controllable by the organizations and there are others which are behold the control of the organization. These risks and uncertainty are believed to have a significant effect on the operations of the organization (John, 2004 pp 99). Even though the application of internet technology by Air Asia is a plus to the company, the following risks are still a threat even in the face of internet technology.

Market risk

These include the foreign exchange risks, fuel price risk and the interest rate risk. These are the major risks that are associated with Air Asia airline in the market. The risks can be described as market-related risks since they are dealing with factors that are contributing to market failures.

Fuel price risk

The organization faces the fuel price risk because the international fuel prices keep on fluctuating every time. This risk has made the company come up with strategies that will protect the organization against drastic increase in fuel prices. At the same time, if the fuel prices decrease it may make the company lose its competitive advantage. It is therefore very important that the organization management consider using favourable risk management strategies to avoid loses in the company. It has been established that the company uses at least ‘six million tones of fuel annually’ (Air Asia, 2008, pp1). Evidently, the volatility of the petroleum and oil product cost has a direct impact on the operational result of this organization. The price risk is generally one of the common market risks that affect the organization end result. It has an impact on the competitive advantage of the organization and the overall net profit.

 

 

Foreign currency risk

Air Asia Company is exposed to foreign exchange risks that come about on purchase, borrowing, and revenue which are denominated in different currencies since this is a multi international company. The company deals with different currencies such as US dollars, euros and Japanese yen among others.  According to the Air Asia annual report the fluctuation of the currencies is a major risk in this organization (2008, pp1). The likelihood of the changes in the exchange rate is unpredictable and therefore can be a risk to the management of the airline company. The most used currency in the global trade is the US dollar which is used generally for any form of transaction yet the airline company operates in many countries which use different currencies. The transaction may include debt settlement, fuel payments and also the capital expenditure (Michael et al 2005, pp 278).

The organization is likely to benefit or experience a negative impact by the changes in the currency. This is purely because the value of the currency may be very low at the time for exchange or also it can be very high. To avoid this uncertainty in the currency it is important that the organization try to minimize the foreign exchange risk exposure. The organization can come up with a policy matching that will enable them use uniform currency for all there expenses, this, however, may not be practical since the company may be dealing in various countries which uses different currencies (Air Asia, 2008, pp1). Additionally, the company can use risk mitigation strategies such as options, forwards and other derivatives.

Capital risk management     

There is need to safeguard the organization capability as a going concern. This will contribute to the benefits of the various stakeholders and also to the returns of the shareholders and the use of the internet technology should be carefully integrated with this need to effectively help in the management of risks that the capital.. The organization also faces the risk of maintaining an optimal capital structure. The most likely impact of not having a well-structured capital structure is that there will be increasing the cost of capital which will affect the operation of the organization. To avoid t6his risk the company has come up with the strategy of ensuring that the net debt and the gearing ratio are well monitored.

According to Air Asia (2009, pp1), the company’s gearing ratio has been on a continuous decrease since the year 2007 and the decrease was attributed to the rise in capital as a result of high operating profit. Besides having to increase the number of fleers that the organization may be having, it is prudent to ensure that they maintain a good capital structure and this may not be alleviated by the fact that the company is using internet technology.

Competition risk

The organization operates in a very competitive environment. The stiff and aggressive competition emanates from the airlines which operate in the same route and also the chatter services and indirect flights from other modes of transport. The company faces the challenge of trying to fit in the market, since some of the companies have got cost structures that are lower than those of the company; for instance the Malaysian Airlines as already mentioned. Some of the other airlines might have a better competitive advantage than Air Asia. The competitive advantage will affect the cost of services which may be lower in other companies and therefore forcing the organization to operate at a loss (Air Asia 2008 pp1).

In case the competitors’ offers a fair discount the company is forced to respond by having to reduce the fair and the most likely impact is that the overall performance of the organization will be affected. On the other hand if the organization fails to respond to the discount offered they will loss the passages traffic. In cases where there are acquisition and mergers among the competitors, there will be an effect on the revenue and the market of the organization. Air Asia operate on the markets that are regulated by the government and therefore the capacity to control and restrict the entry in this market is the responsibility of the particular country. If there is relaxation in some of this rules the most probable impact is that there will be an increase in the growth opportunity but on the other hand it might affect the margins negatively (Smart & Megginson 2008 pp 258).

Airlines sectors face severe financial crisis due to the fact that oil prices are high which reduces profit margin which in turn has direct impact in the expansion of its market. Factors that have led to poor market growth of the airlines are revolving around the Michael Porter’s model which clearly depicts the factors affecting profitability of the airline companies. The model has been used as strategic tool which is used to make analysis on the structure of the industry. The forces that model analysis are directly linked to the market growth of the sector. These forces or factors include;

• More competitors entering the industry
• Threat of substitutes
• Bargaining power of buyers
• Bargaining power of suppliers
• competition among the existing players

Possibility of new entrances into the industry has been considered to adversely affect the growth of airlines market Airline sector has failed to expand its growth due the fact that a lot of capital are required to start the business which cannot be raised by many companies. The airline industry players are required to be having a huge capital which has forced many potential investors to switch to other kind of business leaving the airline industry market with minimal expansion. Cost of entrance has made many investors shy from investing in the sector.          The cost of market expansion is very high and this has been attributed to poor growth or failure of the industry to grow. The industry has been considered to one of the most expensive industries to invest. This is because customer service and manpower are very costly. This has also made companies that operate airline unable to invest in strategizing on how to expand their markets. Thus the digitalisation strategy by Air Asia is a good move to reduce most of these challenges and it can be seen from the success that has accompanied the airline firm throughout the years. This has resulted to reduced vulnerability of the airline company to economic showdown [Day, 1970].

The intensity of competition as described by Porter has an impact on the market growth of the airline industry. Many firms in the industry lead to intense competition and industries that are very competitive earn low profits in the long run. High competition high costs been incurred. The airline industry has been characterized by intensive competition between the rival airlines. Each airline company tries to capture the market share hence industry growth is stagnant and that buyers are in position to switch on between airlines resulting in price wars between the existing companies. This in turns forces the airline companies to reduce price. Airlines are continually competing in terms prices, technology, customer services and entertainment which results in retarded market growth [McMahan, 1996]

Apart from the above factors, there are also other critical factors that have highly contributed to a decline in airline industry.  These factors might have greatly contributed to the drive for Air Asia to adopt digitalisation strategy to benefit from the resulting impact of using IT.

High Operating Costs and Declining Revenue Yields

Monopolistic service providers in the airline industries are faced with high operating costs and insurance cost which both have major implications on the profits of the airline industries. It’s only through monopoly positions that monopoly organizations are able to earn book profits but not through partnerships. Through partnership the monopoly airlines organization cannot manifest itself in tariffs charged. In many cases profits generated by the monopolistic organizations are used to protect the shareholders wealth and interests hence the validity of airline industries is questionable in some cases. The increasing cost of fuel being experienced globally due to inflation has had a notable impact on the operations of the airlines industry. The price increase in the crude oil product has lead to general price increase in the price of fuel and this affected the operations of many airlines industries [Brown, & Churchill, 1998]

Airlines industry has been experiencing very little yields due to the fact there has been reduction in prices with the aim of attracting and retaining customers from running for substitutes. The reduction in air fares has resulted in little growth been experienced in the airlines countries. The air fares status insofar is a subject of concern to many airline industries as it affects the performance of the industry.  Low fares charged by airline industries have the impact of exerting pressure on revenue yields [Eggert, 2002] even though Air Asia has been recording increase in its profits and expanding continually since 2001.

Consumer behaviour

Perceptions of airlines customers on the value of air travel have affected the performance of the industry. Advanced technology and the introduction of the internet and web-based ticketing have enabled consumers of airlines products to put a lot of emphasis on price rather than travel time. Customers are in position to book flights for themselves ends are able to find lowest fares. This forces most airlines companies to reduce fare which in turn leads to low profits in the organization. This fact that the customer is accessible to information elsewhere and has the capacity to make decision of purchasing other airlines’ services constitutes a threat to Air Asia due to lack of grasp to the customer loyalty.

Conclusion

Having carefully analysed the impact of the internet technology on Air Asia, we can conclude that the turbulence in the airline industry is one that calls for quicker decision making and information flow hence the need for internet technology. All these are in line with the need and desire to gain a competitive advantage by increasing efficiency and effectiveness. The amount of pressure that consumers of the services offered by the industry has largely contributed inadequate profits being realized by the airlines operating companies. Customers have the power to influence kind of business through the bargaining process. Due to competition, consumers are placed in a very good position to choose from variety hence are exposed to opportunities to bargain. Consumers are very sensitive to prices hence they can switch off to any other available product that can be use in place of another. This has also affected the airline industry where competition has been affected mainly by the substitute’s products. Substitutes pose threats to any organization and airline industry is not exception. Consumers of airline services are presented with variety of substitutes such as train, car, bus that can be used instead of airlines. Conveniences, money, personal preference and time are some the factors that affects the degree of these of these threats. The fact that short distance travellers can easily change to other substitutes has become a problem to airline industry. This has the effect of underutilization of the resources in the industry. The ease of which the consumers can change to other substitutes is a factor that forces airlines industries to cut down the prices which leads to low profits [Mehta 2000]. Lastly, globalization of business operations has easily been achieved through the internet technology and the fact that culture diversity is appreciated through the various language options given on the site provide the cultural impact of the internet technology on Air Asia.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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