1.

A business model, according to Osterwalder and Pigneur [2010]," describes the rationale of how an
organization creates, captures and delivers value to customers. A business model is the blueprint for a
strategy to be implemented, in order for the business to generate profits. However, comparing it with
strategy, business model starts by creating a value and deliver that value to customers but value
capturing is not much focused in this model. Strategy is intended more to capture value from customers,
and considers well the competitive threats posed by existing and potential entrants, which are less
central to the business model. For exampe, if I, a firm, expect no entrants in the market where I belong, I
rely on my business model, but once there are entrants, besides reconfiguring my business model, I
should rely on my strategies. Based on definition, business model is made of concrete choices and
consequences of these choices in offering value to customers, and strategy is thebfirm's contingent plan
as to the business model it will use. In addition, business model is said to be cognitively limited and
biased with the earlier success of the firm. Because the model works out, the firm becomes complacent
and continues to invest with their current model. Startegy, on the other hand, requires careful and
analytic calculation and choice in order to prosper continuously in the market. Strategy is an ongoing
process and needs to be reconsidered from time to time.

AirAsia's business model is adapted to low-cost carriers, having only a single type of aircraft to utilize
and a single class to allow more seats to accommodate and having no flight tickets and assigned seating
to make way for faster turnaround of planes. Because low-cost carriers are no-frills, no free charge for
baggage restriction and no frequent flyer program (as cited in Doria), AirAsia made sure that its
operations are streamlined and kept as simple as possible to ensure low cost structure. For example,
low-cost mechanisms include applying point-to-point network, having single class to achieve 25-minute
turnaround time, and having only Airbus A320 to achieve economies of scope in maintenance and
aircraft utilization. These mechanisms are necessary in order to gain a large market share in the
competitive industry where AirAsia belongs in. AirAsia achieves competitive advantage as they
continually invest in these means and also seizing conter-cyclical marketing which enables AirAsia to
become the world lowest cost airline, amidst crises.

2.

Liquidity Measure

Evaluating the two airline's liquidity, Malaysian Airline is more liquid than AirAsia, given the former a
high value of Current Ratio. Malaysian Airline is capable of paying off its short-term liabilities more than
AirAsia can because the former has greater amounts of current assets which are essential to pay off the
short-term obligations, compared with the latter. Short-term creditors would appeal Malaysian Airlines
more than they will to AirAsia.
Profitability Measure

In terms of gross margin, Malaysian airlines generates more profit after paying its cost of goods sold,
than AirAsia. Malaysian Airlines has more available funds to utilized in paying off its other expenses than
AirAsia. Malaysian Airlines has wider options to seize, given that positive profits would entail continuing
the current productuon system or expanding or reinvesting the money.

Investment Opportunities

Malaysian Airlines again has favorable return on investment as compared to AirAsia. A positive net
income is necessary in the assurance that the company is able to finance and gain profits for its
investors which will elicit investor credibility and trustworthiness.

Capital Structure

Usingg debt-to-equity ratio, AirAsia leverages it finance more than Malaysian Airlines. Debt financing
requires debt servicing and regular interest payments which demands large amounts from AirAsia. Aside
from this, risk tied to debt financing is high since creditors require AirAsia to pay regular interests in a
consistent manner, and once the company fails to comply, AirAsia loses creditworthiness, therefore less
creditors will favor the requests of the company. Malaysian Airlines, on the other hand, has a more
stable financing than AirAsia because investments which are less risky and allow options for
reinvestments and financing operations, are greater than its debts.

Stable firms go for debt financing because it allowed them to regain and reposition their products in the
market, and once they achieve enough market share, they switch from debt financing to equity
financing. On the other hand, although AirAsia is less attractive in terms of its ratios compared to
Malaysian Airlines in 2008, it is notable that during this time, Fernandes decided to unwind its futures
contacts with the jet fuel purchased. This has decreased its aircraft utilization a bit, nearing to the rate at
which Malaysian Airlines operates. Seizing futures contracts continuously would have sustained the cash
flow which was lost because the expectation that lower fuel prices in that year was unmet.

3.

Capacity utilization: This measures the airline's ability to sell out its seats with the given maximum
capacity. Based on the given data on table 4, capacity level and average cost per passenger is linked to
comp up with a conclusion.
Cost effectiveness: This factor deals with the least cost incurred by the airlines in their operations to
align them with their own LCC model. Two measures, total cost per fligbt and average cost per
passsenger were accounted.

Cost manageability: This looks at the span of costs the airlines consider and the magnitude of the cost
tied to them. This measure is necessary in ensuring a good and proper spending and cost management.

4.

AirAsia X independently strives to become also a low-cost airline, along with AirAsia. AirAsia, on the
other hand, has independently devised ways to achieve cost efficiencies and advantages that no other
airlines implement.

For AirAsia X, its fuel-efficient aircrafts, secondary airports amd human resources practices allowed the
company to be the low cost operator in its own routes. The company, according to CEO Azran, is in
better position that AirAsia, and most of its profits come from first- and business-class travelers which
gave way to subsidizing economy class fares.

However, for AirAsia, the company already attracted many markets domestically and even in regional
travels which would gain momentum as it reaches in international platform. The model it adopted does
not necessarily replicate what AirAdia employs now, but continually changes and augments it with
dynamism, innovation and marketing flair that are exyded from Fernandes' leaderahip and
management style. AirAsia already establdhed brand awareness and company reputation which would
be beneficial for AirAsia X when merged. The institutionalization of web-based and telephone flight
booking system was also managed to be one of the best cost efficiences AirAsia X did in conjuction with
AirAsia's existing methods.

Having this merger would bring the two airlines at a common yet best position. One airline takes
advantage of its operational abilities, while the other seizes its cost and profit mechanisms. This will
result to a properly executed business model which are essential in competing with larger, well-
established long-haul airlines.

5.

Having an informal, friendly, and cheerful environment, as reflective of Fernandes' personality, would
allow the employees to be comfortable and competent in doing their jobs, which are beneficial in
maintaining the target productivity rates of AirAsia. Employees will be well-versed with the methods and
customization of services and will be involved in customer service which would allow smooth
functioning of the distributiom systems. Once this happened, the company continues to rejoice with
generous amounts of profits which will boil down to an increased employee incentives and improved
salary schemes, resulting to employee satisfaction and less turnover.

Allowing communication, which is equivalent to lack of hierarchy, between employees and the
management means being open with suggestions that are not foreseen by the management at all times.
Since employees are the ones who are hands-on with the operations, they know well how they can
improve the systems and oil it well to still achieve maximum aircraft utilization.

AirAsia has already invested much on co-branding and sponsorship relations which are beneficial for
airline safety considerations which is part of the cimpanh stratgey. The company forges linkages with
world-class safety regulators which will ensure that its aircrafts and passengers are cared and sustained
well to provide excellent service.

These three factors are essential in placing AirAsia as one of the competing and competent player in the
long-haul LCC industry.