Pest Analysis On Air Asia Essay

Pest Analysis (Air Asia)

1774 WordsDec 1st, 20108 Pages

PEST Analysis is the Political, Economic, Social culture and Technology analysis that a company does to determine the overall business environment. A PEST analysis is a look at the external environment of a company or a business that plays an important role in managing and decision making of a company. It is crucial for a company to consider its environment before relating with the public or customers. The PEST analysis examines the impact of each of the factor on the company. Thus, political factor considers the impact of legislatives changes, stability of the economy and event that related with the government and politics that may affect the business. Influence of economy, such as interest rate, stability of economy,…show more content…

Customers approximately 14million passengers travelled AirAsia in 2009 this is because the customer pay less compared to other airlines. Managing fuel effectively and increase in employment is an important factor despises International global credit crisis has resulted in increasing unemployment and ‘global trade will shrink by 9 percent in 2009’. Employment rate has constantly increased from 3799 to 4593 employees in the year 2009 as stated in the financial statement. This benefits the financial performance of AirAsia by increasing the operating profit margin 29.1%.
Social-culture analysis
Air Asia operates with many diversified regions in Asia, all of them are different in their own unique way and this allows AirAsia to attract their passengers throughout Asian countries with has many diverse languages and cultures. Related to the difference of the nature the demographic factor helps AirAsia to manage their customers effectively. In Malaysia itself there are about 7 different languages which are the Bahasa Malaysia, English, Chinese, Tamil, Telugu, Malayalam and Punjabi. Air Asia accommodate to three prominent languages which are Bahasa Malaysia, English and Chinese. Just as any other airline AirAsia also accommodates to many different classes such as economy class, hot seat class, standard seats class and premium economy class which is equivalent to a business class seat. As world’s best low-cost airline 2009 and 2010

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PESTEL Analysis on Airasia

PESTEL analysis on AirAsia closely studies and examines the operations of the international airline in its external environment. It focuses on major variables that impacts it daily operations as it delivers its products and services to its clients. The analysis also helps the company to understand its environment better and develop a competitive strategy to enable it achieve a cutting edge even in times of cut throat competition. To have a better analysis, it is good to have background information about AirAsia.


AirAsia was established in 2001 by Dato’ Tony Fernandez. Dato and his partners set up the Tune Air Sdn Bhd popularly known as Tune air, holding company and bought AirAsia. Today, AirAsia has become one of the most successful airline companies in South Asian region. It is a pioneer of affordable, low cost and no frill travel in the region. It flies in Malaysia, has Flights to Macau, China, Cambodia, Myanmar, Philippines, Thailand, Vietnam and Indonesia through Awair.

A closer look at PESTEL analysis on AirAsia


Flying outside Malaysia has been a challenge to AirAsia airline. This is based on bilateral agreement affecting the way in which Pan-Asia budget carriers. Landing and navigation charges are expensive in major destinations including Beijing, Hong Kong, Singapore and Bangkok. There are also no cheaper secondary airports hence, a crisis for the airline. This is worsened by the fact that the airline market is regulated by bilateral air rights agreements.

Economic factors

AirAsia is a low cost airline and it faces stiff competition from Malaysian Airline. The good thing is that AirAsia offers cheap flight services and highly affordable tickets that attract many clients in the region. Asia in theory has the most attractive ingredients making a budget airline successful. This is enhanced by the fact that the region is wide and densely populated. Additionally, economic growth in the region and improved cost of living has empowered many Asians to board flights to different destinations hence, an advantage to AirAsia airline.


Many passengers in Malaysia are very reluctant to board no frill flights for long hours. The longer the route, the fewer prices conscious the clients become. They do not want to be on long flights especially with limited or no inflight services. AirAsia wanted to be an airline that operates on average man basis in the street of being in a position to pay for flights. Individuals who couldn’t think of flying are therefore attracted to AirAsia.

Additionally, AirAsia strongly commits to Safety First following past previous cases of Severe Acute Respiratory Syndrome that scared many people from flying. AirAsia therefore complies with all regulatory measures set and consistently adhere to high standards. This ensures safety for all passengers and airline staff.

AirAsia also operates in countries wide diverse cultural aspects and languages. This is because its staff embraces cultural diversity making it easier for the company to thrive in Thai Malaysian border and in Indonesia.


AirAsia offers airline online service that combines air ticketing with car hire, hotel bookings and travel insurance for enhanced AirAsia Travel Protection. To keep all costs in check, the company has further pushed its online or internet services. This makes it easier for individuals served by poor rail and road infrastructure to board flights.

AirAsia in 2003 became one of the first and best airlines to introduce SMS booking and guests can easily book for their flights, check schedules and get latest updates on AirAsia promotions at their comfort. The airline also introduced GO Holiday and clients can book for holiday making it a reliable, better performance and reliable airline.


Malaysian government does not have a clearly written policy for commercial air transport. Therefore in the past years, more emphasis was placed on domestic flights and with AirAsia’s approval to operate cheap flights locally and internationally, the company has managed to strike a balance in its flights.

Demographic environment

Population growth affects sales of AirAsia. Increasing population in the country increases sales of the airline bearing in mind that many clients prefer affordable services. Demand for products and services have also increased. However, the company should take advantage of this to expand its operations.

Summary of PESTEL analysis of AirAsia

From the above PESTEL analysis for AirAsia, the airline has many opportunities for growth. It only needs to explore its macro environment and trade profitably.


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