AirAsia India Clash For The Indian Skies Case Solution

This is a significantly high cost to incur to be able to successfully launch an airline. Moreover, the cost of aviation fuel is extremely high in India. This cost would probably constitute the greater part of costs incurred for any airline such as Air Asia. In addition to that, due to the multiple fees and taxes charged on airlines such as maintenance costs also make the total cost of entry very high. Indian airports also have strict regulation guidelines for existing and new airline entrants to the market. These are often difficult standards to meet because some of these are specific to the Indian context, such as requiring government approval for foreign investments. 

2. Impact of Demand-Supply Dynamics

Airlines cannot survive in the market if there is no demand for their services. Therefore, Air Asia needs to attract customers and retain them. The airline industry, because of limited suppliers, exhibits the characteristics of an oligopoly. This is important because if there are a plethora of airlines offering similar services, then in an oligopolistic market, it can be tough to compete for customers solely on the basis of price (Wang et. al, 2018). The deciding factors are rarely prices, but they are factors such as extra services and advertising. This is why it important for Air Asia to consider the amount of expected traffic it plans to receive and make purchases based on that. The supply-demand dynamics in the airline industry can have a significant impact on the success of new airlines.